Federal Trade Commission of the United States said on Thursday that it is proposing a rule to ban companies from forcing employees to sign non-compete provisions and some other agreements. Agreements such as non-compete and training repayment are used by companies to ensure that their employees do not leave for better jobs in the future.
According to Lina Khan, chairperson of the Federal Trade Commission, non-compete agreements “block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand,”
The antitrust watchdog estimates that if the rule comes into effect, wages of workers in the United States will increase by 300 billion dollars per year. It is also estimated that nearly 30 million Americans will have the opportunity to move to better jobs with better benefits and working conditions.
The US chamber of commerce has already come out in opposition to the proposed rule stating that it is unlawful. Sean Heather, an official at the US chamber of commerce said that FTCs latest move to outrightly ban non-compete agreements is completely unlawful.
Sean Heather who is also an antitrust expert said that provisions such as non-compete and training repayment are vital tools for fostering innovation and preserving competition in the market.
Meanwhile, officials of the American Economic Liberties Project came out in support of the proposed rule saying that forceful provisions such as non-compete and training repayment have unfairly denied millions of workers in America for changing jobs, demanding better working conditions, and even starting their businesses.
According to several surveys, nearly 16 to 18 percent of all workers in the United States of America are subjected to signing non-compete agreements with their employers. Nearly 10 percent of employees are signing up for training repayment agreements with the companies.
Companies use non-compete agreements to ensure that their current and past employees do not leave their job and work for competitor companies in the same industry or sector. Training repayment agreements make employees obliged to repay the company expenses for some specified training when they leave employment.
The proposed rule states that training repayment would be banned if it is not reasonably related to any costs incurred by the company in training the employee.
Analysts expect that the rule change will face multiple challenges and will take a long time to implement. If implemented all the companies will have to scrap non-compete agreements with current and past employees. Companies will also be obliged to inform current and past employees regarding the cancellation of non-compete agreements.
