These non-compete agreements are now under fire … from feds
If you have any of these non-compete agreements with employees, they may be on the endangered species list.
They are:
- Agreements with lower-wage workers
- Agreements with workers who promote public health and safety, and
- Agreements with employees who are not privy to trade secrets.
The White House issued a call-to-action to reform non-compete agreements.
Specifically, the White House has asked that individual states create legislation that would ban the kinds of agreements listed above — rather than have the federal government enact more sweeping legislation.
In a fact sheet issued by the White House, the Obama administration said 20% of the U.S. workforce is bound to non-competes, including 14% of those earning less than $40,000 per year. It said banning the kinds of agreements mentioned above would lead to a more competitive labor market and faster wage growth.
The White House outlined three best-practices it identified as steps states could use to shape their non-complete laws for the better:
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Ban non-compete clauses for categories of workers, such as workers under a certain wage threshold; workers in certain occupations that promote public health and safety; workers who are unlikely to possess trade secrets; or those who may suffer undue adverse impacts from non-competes, such as workers laid-off or terminated without cause.
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Improve transparency and fairness of non-compete agreements by, for example, disallowing non-competes unless they are proposed before a job offer or significant promotion has been accepted (because an applicant who has accepted an offer and declined other positions may have less bargaining power); providing consideration over and above continued employment for workers who sign non-compete agreements; or encouraging employers to better inform workers about the law in their state and the existence of non-competes in contracts and how they work.
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Incentivize employers to write enforceable contracts, and encourage the elimination of unenforceable provisions by, for example, promoting the use of the “red pencil doctrine,” which renders contracts with unenforceable provisions void in their entirety.
Capitol Hill turned its attention to non-compete agreements following a lawsuit against Jimmy John’s sandwich chain that grabbed national headlines. The lawsuit claims Jimmy John’s non-compete agreements with its sandwich makers and delivery drivers in Illinois are illegal because they significantly restrict the ability of those workers to seek employment at a competitor, despite those workers having almost no access to proprietary trade secrets or intellectual property.
Courts involved in similar lawsuits have struck down non-competes seeking to restrict the employment options of workers who’ve had no access to trade secrets.
We’ll keep you posted as this story develops.
