(NewsReady.com) – Noncompete clauses can severely limit where a person works after leaving a job. They are especially problematic for healthcare workers. The Federal Trade Commission (FTC) is now moving to improve the situation by banning noncompetes.
On April 23, the FTC voted 3-2 to ban noncompete agreements. FTC Chair Lina M. Khan said the agreements “keep wages low, suppress new ideas, and rob the American economy of dynamism,” and estimated more than 8,000 start-up companies would be created annually after the ban takes effect. She went on to say the ban on noncompete clauses would help Americans “pursue a new job, start a new business, or bring a new idea to market.”
According to the FTC, approximately 30 million workers have signed noncompete clauses. The agreements are blamed for forcing people to stay in positions they don’t want to be in because they prohibit employees from seeking work in their field in a specified geographical area for months or years if they quit.
Experts say the agreements allow employers to keep workers under their thumb because they know the person won’t be able to get a job in that profession if they leave. Sometimes, noncompetes force a person to move to a new area if they want to find work without worrying about a lawsuit.
The elimination of noncompete agreements could lower healthcare costs by $194 billion over the next 10 years. Axios reported Khan said that the FTC received 26,000 comments about the new rule and a “significant” number were from healthcare employees. She explained that hospitals and healthcare companies in rural areas often force nurses and doctors to sign noncompete agreements and then pay them less money because they know they won’t be able to find work if they quit.
The American Hospital Association issued a statement after the vote, making it clear there would be lawsuits to fight the new rule. It also stated, “The only saving grace is that this rule will likely be short-lived” because courts would likely stop it.
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