The recent decision by the Federal Trade Commission (FTC) to outlaw nearly all noncompete agreements has set the stage for a significant shift in the balance of power between businesses and workers in the United States. This ruling, which is currently facing legal challenges, could make it easier for millions of American workers to leave their jobs and join competing companies or start their own ventures.

The FTC's new rule, if allowed to stand, will mark a departure from decades of established law, according to Chris Marquardt, Alston & Bird's labor and employment law head. The ban applies to employees and independent contractors across various industries, from doctors and engineers to fast-food workers and salespeople, with very few exceptions. Notably, CEOs, presidents, and senior executives who earn more than $152,000 per year and have policy-making authority are exempt from the ban for existing agreements, although new agreements with these high-level executives will no longer be permitted.

Not all industries will be subject to the ban, as certain institutions such as banks, specific nonprofits like healthcare providers, and stockyards are exempt. This exemption may allow traditional banks to exert more control over departing employees compared to private equity firms or hedge funds on Wall Street.

One exception to the ban allows noncompete agreements to be used in protecting a company's interests during a sale. However, many businesses are vigorously opposing the FTC's ruling. The US Chamber of Commerce, among others, has filed lawsuits challenging the authority of the FTC's non-elected commissioners in making such a decision, arguing that only states have the power to regulate agreements between workers and companies. Some states, like California, have already banned noncompete agreements due to concerns about restricting worker mobility and discouraging innovation.

Critics of the ban argue that it will result in costly and ineffective court battles, as employers will likely sue to safeguard their confidential information and skilled workers may claim that their right to negotiate noncompete agreements has been unlawfully taken away. Employers also express concerns over the potential risk to their trade secrets and the uncertainty surrounding the legality of alternative forms of trade secret protection, such as non-solicitation and non-disclosure agreements.

Legal experts predict that the legal challenges will likely lead to a judge temporarily blocking the implementation of the ban, with the ensuing legal battle potentially reaching the Supreme Court. Regardless, employment attorneys advise businesses to start reevaluating their employment agreements to ensure compliance if the ban survives the legal challenges.

As the debate unfolds, the future of noncompete agreements hangs in the balance, while the potential impact of the ruling on the US employment landscape may shape the relationship between businesses and workers for years to come.