How non-compete clauses cost Americans $300 billion a year

How non-compete clauses cost Americans $300 billion a year
How non-compete clauses cost Americans $300 billion a year

Amid the flurry of papers a new employee receives during the onboarding process, one document could have bearing on a person's future career moves: It's called a non-compete.

"A non-compete is a contractual clause between a worker and an employer that limits the worker's ability to accept or seek other employment or to start their own business for a certain period of time or within a geographical location after the employment ends," says Milana Dostanitch, an employment lawyer with Lipsky Lowe LLP.

The debate over the use and abuse of non-compete has come to a head, with the Federal Trade Commission proposing a new ban on non-competes. The ban would prevent future non-competes from being issued, while also voiding all existing contracts. The FTC estimates that a ban on non-competes would expand career opportunities for 30 million Americans and increase wages by nearly $300 billion annually.

Non-compete contracts were initially given to executive-level employees as a means to protect trade secrets. Today, non-competes can be found in nearly every industry in America. It is estimated that 18% of U.S. workers are bound by non-compete contracts.

"Congress gave the FTC the authority to check unfair methods of competition," said FTC Chair Lina Khan in a January 2023 interview with CNBC. "They told us that we could do that through a variety of ways, through bringing lawsuits, but also through bringing rules, through issuing marketwide rules. And so we're confident that the text and structure of the FTC Act gives us clear authority to do this."

Watch the video above to learn more about the FTC's battle to ban non-compete contracts