Traditionally, non-compete clauses were found in contracts for senior employees who might have access to trade secrets or develop personal relationships to clients. Non-compete clauses help protect companies that fear employees will leave and take those assets to a competitor.
But when the recession receded, non-compete clauses started appearing in contracts for workers in low-wage jobs such as sandwich makers. They remain a roadblock for everyone from hair stylists to house cleaners. Their reach is difficult to determine because many workers don’t realize they have signed a non-compete clause. And though many courts are reluctant to enforce such agreements, few low-income workers have the resources to legally challenge them.
Full employment, economists predicted, would allow employees to shop around for better pay or working conditions. As workers flexed new bargaining muscle, wages would rise and conditions would improve because employers would face increasing pressure to find and keep talent – or so the theory went.
But though unemployment fell to 3.7% in September, that scenario hasn’t fully played out. One reason, research suggests, is that restrictive contract clauses have limited workers’ mobility and their ability to advocate for higher pay.
David Seligman, an attorney and director of Towards Justice, a not-for-profit legal organization that brought cases against fast-food restaurants over anti-competitive hiring practices, “the market for low-wage workers is not free”. Instead, he argues, “there’s all kinds of impediments to worker mobility”.
Michael Kenny’s 13-day stint at Critical Intervention Services (CIS), a Florida private security company, was short but consequential. Kenny says he couldn’t find childcare. When he sought a schedule change, Kenny claims CIS told him to work his assigned shift or resign his $11.75-an-hour job. When Kenny began work at another security firm, CIS wrote to his new employer claiming that Kenny had signed a non-compete clause and thus had illegally taken proprietary information and specialized training with him. The new employer soon fired Kenny.
“This is about money and greed,” said Jonathan Pollard of Pollard PLLC, who is representing Kenny for free along with colleague Alexander Gil. “Companies use non-compete agreements to lock up talent, restrict employee mobility and suppress wages.”
In July, the Massachusetts attorney general, Maura Healey, and attorneys general from 10 other states requested information from eight fast-food chains about their use of no-poaching agreements, in which franchise owners agree not to hire workers from other locations within the same franchise. The attorneys general are currently reviewing the responses. Separately, Washington state attorney general Bob Ferguson reached legally binding agreements to stop including no-poach agreements in contracts with 30 franchises since July.
Non-compete clauses restricting workers from taking a job at a competitor immediately after leaving a job have proven more difficult to rein in. California, North Dakota and Oklahoma won’t enforce non-compete clauses, but they still show up in contracts, according to Matt Marx, an associate professor at the Boston University Questrom School of Business, potentially discouraging workers who aren’t aware of their rights.
Non-compete clauses have now become common in healthcare, where employees often develop personal relationships with clients that employers argue could give competitors an unfair advantage when the worker changes jobs.
Non-compete clauses have now become common in healthcare, where employees often develop personal relationships with clients that employers argue could give competitors an unfair advantage when the worker changes jobs.
For now, non-compete clauses will likely continue to bind workers in fields like in-home healthcare – and worker advocates will continue to fight them. “In my experience,” said National Domestic Workers Alliance attorney and state policy director Rocío Avila, “those clauses … serve as a tool to intimidate and scare people off”.
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