New FTC Rule Bans Employee Non-Compete Clauses In Contracts [Video]

If you have an employment contract restricting who you can work for after leaving your current company, it may no longer be worth the paper it’s printed on under a new federal rule.

The Federal Trade Commission issued a rule Tuesday banning contracts that prohibit employees from leaving a job to work for a competitor. Such “non-compete” agreements, which are already restricted in California and several other states to some degree, currently affect some 30 million workers, the FTC said.

The FTC proposed the non-compete ban in January 2023 that stemmed from an executive order by President Joe Biden issued in 2021. It is part of a far-reaching effort across federal agencies to promote competition throughout the economy. 

The FTC estimates that banning non-competes will push businesses to raise wages, netting workers an average of $524 more a year. The agency also predicted the rule will encourage people to start new companies.

“Noncompete clauses keep wages low, suppress …