The Federal Trade commission (FTC) will host an open meeting on April 23 to vote on a proposed final rule that would prevent the enforcement of noncompete agreements by employers. In a Notice of Proposed Rulemaking (NPR) announced in early 2023, the FTC stated that its preliminary findings reveal that noncompete agreements constitute an unfair method of competition, which would make them a violation of Section 5 of the FTC Act.
Noncompete clauses, as described by the commission, can be a “widespread and often exploitative practice that suppresses wages, hampers innovation, and blocks entrepreneurs from starting new businesses.” The commission estimates that stopping the practice of noncompete clauses could increase wages by almost $300 billion per year and create new career opportunities for 30 million Americans.
Under this proposed rule, it would be illegal for employers to enter into or attempt to enter into a noncompete with a worker; maintain a noncompete with a worker; or represent to a worker, under certain circumstances, that the worker is subject to a noncompete. For direct selling companies, this ban would mean corporate leaders would have to give their blessing to independent distributors who want to represent more than one company at a time—an already common practice that is not always company sanctioned.
The NPR sparked more than 26,000 comments from the public on the issue.
