A report was recently released by the Obama Administration illustrating a link between "unfair" noncompete agreements and low worker job mobility, worker bargaining power and entrepreneurship. The administration highlighted concerns regarding the unnecessary use of noncompete clauses in situations in which workers already have less bargaining power, or when the policies are so broad that the intent is often unclear.
According to the White House Report,
Workers' value comes in part from the skills and experiences gained on the job. Non-competes can reduce workers' ability to use job switching or the threat of job switching to negotiate for better conditions and higher wages, reflecting their value to employers. Furthermore, non-competes could result in unemployment if workers must leave a job and are unable to find a new job that meets the requirements of their non-compete contract.
An employer's reasoning for use of a noncompete agreement is to encourage loyalty, as it prohibits employees from bringing innovative ideas or trade secrets to rival businesses within the industry. The administration emphasized in its report that, while the intent to protect the innovation and intellectual property of a business is valid, many workers are forced into signing noncompetes whether or not they have access to the secrets that these agreements are meant to protect.
The State of Oregon passed legislation limiting the enforceability of noncompete agreements for employees under a certain income threshold. This legislation requires that the nature of the noncompete agreement must be presented along with the job offer so as not to blindside workers who might have other offers at the time. Oregon further mandates that employers with noncompete agreements provide incentives to their workers in the form of pay raises, training, and promotion.
Noncompete agreements are currently covering one in five workers in the United States, including many low income workers. The Obama Administration is compelling employers to reconsider the intent and real impact of these agreements on their workers.
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Knaub, Kelly. "White House Says 'Unfair' Noncompetes Can Hurt Workers." Law360. Last modified on May 6, 2016.
White House Report: https://www.whitehouse.gov/sites/default/files/non-competes_report_final2.pdf