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The Federal Trade Commission on Tuesday banned employers from limiting their workers’ abilities to work for rivals, a sweeping change that the agency says could help raise wages and increase competition among businesses.
The move bars contracts known as noncompetes, which prevent workers from leaving for a competitor for a certain amount of time, in most circumstances.
The agency has said the proposal would raise wages by forcing companies to compete harder for talent.
“The F.T.C.’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,” the trade commission’s chair, Lina M. Khan, said in a statement.
Studies have shown that noncompetes suppress wages because switching jobs is the most efficient way workers can increase how much they make.
“This would be an immediate shock that would allow millions of workers to be free to take a better job in their industry,” said Evan Starr, an economics professor at the University of Maryland.
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