The Federal Trade Commission (FTC) has proposed a new regulation that would block companies from forcing employees to sign noncompete clauses that threaten legal action if they join a competitor or start their own competing business.

Roughly 30 million people—about one in five American workers—are bound to noncompete clauses across a variety of jobs, including hairstylists, doctors, and even sandwich makers. These workers are often forced to remain in their current jobs, which may pay less than other companies, or risk being shut out of their industry altogether.

The FTC rule, proposed on Jan. 5, could have massive ramifications for the U.S. economy, raising wages and increasing competition among businesses, economists say.

“Noncompetes are basicall…