The Federal Trade Commission estimates that about 30 million workers, nearly 20% of the workforce, across the US are currently bound by noncompetes.
FTC Chair Lina M. Khan announced the proposed ban in a Jan. 5 statement. “Noncompetes 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 contracts frequently prevent departing employees from taking jobs with competing companies or jobs with close proximity to the original employer. They also can mandate a certain amount of time before starting a new job. Companies argue that noncompetes protect their intellectual property.
The American Bar Association’s Model Rules of Professional Conduct protects lawyers from being forced to sign noncompetes. This is largely because of attorney-client privilege, as the rule states that the agreement “not only limits their professional autonomy but also limits the freedom of clients to choose a lawyer.”
The ABA’s rule contrasts with a similar rule from the American Medical Association that discourages medical professionals from signing noncompetes, but does not ban them.
Erik Weibust, a lawyer who works on cases involving noncompetes, told Bloomberg that the ABA’s rule is likely stronger because “lawyers make the rules.”
Earlier this month, recruiters told Insider that doing away with noncompete agreements could lead to another wave of employees leaving for better opportunities, or to start their own businesses.
The FTC estimated that banning the agreements could help increase earnings for millions by up to $300 billion, and help close gender and race wage gaps by between 3-9%.
Because many people of color begin working from a lower economic position, it is harder for them to overcome financial hurdles like noncompetes to maximize earning potential, according to the National Employment Law Project.
