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Two Lawyers Explain Why There's No Legitimate Reason For Most Non-Compete Clauses

Increasingly, courts and society weigh the social benefit from employers as greater than the social benefit from workers.
Two Lawyers Explain Why There's No Legitimate Reason For Most Non-Compete Clauses
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Marilynn Mika Spencer of The Spencer Law Firm is an employment and labor law attorney in San Diego, California. Anthony Munter of Price Benowitz is a qui tam and whistleblower attorney in Washington, D.C.

We were mad as hell after reading the excellent article on non-compete causes by Danny Westneat of the Seattle Times.

Mr. Westneat described the absurdity and unfairness of employers forcing non-compete agreements on low-wage workers – thus limiting or even eliminating the employees’ future job options –and then going even further and suing those low-wage workers to enforce those provisions.

What made us so mad?

First, knowing how desperately low-wage workers need an income, and need it now. These are not workers with a cushion of savings to tide them over in hard times. For these workers, hard times are all times. They are always there. If a low-wage worker is lucky enough to find a job in this rotten economy, chances are good the worker will sign anything and everything thrust before him. Most employers know this and are quick to take advantage, adding arbitration clauses, privacy waivers, non-compete agreements, and more to the mass of paperwork a job applicant or new hire must sign just to get to the next step.

As a society, we don’t condone a party with great power forcing its will on a party without power. We limit interest on loans and fees, we enact usury laws, we require critical contract language to be highlighted in bold type, we declare certain agreements unenforceable because they violate public policy, and more.

Yet, most states still allow and enforce employee non-competition agreements. When we did a little research on the subject, we found confirmation of the more disturbing trend that we’ve already noticed: increasingly courts and society weigh the social benefit from employers as greater than the social benefit from workers. They use only a shallow rationale to support their pro-employer decisions. This has created an increasing solidification of the role of money in society as the most important consideration.


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For example, one article in favor of restricting employee’s future job options began by explaining that the employer makes an investment in training workers, and then jumped to the horrors of losing that investment – as if that loss were worse than losing one’s income, home, and ability to feed the family. The article therefore concluded that only the employer has an interest in protecting its investment and so we should enforce the non-compete.

What are we really talking about with respect to low-wage workers? How much has the employer invested in training? Specialized tools or equipment? How long was the training? A few hours? A few days? Certainly not a few weeks. If an employer pays an employee $10 an hour, how much of an investment has the employer made in this worker? Obviously the employer doesn’t see the worker as valuable enough to pay $13 or $15 an hour. Wouldn’t it be more likely the employee would stay on the job if the employer paid $15, $16 or (gasp!) $17 an hour? The idea that the worker also is investing in his or her own life and career did not merit consideration.

No, the employers who force non-competition agreements on employees are not protecting a meaningful investment. There must be something else.

Although we concentrated our review of non-competes on those provisions that limit future job options, we also found false arguments in the justification employers’ use to impose trade secret agreements on low-wage workers. The employer’s main argument here is that it needs to protect against potential damage from a competitor getting its hands on the employer’s trade secrets. That might be fair, but it has nothing to do with a non-compete. An employer with trade secrets can sue to protect them so they do not need a non-compete clause for that reason.

Even worse in this context we have to ask: How much access to a trade secret does a minimum wage or low-wage worker have?

It doesn’t look like the employer is protecting itself from the competition. Again, something else must be going on.

What is really going on is employers imposing non-competition agreements on low-wage workers to undercut any power the employees have. The employers want to remove perhaps the workers’ only bargaining chip: the right to stop working for an employer when they want. If the employee is not free to withhold his or her labor and not free to quit and work somewhere else, then the employee is wedded to the current employer, like it or not.

This gives the employer inordinate power over any employees. It doesn’t matter how poorly paid the worker is, how unsafe the workplace is, how oppressive management is. The employee is stuck. If the employee wants to pay the rent and feed the kids, the employee has to endure whatever the employer imposes. This utter inequality makes a mockery of the employee’s supposed freedom to contract for his labor. It also reveals the lie inherent in at-will employment. (At-will employment is the legal doctrine found in 49 of the 50 United States that says an employer can fire, or demote an employee whenever it wishes, and an employee can quit whenever she wishes.) This kind of top-heavy control severely hampers the likelihood that the employees will organize into a union, thus completely eliminating any potential to even-out the playing field.

The argument that non-competes should be valid has no balance. The worker being paid (and demonstrably underpaid, considering he can get a higher-paying job somewhere else) must suffer lower than market rate wages because his employer wants to enjoy as much control as possible over his employee’s life.

What does the low-wage worker get? Subsistence, if she is lucky. Who among us hasn’t heard of, or doesn’t know, people working two or even three jobs, just to get by? Can the low-wage worker work toward a better future? Can the low-wage worker learn a skill and outgrow her current job? Can the low-wage worker increase her contributions to society?

As our economy started its decline in 2006 and 2007, the voices against capitalism got louder and gained support. To counter this opposition, those in power argued back that once the economy got better and employers must again compete for labor, then labor would get something out of the deal, too. Yet the economy has been improving, albeit slowly, for a couple years now without the workers “getting something” out of the bargain. At best, they’ve regained just a fraction of what they’ve lost.

We urge you though not to think of this fight as “the other guy’s problem.” Maybe you make a lot more than $15 an hour. Maybe you have a better paying job. Still, what would happen to your marketability in this already-tough labor world if you had to sign one of these non-competition agreements? Do not be pacified just because you may make more than $15 per hour. Once large employers realize they can suppress wages and eliminate dissent through this tool, they will use it on everyone.

The mid-term elections are over, but you still have a voice. Don’t stop using it. People don’t change their views quickly, and we have to be aware of these issues at all times. If this issue makes you mad, watch carefully and write a lot about it. If you think you have a case then talk to a lawyer and find out what your rights are.

The people who want to impose these kinds of conditions on your right to earn a living will not stop. It is up to us to fight to prevent these provisions from taking away our right to compete.

Marilynn Mika Spencer of The Spencer Law Firm is an employment and labor law attorney in San Diego, California.

Anthony Munter of Price Benowitz is a qui tam and whistleblower attorney in Washington, D.C.

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