[THE VIEW] U.S. Lifts Restrictions on Joining Competitors After Resignation

FTC Bans Noncompete Agreements for Companies
U.S. Regulation Calls for Flexible Workforce Management
for Korean Firms Entering the American Market

Last month, the U.S. Federal Trade Commission (FTC) enacted a regulation prohibiting all for-profit companies in the United States from entering into new noncompete agreements with their employees. These agreements restrict workers from joining competing companies for a certain period and have generally been used to protect corporate secrets and intellectual capital.

The FTC’s decision can be seen as part of a policy aimed at expanding economic freedom and market competition in the U.S. While noncompete agreements have been used under the pretext of protecting corporate secrets and knowledge, they have effectively limited talent mobility and suppressed economic activity. Therefore, this change is notable in that it protects employees’ rights to freely change jobs, offers broader economic freedom through new business opportunities, and promotes creativity and innovation.

On the other hand, the decision has raised concerns about weakening corporate intellectual property protection and regulatory uncertainty. Companies will need to invest more resources to safeguard their intellectual property and redefine operational strategies in the new regulatory environment by strengthening legal frameworks such as confidentiality agreements. This policy shift is expected to have a significant impact not only in the U.S. but also on the global labor market.

Although competitiveness in the global market has always been important, the prohibition of noncompete agreements makes it even more crucial for Korean companies entering the U.S. market or collaborating with U.S. firms to establish more transparent and flexible workforce management strategies. For example, maintaining competitiveness will require offering various incentives such as wage increases aligned with global trends and standards, improved working conditions, and career development opportunities. Additionally, from an international perspective, companies need to adjust corporate culture and HR policies, review talent recruitment and management strategies within the U.S., and promptly strengthen necessary legal measures by reassessing legal risks.

Currently, there are six months remaining before this regulation takes effect, and some organizations, including chambers of commerce, have filed lawsuits arguing that the FTC lacks the legal authority to enact such rules. I believe this change can ultimately serve as an opportunity to create a healthier and more dynamic labor market, improve overall labor standards, and promote innovation. However, several prerequisites are necessary for the successful implementation of the noncompete agreement ban. First, clear and consistent legal regulations are required, along with education and awareness efforts to ensure both companies and employees fully understand the rules.

Finally, ongoing evaluation of the regulation’s economic and social effects is needed to minimize unintended negative impacts on both companies and workers. Ultimately, finding a balance between promoting labor market flexibility and overall economic innovation and protecting corporate intellectual property is crucial. How transparently and clearly this regulation harmonizes with the law and is enforced will be a key factor.

Yunseok Son, Professor at the University of Notre Dame, USA