The Federal Trade Commission (FTC) announced a plan on April 23 to prohibit employers across the United States from entering into non-compete agreements with their employees. This decision is estimated to impact around 30 million workers, roughly one-fifth of the workforce, who are currently bound by such restrictions.
Non-compete agreements restrict employees from joining competitors or starting similar businesses within a set period after leaving a company.
FTC Chair Lina Khan emphasized that such agreements strip individuals of economic liberties, affecting various other freedoms. The ruling is set to be implemented in six months, anticipating significant opposition from business lobbyists aiming to challenge it in court.
The FTC projects that this change will increase U.S. worker earnings by at least $400 billion over the next decade and could lead to the creation of approximately 8,500 new companies annually.
The current non-compete clauses will remain valid for senior executives who meet certain conditions, including an income threshold of over $151,164.
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