(Reuters) – The U.S. Federal Trade Commission, which enforces antitrust laws, proposed a rule that would ban companies from requiring workers to sign non-compete clauses as well as certain training reimbursement agreements, which companies use to prevent workers from leaving for better jobs. the agency said Thursday.
Non-compete agreements “block workers from freely changing jobs, deprive them of higher wages and better working conditions, and rob companies of a talent pool they need to build and expand,” FTC Chairwoman Lina Khan said in a statement.
The proposed rule is the latest sign from the Biden administration of its support for labor, including backing a measure to make it harder for an employer to classify a person as an “independent contractor,”; which generally means fewer benefits and legal protections.
The agency estimated that if the rule goes into effect, wages for American workers will rise by $300 billion a year and an estimated 30 million Americans would have better career opportunities.
The rule, which could be months from taking effect, would also require companies with existing non-compete clauses to scrap them and inform current and former employees that they have been terminated.
It would also prevent companies from requiring employees to reimburse them for certain types of training if they quit before a certain time, a strategy some companies began using when non-compete clauses came under closer scrutiny. The reimbursement of training would be prohibited if it is “not reasonably related to the costs incurred by the employer to train the employee,” the proposed rule said.
The U.S. Chamber of Commerce indicated it opposed the proposed rule.
“Today’s action by the Federal Trade Commission to completely ban non-compete clauses in all employer contracts is patently illegal,” said Sean Heather, their antitrust expert who said the regulations “are an important tool to promote innovation and preserve competition.”
Sarah Miller, executive director of the American Economic Liberties Project, welcomed the rule, noting that “forced competition agreements have unfairly denied millions of working people the freedom to change jobs, negotiate better pay and start new businesses.”
FTC Commissioner Rebecca Slaughter said in 2020 that surveys have estimated that 16% to 18% of all US workers are subject to non-compete agreements. Meanwhile, nearly 10% of American workers surveyed in 2020 were covered by an education reimbursement agreement, the Cornell Survey Research Institute says.
The move comes a day after the agency announced that two major glass container manufacturers and a security company agreed to drop non-compete clauses.
Ardagh Glass SA and OI Glass Inc., the two largest US manufacturers of glass containers, had non-compete clauses affecting more than 1,700 workers. Ardagh typically barred former workers from being employed by another similar company for two years while OI Glass said the company must provide written consent for former workers to take new jobs in the industry, the FTC said.