Do We Really Need a Law to Ban Non-Competes For Hourly Workers?

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Jun 4, 2015

By Eric B. Meyer

Here’s a news flash: A new U.S. Senate bill would abolish non-competes for low-wage workers.

The Jimmy John’s thing aside, is that really an issue? The use of non-compete agreements for employees making less than $15 an hour?

Well, it’s called The Mobility and Opportunity for Vulnerable Employees (MOVE) Act.

According to a press release from Sen. Chris Murphy, D-CT, “research” shows that somewhere between 8-15 percent of low-wage workers have to sign non-competition agreements as a condition of employment. So, Sen. Murphy, along with U.S. Senator Al Franken, D-Minn., introduced the Mobility and Opportunity for Vulnerable Employees (MOVE) Act in the Senate.

The MOVE Act would amend the Fair Labor Standards Act to ban the use of non-compete agreements for employees making less than $15 an hour, $31,200 per year, or the minimum wage in the employee’s municipality, and will require employers to notify prospective employees that they may be asked to sign a non-compete agreement.

A “shaming exercise” for employers

Let’s go back to Sen. Murphy’s statistics.

If 8-15 percent of low-wage workers are affected by non-compete agreements, that means that means about 9 out of 10 low-wage workers aren’t encumbered by this form of restrictive covenant. And, how many of those one in 10 have had their former employer seek to enforce a non-compete? Indeed, I imagine that most do not pose a competitive threat.

Plus, the courts disfavor enforcement of restrictive covenants where the employee would be precluded from making a living, or the employer lacks a legitimate business interest in enforcement. So, we’re talking about a really small number of employees truly affected by this so-called “practice.”

Then, why break out the legislative handcuffs to police a workplace issue that really needs no policing? According to an article from Bloomberg Law’s Chris Opfer, Sen. Murphy described the MOVE Act as a “shaming exercise,” to bring attention to the issue.

Your tax dollars at work, folks.

Solutions in search of a problem

That said, 20 plus states have laws forbidding employers from demanding social media passwords from employees. That’s not so much a shaming exercise as a solution in search of a problem, with not a scintilla of supporting empirical research.

At least the MOVE Act is based on “research.”

This was originally published on Eric B. Meyer’s blog, The Employer Handbook.