Most workers in the glass and glazing industries will soon be able to move jobs more freely following the Federal Trade Commission’s (FTC) move to ban noncompete clauses. The FTC’s decision resulted from a three to two vote among its five commissioners Tuesday afternoon. Noncompete clauses block people from working for a competing employer or starting a competing business after employment ends.

The FTC’s ruling bans for-profit employers from issuing new noncompetes and makes currently existing noncompete agreements unenforceable after the rule’s effective date.

The construction and manufacturing industries have been noted for their reliance on noncompete contracts, as highlighted in a U.S. Bureau of Labor (BOL) statistics survey. The survey found that 11% of construction and 18% of manufacturing workers had noncompete contract clauses. Sales (22%), management business (21%) and production (16%) rounded out the top three industries with the highest rates of noncompete clauses. The data was compiled from the 2017-18 round of the 1997 cohort of the National Longitudinal Survey of Youth.

The FTC’s ruling bans for-profit employers from issuing new noncompetes and makes currently existing noncompete agreements unenforceable after the rule’s effective date. The ruling allows current noncompete contracts for senior executives to remain. Senior executives are defined as earning more than $151,164 annually and are in a policy-making position. It should be noted that California, Colorado, Oklahoma, North Dakota and Minnesota have fully or partially banned noncompete clauses.

According to FTC officials, evidence shows that noncompete clauses bind about one in five American workers, approximately 30 million people. They explain that noncompetes prevent workers across the labor force from pursuing better opportunities that offer higher pay or better working conditions. Noncompetes also hinder employers from hiring qualified workers bound by these contracts.

The FTC estimates the ruling could increase workers’ earnings across industries and job levels by $250 billion to $296 billion annually.

The ban has faced legal backlash, notably from the U.S. Chamber of Commerce, which sued the FTC over the ruling on Wednesday. Commerce president and CEO Suzanne Clark stated that since FTC’s inception more than 100 years ago, it has never been “granted the constitutional and statutory authority to write its own competition rules. Noncompete agreements are either upheld or dismissed under well-established state laws governing their use.”

Daryl Joseffer, chief counsel of Commerce’s Litigation Center, argues that the FTC ruling is an administrative power grab.

“The final rule to ban all noncompete agreements nationwide—except existing noncompetes for senior executives—is a radical departure from hundreds of years of legal precedent,” says Ben Brubeck, vice president of regulatory, legal and state affairs for Associated Builders and Contractors. “Ultimately, this vastly overbroad rule will invalidate millions of reasonable contracts—including construction project contracts—around the country that benefit businesses and employees.”

Officials from Associated General Contractors of America (AGC) state that even though legal challenges will likely delay the ruling, companies should begin “exploring alternatives to non-competes that may satisfy the company’s legitimate business objectives, including the protection of trade secrets and other confidential information, without violating the FTC’s rule.”

Leave a Reply

Your email address will not be published. Required fields are marked *