Now a national backlash is building against employers that make such movement harder with noncompete agreements that bar departing employees from taking jobs with industry competitors for certain periods of time. That’s good news for workers, because eliminating barriers to job-hopping could help stir the kind of wage growth workers haven’t seen since before the last recession.
Employers have long used noncompetes to protect company secrets and intellectual property, applying them primarily to high-earning professionals such as business executives, scientists and lawyers. Noncompete provisions have also crept into contracts for lower-wage workers like janitors, hairdressers and dog walkers, with companies saying those workers have access to proprietary information and customer bases.
In Washington, state legislators last month passed a law making noncompetes unenforceable for certain workers, including employees earning less than $100,000 a year. Hawaii in 2015 banned noncompete agreements for technology jobs, arguing they imposed hardship on tech employees and discouraged entrepreneurship. A later study found that the Hawaii ban increased mobility by 11% and wages for new hires by 4%.
Earlier this year, New Hampshire’s Senate passed a bill banning noncompete agreements for low-wage workers, and lawmakers in Pennsylvania and Vermont have proposed to ban noncompetes with few exceptions.
Attorneys general also have successfully challenged some of these agreements. WeWork Cos., for example, last year agreed to sharply curtail its practice of requiring most employees to sign noncompete agreements, as part of a settlement with attorneys general in New York and Illinois.
After the settlement, WeWork released 1,400 rank-and-file employees, including cleaners and baristas, from noncompete agreements nationwide. The terms of another nearly 1,800 employees’ noncompetes were made less restrictive. The shared-office company declined to comment on the percentage of its employees that are still bound by noncompete agreements in the U.S.
New York and Illinois also reached settlements in 2016 with sandwich chain Jimmy John’s to stop it from including noncompete agreements in its hiring packets. The company said in a statement it no longer uses noncompete agreements; nor does it encourage franchises to use them.
The vast majority of noncomplete clauses should be banned by the next unified Democratic government. At a minimum, there should be a substantial, inflation-adjusted minimum salary requirement like Washington has imposed.