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Noncompete agreements have been banned by the FTC

On Behalf of | May 7, 2024 | Employment law |

In the past, some workers have been asked to sign noncompete agreements. These agreements generally specify that the worker can’t leave the company and then quickly start a competing business, nor can they leave the business and immediately start working directly for the competition.

But it’s important for workers in 2024 to understand that the Federal Trade Commission (FTC) has fully banned noncompete agreements. They can no longer be used. There may still be employers who don’t know about the change and ask employees to sign. But those agreements are not binding and would not be enforced in court. Even if an employee signed it, they wouldn’t actually have to uphold the noncompete.

Why have things changed? 

One of the main reasons that employers have long given for using noncompete agreements is that they are trying to protect their intellectual property. A company owner may have to train their employees, which they consider a cost to the business. They don’t want that employee to use what they’ve learned to start a new business that hinders their profits.

The problem, however, is that noncompete agreements can ruin the labor market. If workers cannot switch jobs, it allows corporations to keep their wages artificially low. It also prevents workers from starting small businesses, which have often been defined as the backbone of the economy. The FTC believes that banning noncompetes will be beneficial to new small business owners and to employees.

Labor laws do change from time to time, and this is just one example. It’s very important for all employees to understand their rights, especially during a dispute.