FTC Proposes New Rule to Ban Non-compete Agreements

On Thursday, January 5th, The Federal Trade Commission (FTC) rolled out a proposal to prohibit employers from implementing non-compete clauses that limit workers’ freedom to explore opportunities.

In the freelance context, a non-compete agreement forbids you from engaging in direct or indirect competition with your client for a fixed period of time, doing similar work for someone else, and starting your own business that could compete with the client.

Non-compete agreements restrict workers from quitting their jobs and taking new jobs at rival companies or starting up similar businesses of their own within a specific time period. In doing so, these agreements have unfairly denied workers the freedom to change jobs, negotiate for better pay, and start new businesses. The FTC estimates that a ban on these agreements could increase wages by nearly $300 billion annually as they allow workers to pursue better opportunities.

With the aim of shifting the balance of power from companies to workers, the rule, if finalized, wouldn’t just ban non-competes going forward; it would also require employers to rescind existing non-competes and inform workers of the change. Most importantly, the proposal covers independent contractors and interns in addition to full-time employees.

Non-competes are especially a hindrance to freelancers and independent contractors whose livelihood depends on project-based work. The agreements limit freelancers’ ability to choose their clients and maintain multiple jobs and income streams.

Freelancers Union has been working to ban non-compete agreements in the NYC Council and elsewhere around the country. With the passing of the FTC rule, we would no longer have to go state by state to ensure freelancers across the country are afforded the opportunity to work without barriers from previous clients. We are excited by this movement on the federal level and applaud the FTC for  Comment end standing by workers.