In a significant move to promote competition and boost the economy, the Federal Trade Commission (FTC) has proposed a final rule that would ban noncompete agreements for all workers, including senior executives. The proposed rule aims to enhance innovation, foster new business formation, and increase worker earnings.

Under the final rule, employers would be prohibited from entering into noncompete agreements with workers after the effective date, as this practice would be considered an unfair method of competition and a violation of Section 5 of the FTC Act.

However, the treatment of existing noncompetes varies depending on the workers' positions. For senior executives, current noncompetes can remain in force, while noncompetes with workers other than senior executives would become unenforceable after the effective date. It is estimated that less than 1% of workers would be classified as senior executives under the final rule.

The final rule defines a "senior executive" as someone earning more than $151,164 annually and occupying a "policy-making position." This definition helps provide clarity and ensures that the rule targets noncompetes that are likely to significantly impact the labor market.

If implemented, the FTC anticipates a host of positive outcomes. The banning of noncompetes is projected to result in reduced spending on physician services, with estimated savings ranging from $74 billion to $194 billion over the next decade. This reduction in healthcare costs is expected to benefit both individuals and businesses alike.

Furthermore, the rate of new firm formation is predicted to increase by 2.7%, leading to the creation of over 8,500 additional new businesses each year. This surge in entrepreneurship could inject vitality into the economy, create jobs, and foster a more competitive business landscape.

The prohibition of noncompetes is also anticipated to drive innovation, with an estimated average of 17,000 to 29,000 more patents filed annually for the next ten years. In the first year alone, a predicted 3,000 to 5,000 new patents are expected, eventually rising to 30,000 to 53,000 patents in the tenth year. This represents an average increase of 11% to 19% per year over the ten-year period.

Perhaps most exciting for workers is a projected increase in wages. The FTC estimates that worker earnings could see a boost of $400 billion to $488 billion over the next decade if noncompetes are banned. On average, each worker could experience an additional $524 in their annual earnings, resulting in improved financial stability and prosperity.

The FTC's final rule serves as a testament to the agency's commitment to promoting competition, supporting consumer interests, and strengthening the U.S. economy. By curbing the use of noncompetes, the proposed regulation aims to level the playing field, foster innovation, and ultimately create a more vibrant and dynamic labor market.

It is important to note that the FTC will never demand money, make threats, ask for money to be transferred, or promise prizes. The agency's role is solely focused on shaping policy initiatives that have a positive impact on competition, consumers, and the overall national economy.