"WASHINGTON -- Federal Trade Commission Chairwoman Lina Khan said the agency is considering a new regulation to restrict the use of noncompete clauses by companies, which she said hurt lower-wage workers and can stifle competition for talent.
In addition to regulation, Ms. Khan said the agency planned to target their use in individual cases through enforcement actions.
In an interview Tuesday, Ms. Khan also said the agency was pushing forward with an ambitious agenda. Many observers expect her to bring an antimonopoly lawsuit against Amazon.com Inc., a company she had publicly argued was harming competition before taking the FTC job. The FTC has been investigating the company for years but hasn't filed a case.
Noncompete agreements typically bar employees from joining a competitor for a period after they quit. Long associated with higher-paid salaried employees, they have increasingly become a condition of hire for hourly workers.
"We feel an enormous amount of urgency given how much harm is happening against the workers," said Ms. Khan, an appointee of the Biden administration. "This is the type of practice that falls squarely in our wheelhouse."
Companies that use noncompete clauses say they protect a business's intellectual property and other investments by preventing employees from sharing those assets with a new employer.
The U.S. Chamber of Commerce argued last year that the FTC lacked the authority to pass a regulation on noncompete clauses. Efforts to combat noncompete clauses should be done on a case-by-case basis through litigation, the Chamber wrote in a letter to the FTC, a strategy that would preserve their use in justified cases.
"Non-competes have a legitimate place in contract law, especially when a business is bought or sold," said a statement from Sean Heather, senior vice president of antitrust policy at the U.S. Chamber of Commerce. "A blanket ban on non-competes would be a clear sign of FTC overreach."
The issue is emerging as a test of Ms. Khan's ambitions as the 33-year-old approaches the first anniversary of her swearing-in as FTC chairwoman on June 15. For most of the past year, the FTC has been divided 2-2 between Democrats and Republicans. A third Democrat took office last month.
Noncompete clauses have long been used for executives and others with specialized knowledge of a company's operations.Over time, however, they have been applied to lower-paid employees such as restaurant workers who don't have access to trade secrets.
The restrictions can restrain pay growth and mobility for lower-wage workers, who can't shift between competing companies to seek better pay or promotional opportunities, according to Ms. Khan and other critics of the practice.
Researchers say noncompete clauses may hamper economic activity more broadly by preventing higher-paid people from joining startups or starting their own businesses.
About 18% of all U.S. workers are bound by noncompete agreements, according to data analyzed by researchers including University of Maryland management professor Evan Starr." [1]
Such agreements are also used in Lithuania.
1. U.S. News: Khan Says FTC Will Consider Restricting Noncompete Clauses
Michaels, Dave; Ryan, Tracy.
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 09 June 2022: A.4.
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