White House Calls For Ban On Non-Compete Agreements

On October 25, the White House called for a crackdown on non-compete agreements, saying that they stagnate wage growth and hinder employees from finding better work.

The agreements that employees sign to refrain from moving from one company to a competing one frequently lead to legal battles, but they are legal in every state besides California, North Dakota and Oklahoma, reports NBC News. The Obama administration said that many workers, such as those who make low wages or are not exposed to insider secrets, should not have to agree to them.

In a statement, Vice President Joe Biden recounted stories from unhappy employees who signed non-compete agreements and were unable to make additional income, such as a Nebraska teacher who was restricted from accepting a summer job selling pet food and a Connecticut salesman forced to spend his retirement savings after he was laid off, because a non-compete agreement barred him from taking any other sales jobs.

“Folks, no one should have to sit on the sidelines because of an unnecessary non-compete agreement,” Biden said in the statement, according to USA Today. “We have the most dynamic, productive workers in the world, but they can’t reach their true potential without freedom to negotiate for a higher wage with a new company, or to find another job after they’ve been laid off.”

The administration’s directive is another in a series of requests to states to do what a Republican-dominated Congress will not during Obama’s lame duck period.

Some employers say that non-compete agreements restricts them as well as potential employees.

“It suppresses employees from finding new jobs in their chosen fields,” said Mark Chandler, Senior Vice President of Cisco Systems. “But it also suppresses entrepreneurs from assembling teams to drive innovation.”

Others say that there are many legitimate reasons to require the agreements and that states should not ban them outright when some employers need them to protect their business.

“There need to be individualized assessments of the agreements that consider the industry and the geographical location,” said Beth Milito, senior legal counsel at the National Federation of Independent Business, according to NBC News.

The White House estimates that 20 percent of U.S workers are currently under non-compete agreements, including 14 percent of workers who make less than $40,000 per year.

Sources: NBC News, USA Today / Photo Credit: Steve Jurvetson/Flickr