- [Narrator] Nearly $300 billion.
That's how much money
the Federal Trade Commission estimates workers
could be missing out on each year
because of noncompete agreements.
- Interestingly, we see wages depress,
not just for people who are directly subject
to noncompetes, but even for workers that are not.
- [Narrator] A new proposal from the FTC
would ban noncompete clauses at the federal level,
following states that have already made them unenforceable.
- The FTC thinks this is gonna be really good for workers.
It will make companies have to think differently,
maybe more creatively,
about how they're gonna retain people.
- [Narrator] Here's what a federal ban
on noncompetes could mean for workers and businesses,
and why it faces challenges.
Noncompetes typically restrict workers from jumping
to competitors after they leave a company.
For example, this is a noncompete clause
for Amazon from 2018.
It specifies an amount of time that workers have to wait
before moving to a competitor.
Others can also bar people from working
in a certain geographic area.
- Employers include these in contracts
because they want to protect confidential information.
They wanna protect trade secrets, proprietary information.
That might be everything from a scientific formula
to a list of customers.
- [Narrator] The FTC estimates that almost 20% of workers
in the US are affected by noncompete agreements.
That includes people across industries and positions,
from business executives to lower wage workers,
who likely have less access to proprietary information.
Regulation for enforcing them right now
is entirely up to states, but the Biden administration
has pushed for federal regulation.
- Workers should be free to take a better job
if someone offers it.
- [Narrator] The FTC says that noncompete clauses hurt
the US labor market and that eliminating them
would give workers more mobility in their industry,
which could increase wages.
- Noncompetes mean that somebody can't go
to another company where they might be offered
a higher salary or a higher wage.
It also means that they can't go and get an offer
from another company and come back to their employer
and say, "Hey," you know, "here's my offer.
Will you meet it?"
It doesn't give them the means to negotiate for higher pay.
- [Narrator] After a ban on noncompete clauses
for hourly workers in Oregon in 2008,
wages increased by 2 to 3% on average.
Something similar happened in Hawaii in 2012
when wages for new tech hires went up by 4%
after the state introduced a ban in the sector.
Proponents of a federal ban say
it could also promote entrepreneurship
by freeing employees up to join a new business
or start their own.
- The FTC's idea is that by giving people the freedom
to do that without these restrictions,
it will be both, you know, good for individuals
and also good for the economy.
- [Narrator] But it's a little more complicated
for companies.
On one hand, the potential ban could give companies
a broader hiring pool and more chances to bring on talent,
but opponents of the ban also say it offers less protection
for trade secrets, which aren't fully covered by laws.
- When I've asked lawyers about this, they say,
"Yeah, but it's tricky because trade secrets laws
you can only impose after the fact, you can't monitor
and track what they're telling other people
or what they're using."
So, you know, they say that noncompetes really are
the only way they they can know that their information
is being protected.
- [Narrator] If adopted, companies would need
to rescind these clauses from any contract
and inform employees past and present.
The US Chamber of Commerce says that the FTC's proposed ban
is blatantly unlawful.
- No matter what rule the FTC comes out with,
they will probably be challenged in court about
the parameters or even whether they have the authority
to create a rule like this.
- [Narrator] The FTC says it does.
- We are confident that the text and instructor
of the FTC Act gives us clear authority to do this.
- [Narrator] But the proposal still has some time before
it gets to that point.
It has to go through 60 days of public comment first,
where anyone can offer feedback.
Then the agency can formally make the proposed rule
a regulation.
- At the moment, it's very broad and it basically applies
to any noncompete.
The final rule may be different from them.
They might modify some of it.
- [Narrator] The public comment period ends March 10th.