On Judge’s Decision to Block the Federal Trade Commission’s Ban on NonCompete Provisions in Employment Contracts

The National Employment Law Project (NELP) denounces the decision by a Texas federal judge to block the Federal Trade Commission’s (FTC) noncompete rule that bans corporate-imposed noncompete provisions that trap workers in jobs they do not want.

These exploitative clauses affect millions of workers across industries and have an especially negative impact on workers of color and women. Noncompete clauses take away the one type of bargaining power non-unionized workers have to improve their working conditions—the ability to quit for a better job. These clauses have been proven to depress wages, reduce job mobility, and stifle labor competition—factors which can lead to better workplace conditions.

“The FTC’s attempt to ban noncompete clauses was a significant step towards building worker power and ensuring working people have the freedom to seek better opportunities. While the judge’s decision to block this rule is disappointing, it only strengthens our commitment to fighting for fair treatment and better conditions for all workers. Noncompete provisions have long suppressed wages and stifled job mobility, but we believe that every worker deserves the chance to improve their circumstances and our laws should reflect that. NELP will continue to advocate for the complete elimination of these exploitative clauses and push for policies that create a good-jobs economy—where every job is a quality job, and every worker has the opportunity to advance and achieve economic security,” said Rebecca Dixon, NELP’s president and CEO.

BACKGROUND

Noncompete provisions prevent workers from working for a competitor company during or after their current employment. More than 30 million workers—at least 18 percent of the U.S. workforce—are required to sign noncompetes as a condition of accepting a job.

Noncompetes, which were originally used only in highly paid executives’ employment contracts, are now found in almost all occupations, including sandwich makers, dog walkers, and hotel workers. Even workers labeled as “independent contractors”—who should have the freedom to work for multiple clients—are often required to sign noncompetes that limit where they can work.

Research shows that banning noncompetes would close the earnings gap between white men and Black women by 4.6 percent; 5.6 percent for white women; 8.7 percent for Black men; and 9.1 percent for non-Black, non-white women. Noncompetes also can trap workers in abusive job situations where they face sexual or racial harassment by making it difficult for them to quit and take a new job.

The FTC’s rule to ban noncompetes includes independent contractors, bans non-disclosure provisions that function as de facto noncompetes, and limits “training repayment agreements,” which have been used as “back door” noncompetes that force workers to stay in positions to “repay” the employer for providing on the job training.