FTC to Ban Noncompete Agreements
On April 23rd, 2024, the Federal Trade Commission (FTC) voted to pass a new rule spanning 570 pages which would outlaw most noncompete agreements across the United States.
Details
A non-compete agreement is either a contract or part of a contract that, upon leaving business with another party, makes it prohibited to start a competing business, usually within a particular distance and/or time limit.
An estimated 30 million Americans are subject to a non-compete agreement, according to the FTC. The FTC estimates that eliminating them will result in 8,500 new businesses each year and increase the annual earnings of the average worker by $524.
“Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned,” said FTC Chair Lina M. Khan. “The FTC’s final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”
It goes without saying that this will be a tremendous boon for the majority of drivers within the trucking industry, of which noncompete agreements and clauses are common.
There are exceptions, namely, senior executives earning more than $151,164 annually and those in policy-making positions can still be required to sign noncompete agreements as terms of employment.
Conclusion
The final rule is set to become official nationwide regulation 120 days after its publication, so around August 21st. This is assuming that impending lawsuits against it, as many published rules receive, do not swing against the final rule.
The implications of this for the trucking industry are massive. One of the reasons why someone may be opposed to entering the industry in the first place is the inability to start their own owner-operator business after driving under someone else for numerous years. On the other side, it could make currently established owner-operators more hesitant to expand as they fear hiring and training their future competitors. As with every published rule, we will just have to wait and see what happens.
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