A non-compete agreement is a contract entered by an employer and an employee. The contract dictates the types of work and employment a former employee may seek after their employment has ended. Non-competes restrict former employees from (a) working for particular employer for a designated amount of time, (b) working within a defined geographical area, and/or (c) completing the same type of work they engaged in with their original employer for any other employer. Non-compete agreements may be within an employment contracts, other employment agreements, or stand as its own sperate document. According to a report filed by the U.S. Department of Treasury’s Office of Economic Policy (OEP), in 2016, 37% of workers reported that they, at some time, were employed under a non-compete agreement.
Impacts of Non-Competes
Supports argue non-compete agreements are good for both workers and the economy. However, these contracts can place workers in a precarious position. People are often unaware of the full implications of non-competes. Some companies reveal a non-compete agreement must be signed only after a person has accepted a job offer, or even after they have already begun working in a new position.
While non-compete agreements share the same general goals the specific details and language used within the contracts are unique to the company. The use of vague language adds to employee’s inability to completely understand their contracts. Unclear language also means that without realizing it, workers may be signing a non-compete agreement that in unenforceable within their state. Finally, non-compete agreements can place an extra burden on workers fired without just cause as they seek new employment within their industry.
Should I Sign a Non-Compete
Many workers believe non-competes must be signed as is. This is not the case. Non-compete agreements are negotiable. Reading them carefully, insisting on clear statements rather than vague ones, and having an employment attorney assess a non-compete’s legality and fairness are all ways workers can ensure they maintain power within their employment.
When negotiating a non-compete it is also important to understand why a company has one. Proponents of non-compete agreements say the contacts not only protect companies but also encourage them to invest in workers. Having non-competes boost company’s willingness to spend money on training workers without feeling they will lose an investment should a person quit and begin working for a competitor. It is also argued that non-competes are used to ensure that the employees they hire are committed to the company. Opposers say the harm non-compete agreements causes employees outweighs the security it may give companies. In addition, they argue these benefits cannot be proven.
Opponents of Non-Competes
Companies ranging from Jimmy John’s and Microsoft have required their employees to sign non-complete agreements. Organizations, such as presidential campaigns, are also known to implement non-competes. The main reason companies and organizations often cite for their use is ‘the protection of trade secrets’. They argue that such contracts ensure that former employees will not share their industry practices and secrets with rivals. In addition, they argue implementing non-compete agreements stop employees from threating to reveal trade secrets in exchange for better benefits or higher pay.
However, opponents of the contracts point out that many states already possess laws that prohibit the theft or disclosure of trade secrets; and, they argue that companies have found numerous ways to protect themselves. The offering of additional pay or raises based upon a worker’s continued employment is one example of companies protecting themselves and their trade secrets. In addition, the OEP’s report found that many workers employed under non-discourse agreements did not possess any trade secrets. In 2016, 14% of workers without a 4-year college degree and 15% of workers who made less than $40,000 a year reported having signed a non-compete.
In the case of Jimmy John’s, for example, employees signed agreements in their contracts that barred them from working for Jimmy John’s competitors for two years or from working within two miles of a store after leaving the company. The New York Office of the Attorney General investigated the franchise in 2014 and two years later found that the non-competes were unlawful.
Eric Schneiderman, New York’s attorney general at the time, stated “Noncompete agreements for low-wage workers are unconscionable.” He continued, “They limit mobility and opportunity for vulnerable workers and bully them into staying with the threat of being sued. Companies should stop using these agreements for minimum wage employees.”
Donald Trump’s 2016 presidential campaign, like many others, implemented non-compete agreements. They barred personnel from working on the Clinton campaign after terminating their employment. What was unusually, however, was the broadness of the contract. Its reach expanded beyond volunteers and campaign employees, stating that independent contractors must ensure that their employees would not complete work on a political rival’s campaign. In this case the non-compete affected workers who had not even signed the contract themselves.
While typically non-competes are drawn up for high level professionals, cases like Jimmy John’s and the Trump campaign call into question the contract’s use and enforceability. This is especially apparent when they are placed upon lower level or minimum wage workers who require mobility and opportunity to fully practice economic freedom.