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The Federal Trade Commission on Tuesday voted to ban noncompete agreements. The ban would prohibit new noncompete agreements for every employee and mandate that companies inform both current and former staff that they won鈥檛 be enforcing such agreements. Additionally, businesses will be obligated to revoke existing noncompete agreements for the majority of their employees. Senior level executives鈥� agreements, however, may remain intact. 

The FTC view

Commission members backing the ban argue that noncompete agreements are unfair for workers. 

鈥淚t is so profoundly unfree and unfair for people to be stuck in jobs they want to leave, not because they lacked better alternatives, but because noncompetes preclude another firm from fairly competing for their labor,鈥� FTC Commissioner Rebecca Slaughter (D) said. 

The chairwoman of the FTC argued that the ban will foster new business formation.

鈥淣oncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned,鈥� said FTC Chair Lina M. Khan. 鈥淭he FTC鈥檚 final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.鈥�

Businesses strongly disagree

Business groups blasted the rule, arguing that noncompetes are important to the protection of intellectual property and that the FTC lacks the authority even to issue such a ban. 

Bills have been introduced in Congress to reform noncompete agreements, but no authority has been explicitly granted to the FTC. 

Suzanne Clark, president and CEO of the U.S. 小红帽直播app of Commerce said that the ban is 鈥渁 blatant power grab that will undermine American businesses鈥� ability to remain competitive.鈥�

Melissa Holyoak and Andrew Ferguson, two of the agency鈥檚 Republican commissioners, echoed these sentiments. 

鈥淲e are not a legislature,鈥� Ferguson . 鈥淚 do not believe we have the power to nullify tens of millions of existing contracts.”

In a press release from the National Association of Manufacturers, the organization that the ban is 鈥淯nprecedented and threatens manufacturers鈥� ability to attract and retain talent. In addition, today鈥檚 action puts at risk the security of intellectual property and trade secrets 鈥� anathema to an industry that accounts for 53% of all private-sector R&D.鈥� 

The Arizona 小红帽直播app of Commerce & Industry called it 鈥渇ederal overreach at its finest.鈥�

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Arizona 小红帽直播app President and CEO Danny Seiden in a column last year when the ban was originally floated by the FTC, said, 鈥淭he proposed rule stretches the agency鈥檚 mission to the point of absurdity and seeks to unilaterally reinterpret the section of the Federal Trade Commission Act on 鈥榰nfair methods of competition,鈥� never mind what the pesky legislative branch or the 50 states might have to say on the subject.鈥�