Will ending non-competes be good for retail workers and their bosses?
Businesses include non-compete clauses in their employment contracts to protect trade secrets, but the practice has come under fire in recent years for unfairly preventing employees from pursuing better opportunities and wages. President Joseph Biden, last week, delivered an executive order that seeks to restrict the future use of such clauses.
The order encourages federal agencies such as the Federal Trade Commission to ban or limit non-competes in an attempt to curtail the practice, which the Biden Administration estimates is affecting 35 to 60 million workers and stifling economic growth, The National Law Review reports. The Administration has not, however, released any information about specific moves it wants agencies to take. It will also potentially take a considerable amount of time for the order to yield results.
At the signing of the executive order, President Biden pointed to cases in which non-competes appeared excessive, such as when they prevent people running machines that lay down asphalt from moving to competing businesses. He also cited two quick-serve restaurant giants as going too far with non-competes.
“You can’t leave Burger King to go to McDonald’s,” said Mr. Biden. “Come on. Is there a trade secret about what’s inside that patty?”
In the last few years some states have taken smaller-scale actions against the proliferation of non-competes in contracts, especially those aimed at lower wage earners. Large corporations have lobbied on behalf of the restrictive agreements.
The Washington state Senate passed a bill in 2019 exempting workers who make below $100,000 from non-compete clauses, a number favored by Amazon.com, according to The Associated Press. The original ceiling wage written into the rule was $180,000. Amazon’s average employee salary is $113,000.
The state law passed the legislature and went into effect in January, 2020 according to the Tyson Law blog. The law further nullifies non-competes pertaining to independent contractors who make less than $250,000 per year.
Some states even have existing labor laws that render non-competes unenforceable. For instance, an item in a California business law voids any contract that restrains people from engaging in “a lawful profession, trade or business,” according to the Callahan & Blaine Law blog.
- Biden Executive Order Signals Future Restrictions on Non-Compete Agreements – National Law Review
- Remarks By President Biden At Signing of an Executive Order Promotion Competition in the American Economy – The White House
- Amazon lobbies to exempt employees from labor protections – Associated Press
- Washington’s New 2020 Non-Compete Law – Tyson Law
- Are Non-Competes Enforceable in California? – Callahan & Blaine
DISCUSSION QUESTIONS: Do you support the current use of non-compete clauses by retail employers or do you think there should be more limits? How will limiting employers’ ability to use non-competes at the Federal level affect retail industry employers and employees?