Despite Mills’ veto, Maine workers will still see relief from binding noncompete agreements

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Just weeks after Gov. Janet Mills vetoed a bill to further limit noncompete clauses in Maine, the federal government finalized a rule banning the use of the agreements for most workers nationwide. 

The Federal Trade Commission (FTC) on Tuesday announced its finalized rule prohibiting noncompete clauses, which typically prevent an employee from working for a competitor during and for a period of time after their employment. 

The rule will go into effect later this year and will render the vast majority of existing noncompete clauses unenforceable after that date. The policy does make an exception for noncompete clauses already in place for senior executives — a group the FTC says represents less than 0.75% of workers — but prohibits new noncompetes for any worker. 

“Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned,” said FTC chair Lina Khan in a statement. “The FTC’s final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”

The agency also stated that banning noncompetes will increase workers’ wages and decrease health care costs. The FTC further argued that the current system of allowing noncompetes has often exploited workers and forced them to stay in jobs they would otherwise leave. About 30 million workers are subject to the agreements across the country, the agency estimated. 

This year in Maine, lawmakers also targeted noncompete agreements. In March, the Legislature passed a bill to restrict the accords by only allowing them in cases that would protect an employer’s “trade secrets” or when an employee has an ownership stake in a business. 

However, Mills vetoed the measure and lawmakers failed to override her opposition. Among other issues she raised about the bill, Mills cited the pending federal action, arguing that it would be “ill-advised” to enact state level legislation right before a new national policy is announced.  

Bill sponsor Rep. Sophia Warren (D-Scarborough) countered that Maine should be leading on the issue rather than waiting for action at the federal level. 

The fight on noncompetes at the federal level may not be over yet. The FTC’s vote to finalize the rule was 3-2, with the commissioners against arguing that the agency went beyond its regulatory authority. And the day after the finalized policy was announced, the U.S. Chamber of Commerce and other organizations representing business interests filed a lawsuit against the FTC over the ban.

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