Approximately 30 million American workers are bound by a non-compete clause, according to the FTC, which estimates the proposed rule would increase workers’ earnings between $250 billion and $296 billion per year.

“I’m not sure where the FTC gets these numbers, but they seem spurious,” Linder says. “I don’t deny that there will be an increase in wages and more jobs, but it’s way overstated. This is especially true because of the severe deleterious impact a ban will have on businesses. So, whatever number may be accurate, but it doesn’t take into account how many jobs will be lost from the potential demise of many businesses.”

Non-competes’ waning power

Initially, non-compete clauses were reserved for technical employees, those who possessed the keys to the business and knew everything about the core product/service. Once employers noticed that non-competes influenced the retention rate, they expanded the clauses to all employees, which prompted the courts to intervene.

“Slowly, over the years, various state legislatures and (more often) various state courts have eroded non-competes to a certain extent,” Linder says. “As a simplification, courts have required companies to show why it’s reasonable for a court to enforce them. Each state that has done so has generally established different criteria that it uses in its deliberation on this.”

For example, a Colorado law went into effect last August that voids all non-compete agreements that aren’t entered into with a worker making at least the cap for “highly compensated” workers (in 2022, the threshold was $101,250); aren’t designed to protect trade secrets; or are broader than necessary to protect the employer’s “legitimate interest in protecting trade secrets.”