The Federal Trade Commission (FTC) has enacted a final rule that prohibits noncompete clauses nationwide. The FTC maintains that this measure will safeguard workers' ability to switch jobs, stimulate innovation, and foster the creation of new businesses.

According to an FTC press release, noncompete clauses are prevalent, affecting roughly 30 million U.S. workers. "Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned," stated FTC Chair Lina M. Khan in the release. She further added, "The FTC’s final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market."

The FTC predicts in its press release that banning noncompete clauses will boost new business formation by 2.7% annually. This equates to over 8,500 new businesses each year.

The press release also suggests that the FTC expects the new rule to increase average worker earnings by $524 per annum and reduce healthcare costs by up to $194 billion over the next decade.

In terms of innovation, the FTC foresees in its press release that the prohibition will generate between 17,000 and 29,000 additional patents annually over the next decade.

Upon implementation of this rule as stated in the press release, most existing noncompetes binding workers will become unenforceable. Exceptions include existing noncompetes for senior executives who constitute less than 0.75% of workers. However, even with senior executives, entering into new noncompetes is prohibited under this rule. The final rule becomes effective 120 days after its publication in the Federal Register.