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The US Federal Trade Commission has voted to ban non-compete agreements across the US economy.

The FTC on Tuesday voted 3-2 to implement the far-reaching measure it initially proposed in January 2023, in a bid to avoid wage suppression and protect innovation. 

Non-compete contracts have become pervasive across industries, experts say, amid limited oversight and a decline in unionisation. Approximately 30mn workers are subject to non-compete clauses, according to the regulator.

FTC chair Lina Khan on Tuesday said such agreements constituted “unfair methods of competition”, adding that the agency had received more than 26,000 public comments. Non-competes impinge on workers’ personal freedoms and “are directly undermining competition in product and service markets”, she added.

The ruling has inflamed industry groups, which have claimed it is too drastic and will increase business costs while putting trade secrets in jeopardy.

Andrew Ferguson, one of two Republican FTC commissioners who voted against the rule, said it was “unlawful” given the agency lacked authority as granted by Congress.