A non-compete clause is a “contractual term between an employer and a worker that blocks the worker from working for a competing employer, or starting a competing business, typically within a certain geographic area and period of time after the worker’s employment ends.” This is the definition of a non-compete clause directly from the Federal Trade Commission (FTC). This year may finally be the year non-compete clauses bite the dust, however, after decades of organizing/effort by employees and labor rights organizations. The vehicle of the non-compete clause demise could be a rule from the FTC. Read on to learn more about what it means for you.


Employees, labor rights organizations, politicians, and more have lambasted non-compete clauses as “unfair” and “artificially lowering employee wages.” They used to be included in contracts for only very niche fields/professions or c-level executives. Companies say the clauses are vital to safeguarding intellectual property, proprietary business processes, and other aspects of doing business that take months, years, or decades to develop. This is said to be especially true for small companies in emerging industries. They worry passage of the FTC rule would potentially lead to negative consequences and hinder America’s standing as a place to do business on the world’s stage.


This landslide of resentment toward non-compete clauses motivating the FTC to act built up steadily as companies steadily expanded how far down the hierarchy employees were required to sign contracts with non-compete clauses in them. Bad PR related to non-compete clauses increased as more low-wage workers, typically living paycheck to paycheck, spoke publicly on the fear of $100,000 fines related to changing jobs within the same industry. These employees were viewed as typically just trying to provide for their families and survive the rising tide of inflation, not trying to cheat any company out of its intellectual property or open competing companies.


Some legal experts view the clauses as “boilerplate” language that has just become standard when writing up an employment contract but that could all change with the passage of this FTC rule. Other legal experts predict a need for more, stronger non-disclosure agreements as a way to potentially fill the gap left if companies are not allowed to use/enforce non-compete clauses/agreements. Human resources experts predict that employers would increase leveraging of other tools used to retain top talent, such as salary increases or other fringe benefits. Analyses by think-tanks and consulting firms estimate that tens of millions of employees in the United States alone are currently subject to non-compete agreements.