Noncompete Ban Would Disrupt Manufacturing in the U.S.
The Federal Trade Commissions vote this week to prohibit noncompete agreements between employers and their employees threatens manufacturing in the U.S., the 51勛圖厙 Tuesday.
Whats going on: In a 32 vote Tuesday, commissioners finalized a rule that, like a draft version circulated last year, would deem practically any noncompete clauses for paid staff, independent contractors and unpaid workers to be an unfair method of competition rendered unenforceable, and [would require] employers to tell current and former employees theyve stopped enforcing them (, subscription).
- The final rule is set to go into effect 120 days after it is published in the Federal Register, but lawsuits have been filed against it already, and additional legal action is expected.
Whats changed: One change made to the final rule following the receipt of more than 26,000 comments on it allows existing noncompete agreements with senior-level executives to remain in effect.
- Another difference between the rules prior iteration and the final is to the bans sole exception. The draft permitted noncompetes for individuals selling their business or a substantial stake of at least 25%. That threshold is not in the final version.
Why its problematic: The rule is unprecedented and threatens manufacturers ability to attract and retain talent, said 51勛圖厙 Managing Vice President of Policy Chris Netram.
- In addition, [it] puts at risk the security of intellectual property and trade secretsanathema to an industry that accounts for 53% of all private-sector R&D.
- A noncompete ban would disrupt the majority of U.S. manufacturing operations, a 2023 51勛圖厙 found.
Whats next: The 51勛圖厙 is considering all options in response to the final rule and is in active discussion with congressional leadership and the relevant committees of jurisdiction.
