Why low-wage earners get noncompete agreements too
When Krishna Regmi started work as a personal care aide for a Pittsburgh home health agency in 2015, he was given a stack of paperwork to sign. "They just told us, 'It's just a formality, sign here, here, here,'" he said.
Regmi didn't think much of it. That is, until he quit his job nine months later and announced his decision to move to a rival agency — and his ex-employer sued him for violating a noncompete clause Regmi says he didn't know he had signed. The agreement barred Regmi from working as a personal care aide at another home health agency for two years.
Big companies often ask top executives who have access to confidential business information to sign noncompete agreements. But lowwage, unskilled laborers such as janitors, landscapers and entry-level health workers are often asked to sign them, too.
Employers say the agreements help them retain their workers in a tight labor market and protect their business interests — from secret formulas to client lists. And, they say, workers who sign them sometimes get additional training or higher pay in return, because their employer knows they won't leave for a competitor.
But advocates for workers say it's ridiculous to ask employees who don't have specialized skills or secret knowledge to give up their freedom to work for a rival company. They say noncompete agreements reduce social mobility and clog up the labor market by preventing businesses from hiring the workers they want and preventing workers from taking the jobs they want. And for many workers, just being threatened with legal action is enough to make them back away from their career and look for different jobs instead.
Requiring low-wage workers to sign the agreement is "really abusive, and I think interferes with people's ability to earn a living," said Maryland state Delegate Alfred Carr, a Democrat.
This year, legislation has been introduced in at least six states that would tighten the legal standards the agreements have to meet in order to be enforced, or make certain types of them illegal outright. Four states passed laws on the issue last year, including Illinois, which prohibited noncompete agreements for employees who earn $13 an hour or less.
Bills in Maine, Maryland and Massachusetts would restrict noncompete agreements that involve low-wage employees; New York Attorney General Eric Schneiderman, a Democrat, is pushing for the same change in his state. Proposals in Massachusetts and Washington would also restrict the agreements for other types of workers, such as temporary employees and independent contractors.
Such bills face an uphill struggle, however, often because of stiff opposition from business. "Noncompete agreements are essential to the growth and viability of businesses by protecting trade secrets and promoting business development," the Maryland Chamber of Commerce said in written testimony opposing a bill Carr introduced that would have voided agreements signed by workers who earn less than $15 an hour. The bill passed the House in February but died in the Senate.
Federal surveys don't track how many U.S. workers have signed a noncompete agreement. The best estimate comes from a 2014 online survey of more than 11,000 people analyzed by researchers Evan Starr of the University of Maryland and J.J. Prescott and Norman Bishara of the University of Michigan.
They calculate that about 38 percent of U.S. workers have signed a noncompete agreement at some point in their careers and 18 percent of workers are currently bound by one. High earners are more likely to sign such agreements, but about a third of workers earning less than $40,000 have done so.
In theory, both employers and employees can benefit from noncompete agreements. But in practice, advocates for workers say the agreements often favor employers. And both parties can be confused about what courts will enforce.
Many workers sign noncompete agreements after they have accepted a job, when they have less power to negotiate. In the survey study, respondents who signed an agreement after accepting a job or when they didn't have other offers were less likely to say they received something in return, such as better working conditions or additional training, Starr said.
Other survey respondents weren't sure if they signed one at all. "People who have high education levels, who are making lots of money — they're pretty confident about whether they signed or not," Starr said. "But people who are relatively lowskilled, people with, let's say, a high school degree or less, or people who earn less than $40,000 — they're very unsure."