Obama Administration Eying Non-Compete Agreements
A May 2016 report from the White House says research suggests 30 million American workers are currently covered by non-compete agreements, and enforcement of them apparently is rising.
A report released May 5 by the White House says research suggests 30 million American workers are currently covered by non-compete agreements, and enforcement of them apparently is rising. They aren't being used solely for highly paid professionals or executives, it says -- about 15 percent of workers who lack college degrees are covered by non-competes, and recent media coverage indicates they are being used among low-wage workers including fast-food workers, warehouse workers, and camp counselors, it states. But engineering and computer/mathematical occupations do have the highest prevalence, at slightly more than one-third, of non-compete coverage, it says.
The report says that, as part of the Obama administration's efforts to support competition in consumer and labor markets, the White House, Treasury Department, and Department of Labor will convene a group of experts in labor law, economics, government, and business to discuss non-compete agreements and their consequences. "The goal will be to identify key areas where implementation and enforcement of non-competes may present issues, to examine promising practices in states, and put forward a set of best practices and call to action for state reform," as well as to prompt additional research on the use and effects of non-competes, it says.
The 16-page report is a summary of non-competes as currently used, not a detailed analysis; it briefly discusses how non-competes can depress workers' wages and limit their mobility. It discusses bans of non-competes for certain occupations or limits on their scope by several states, including Hawaii, New Mexico, Oregon, and Utah, while California's legislature has made non-competes generally unenforceable there. Idaho has passed a bill to restrict non-competes to "key employees," who are defined as those who "by reason of the employer's investment of time, money, trust, exposure to the public, or exposure to technologies, intellectual property, business plans, business processes and methods of operation, customers, vendors or other business relationships during the course of employment, have gained a high level of inside knowledge, influence, credibility, notoriety, fame, reputation or public persona as a representative or spokesperson of the employer, and as a result, have the ability to harm or threaten an employer's legitimate business interests." And a bill to be considered next year in Washington state would make non-competes void if the employee is a seasonal or temporary employee.
It also cites a Treasury report that found at least 37 percent of workers are asked to sign a non-compete after accepting a job offer, when they have less leverage to bargain because they already may have turned down other job offers.
While the administration plans to identify best practices and issues, "Ultimately, most of the power is in the hands of State legislators and policymakers in their ability to adopt institutional reforms that promote the use and enforcement of non-competes in instances that appropriately weigh their costs and benefits and in ways that provide workers appropriate levels of transparency about their rights," the report's conclusion states.