What is a Non-Compete Agreement?
Before you can understand how a non-compete agreement can affect you, you need to understand what it is. Non-competes have been around for a very long time. Non-compete agreements were originally designed to protect a business’s confidential information and trade secrets. Companies don’t want employees to learn all their secrets then be lured away by a competitor for higher pay. The agreements protected against the possibility that their business secrets would be passed to their competitors. They also keep an employee from leaving the business and starting a competing business using the information they learned while an employee.
That all sounds understandable. If a competitor learns a business’s secrets or strategy they could use those secrets in their own business and do a lot to counteract the other company’s strategy.
No Poaching Clause
But those non-compete agreements have morphed and are being used in ways that are harmful for regular workers. Companies are not just using them to protect their trade secrets, they’re now using them to chain workers to them. Many chain companies are using a No Poaching clauses in their Non-Compete agreements. What that means is that if you leave you cannot be hired by a competitor for three years which is the normal length of the contracts. Since a lot of chains are franchises even a different location of the same business is a competitor.
Why Businesses are Using No Poaching Clauses
So how can flipping burgers be considered some kind of trade secret? Why are businesses using no poaching clauses for low level, low wage positions? The excuse companies give is that it costs them a lot of money to train someone. They don’t want someone to get that training then go somewhere else (that pays better).
The reality behind this is money. If a company keeps losing staff to other companies because they don’t pay enough then the logical thing to do is to raise the pay to a level that the market bears but naturally that’s not what they want to do. They don’t want to have to pay an employee more. They want to pay workers as little as they can legally get away with paying them.
How these Agreements and Clauses Hurt Workers
It’s one thing when non-compete agreements were used on high level people who had other options to make their living. When these tactics are used against low level workers they can be extremely harmful. Normally the market dictates what the average worker gets paid in the private sector. Someone new into the workforce gets taught a job. Once they are in the field a while they realize that other companies pay more. Like anyone, they would like to earn more but they can’t move from where they are. They are not allowed to apply for those higher paying positions. The company has basically chained that employ to them almost like an indentured servant. If they want to leave they have to go into a completely different business which means they start from the bottom again and very likely have been locked into another no poaching clause.
These agreements allow companies to suppress wages with no repercussions. They make it extremely hard for a worker to make moves to better their financial situation. Quite often these workers don’t have the education or skills to easily transition to a different field that pays more. If they did, they would have already been there in the first place. Businesses are gaming they system. These companies want the free market when it works in their favor but not when it works against them.
Can You Refuse to Sign a Non-Compete Agreement?
A non-compete agreement is a legal contract. Signing it makes you legally bound. Quite often the agreement is added in with a lot of other documents you need to sign when getting hired. You may not even notice it’s there but even if it is obvious, if you don’t sign they are not going to hire you. This really puts people in a bind. Are you desperate? Do you need a job now? Do you feel your options are limited due to your lack of education or other reasons? Those businesses are counting on that desperation and your lack of understanding about non-compete agreements.
Can Anything be Done to Stop this Practice?
Businesses are designed to make money. Free market rules give them a lot of leeway to do that. To change their behavior usually takes regulations. There are two main political parties in our country. One that works mainly in favor of people and another that works in favor of big business. Right now Republicans are in charge. They work on behave of big business and against workers. Democrat Senators Elizabeth Warren and Cory Booker are trying to pass legislation to stop this practice but it’s not going to go anywhere. Republicans won’t let it. To get regulations that stop businesses from taking advantage of workers we will need to get more Democrats in office. We need Democrats to be the majority so protections can be passed. For that to happen you need to vote.
The Washington Post has a good article on this. Click here to read it.
And here’s an article on how Republicans in the red state of Idaho have made it easier for companies to use non-compete agreements and harder for people to move to better paying jobs.