Employers would face limits on restricting lower-paid workers’ future jobs

Employers and clients would be barred from making, enforcing, or trying to enforce covered noncompete agreements. The rule would cover employees and contractors whose employer’s or client’s activities involve or affect trade. Stronger state protections against noncompete agreements would remain in place. The cutoff would increase with inflation each calendar year after 2026.

Eligibility would use actual or expected yearly cash pay from each employer or client. Cash pay would include wages, cash bonuses, and contractor fees, but exclude stock-based pay. For current workers with at least 12 months of service, bonuses, commissions, and other variable cash pay would use the preceding 12 months’ earnings. For current workers with less than 12 months of service, only guaranteed variable cash pay would count. Current workers’ pay would be measured when the agreement is imposed as a job condition or enforcement is sought. Former workers’ pay would be measured when their employment or contract ended.

Employers and clients would have to send covered workers written notice that prohibited agreements cannot be enforced. Notices would go to current employees and contractors below the pay cutoff, plus former workers with covered agreements.

The Federal Trade Commission would enforce the ban and notice rules, and state attorneys general could sue over violations. State lawsuits could seek court orders stopping violations, compliance with the rules, and money for affected residents. A state attorney general could sue when a violation harms or threatens residents’ interests.