Clauses that hurt workers
Many businesses have long required that executives and other important employees agree not to work for a competitor for a year or two after they leave. Now some employers are unfairly imposing that requirement on all kinds of workers, including lower-wage employees like camp counselors, interns and yoga instructors.
The indiscriminate use of such noncompete clauses hurts workers by limiting their ability to seek better jobs in their chosen professions. One study found that workers switch jobs less frequently when they are restricted by such clauses and earn less money than similarly qualified workers who are not bound by these agreements. Experts have also found that states like California where courts do not enforce noncompete clauses tend to have more entrepreneurship than states where the clauses are recognized.
Proponents argue that there is nothing wrong with noncompete agreements because most workers willingly agree to them. This assumes, preposterously, that employees have the same bargaining power as their employers. Indeed, some workers may not even realize they are agreeing to such conditions because the clauses are tucked deep inside employment documents. This is particularly true among young people and lower-skilled workers who, unlike senior executives, cannot afford lawyers to negotiate agreements on their behalf. These workers take entry-level jobs precisely because such jobs give them the experience they need to move on to more challenging and rewarding work.
Lawmakers in some states have realized the problems. Like California, North Dakota does not enforce the clauses, while other states give courts discretion to determine if such clauses are “reasonable.” In Massachusetts, lawmakers are so worried that these clauses are hurting workers and the state economy that they are considering making the clauses broadly unenforceable.
Some business groups have argued that noncompete clauses are needed to make sure people do not trade in, and illegally profit from, the intellectual property of their former employers. But there are better ways to prevent the theft of trade secrets — by, for instance, suing former workers for violating nondisclosure agreements aimed at protecting sensitive documents and corporate strategy.
That would require a trip to court. But so would enforcing noncompete agreements that seem increasingly harmful to both individuals and the economy as a whole.