Non-Compete Ban Fight Moves to States
Cheif economist Brian Callaci exclaims how that banning non-compete clauses is essential for protecting worker freedom, boosting the economy, and countering corporate coercion, even as federal support wavers
The future of the Federal Trade Commission’s landmark 2024 decision to prohibit non-compete clauses in employment contracts is uncertain. Now under chair Andrew Ferguson, the FTC has until September 8 to decide whether it will stand up for the ban in court. But even if the FTC wavers on its commitment, a growing number of states — both Democratic and Republican — are taking actions to defend the right of workers to freely move from job to job.
Enacted in 2024, the FTC’s non-compete rule is a near-total ban on contracts that prevent workers from leaving their current employer to take another job or start their own businesses. The Open Markets Institute led the coalition that first petitioned the FTC to ban non-competes in 2019. Last August, however, a judge in Texas held that the FTC had neither the statutory power nor sufficient evidence to enact the ban and stopped the rule from taking effect nationwide.
The benefits of the FTC fighting to uphold the rule are clear and substantial. The agency estimated the rule would increase worker earnings by $400 billion to $488 billion over 10 years. The rule would also likely lead to more innovation and business startups: When Hawaii exempted workers in technology industries from non-compete clauses, it resulted in a 10.2 percent increase in the number of technology establishments and a diffusion of skilled technology workers across the labor market.
The rule is also important for legal and moral reasons. The rule, for instance, revives notions of coercion and exploitation that, while long integral to antitrust, had been abandoned in favor of narrow “consumer welfare” since the late 1970s. In addition to adverse effects on wages and output, the FTC banned non-competes, in part, simply because they are coercive and exploitative.
The Trump FTC has thus far shown little practical interest in defending the Agency’s rule. Ferguson has expressed a preference to using individual lawsuits rather than a blanket ban to rein in non-compete clauses. But most legal experts believe such an approach would be clumsy and slow, and would ultimately fail to protect the interests of most workers. In an economy in which 18 percent of workers are bound by non-compete clauses, judicating the ban on a case-by-case basis guarantees a game of litigation whack-a-mole.
The FTC’s internal debate on the issue has also been warped by President Trump’s illegal firing of two of the three Democratic commissioners who originally voted in favor of the non-compete ban, Rebecca Slaughter and Alvaro Bedoya. The third vote came from then FTC Chair Lina Khan.
The good news is that a growing number of states are taking action. In April, Virginia’s Republican Governor, Glenn Youngkin, signed into law legislation expanding the state’s non-compete ban. Previously only applying to workers making less than the state’s average weekly wage, the state’s non-compete ban applies to all workers entitled to overtime under the federal Fair Labor Standards Act. In Ohio, bipartisan legislation broadly banning non-competes has been introduced in the Senate. In New York, state senator Sean Ryan reintroduced his bill broadly banning non-competes. Last year, the Rhode Island General Assembly, citing the FTC’s findings, passed a comprehensive ban on non-competes, though Governor Daniel McKee vetoed the bill on grounds that it was overbroad.
Other states are restricting the use of non-competes in more targeted ways. This year, Wyoming passed a non-compete law that covered a substantial fraction of the workforce but excluded broad classes of highly paid and professional employees from the law and did not limit the use of training repayment agreement provisions (TRAPs) requiring workers to repay employers for training received should they leave.
Concerningly, a few states have considered laws that would actually allow employers to impose non-competes more freely on their workers. For instance, Florida has decided to roll back its existing laws against non-competes with draconian new legislation. The new law, shaped by lobbyists for billionaire Kenneth Griffin’s hedge fund Citadel Capital, extends the maximum time for a non-compete clause to stay in effect from two years to four years for workers earning over twice the mean wage in the county where the employer resides (this salary threshold currently ranges from $80,000 to $150,000).
By contrast, earlier this year, the Minnesota legislature rejected an attempt to water down a new state level law restricting non-competes.
Supreme Court Justice Louis Brandeis famously called state governments “laboratories of democracy.” Even as the Trump administration acts to restrict democracy in sector after sector of the political economy, recent actions in states all across America suggest that protecting workers and small businesses from coercive practices like non-competes is a policy that enjoys broad, bipartisan support.
This article appeared in The Corner Newsletter: August 19th, 2025.
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