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Wednesday, October 26, 2016

In olden days, the way you kept good workers was to pay them more. That’s no longer the case in many jobs. Companies have been using “noncompete” agreements to stop these workers from seeking better compensation at rival companies.

Originally designed to stop tech whizzes from taking company secrets to higher bidders, these noncompete agreements are being forced on workers loading boxes at warehouses or assembling sandwiches so that they can’t go to the warehouse or sandwich shop down the block.

Such agreements have been challenged at Jimmy John’s sandwich franchise and Subway, among others. According to The Huffington Post, the Jimmy John’s contract forbids an employee to work at any company making more than 10 percent of revenues “from selling submarine, hero-type, deli-style, pita and/or wrapped or rolled sandwiches” within 3 miles of a Jimmy John’s (anywhere in the country) for two years.

The practice is outrageous, and a new bill before Congress would bar noncompete contracts for jobs paying less than $15 an hour. Introduced by Sen. Al Franken (D-MN) and Rep. Chris Murphy (D-CT), the legislation is aptly named the MOVE Act, which stands for the Mobility and Opportunity for Vulnerable Employees Act.

The need for such protections is truly a sign of these times. It reflects the increasingly skewed balance of power favoring top dogs over their delivery truck drivers.

Hotshot execs keep telling us that their companies have to pay them a zillion dollars an hour to attract rare talent such as theirs. You know, the supply and demand thing. When brilliant execs themselves are in short supply, you have to pay more for them.

But somehow, respect for the labor market’s law of supply and demand fades the lower down the corporate ladder you go. So here you have guys making $15 an hour and doing a good enough job that a company across town might pay them $17 an hour to do the same thing, but they can’t go.

Rather than give them a raise, employers wave these agreements workers had to sign as a condition of being hired. Lower-skilled workers rarely challenge them, although they can. (The employer has to demonstrate that the workers could expose privileged information to its competitors.)

Some companies are paying off former employers to get higher-skilled workers out of noncompete agreements. California has virtually banned all types of them.

Over 19 million workers are now covered by such contracts, according to a working paper by Evan Starr at the University of Illinois and Norman Bishara and James J. Prescott, both at the University of Michigan.

For obvious reasons, knowledge-intensive positions are likeliest to come with noncompete agreements. But the paper found that over 10 percent of repair jobs also require “noncompetes,” as do 11 percent of jobs in production (tailors, machine operators) and nearly 12 percent in personal services (barbers, gym instructors, manicurists).

Noncompete agreements do reduce worker turnover, an expense for businesses. But so do higher wages and superior working conditions.

Companies demand these agreements because, why not? Only 10 percent of job applicants try to negotiate for higher pay in return for accepting restrictions on their ability to seek employment elsewhere, according to the working paper. Those with more ordinary skills are assumed to be less combative and more accepting of whatever they’re offered. They just want the job.

They may get the job, but it’s one with rather tight strings. The MOVE Act would cut the strings for those lower down the pay scale. If it passed, many employers wanting to keep their most prized workers would have to do it the old-fashioned way — by paying them more.

Follow Froma Harrop on Twitter @FromaHarrop. She can be reached at [email protected] To find out more about Froma Harrop and read features by other Creators writers and cartoonists, visit the Creators Web page at 

Photo: Thomas Heylan via Flickr

  • Dominick Vila

    Situations like this, and the stagnant salaries we have seen during the last 15 years or so, are the direct result of unemployment and under employment. The situation will change as soon as the unemployment rate drops below 5% (considered full employment), when companies are forced to compete against each other for the workers they need to deliver their products or services. We are getting there, the question is how long will our economy prosperity last? With outsourcing (off shoring) and automation decimating American jobs in the pursuit of higher profits and market share in emerging economies, the long term future does not look too promising.
    The key to achieve sustainable growth at home includes a combination of investment in education, tax incentives to encourage private enterprise to invest at home, investment in infrastructure, investment in alternative energy sources, and getting rid of deficit spending and our trade imbalance.
    Sadly, our politicians seem more interested in talking about Benghazi, e-mail gate, and immigration, than focusing on things that may have a profound impact on our ability to preserve our privileged position in the world, and the challenges that may impact our way of life and standard of living in the not too distant future.

    • johninPCFL

      This is the fallacy of the Rick Scotts of the world: “when companies are forced to compete against each other for the workers they need to deliver their products or services”. They presume that some government action can force or induce companies to hire.

      In fact, companies hire when they need more employees to deliver the products and services they provide, and not before. The cost of those employees is normally 1/4 to 1/3 of their costs. 1/3 of a 10% employee cost increase is about 1% of the net profit. While not a forgettable expense, it’s hardly the driver that keeps current employment low.

    • toncuz

      Not really. The money is there…only the head pigs are keeping 90 percent of it. American productivity has been highest for twenty years and the average hourly wage is the eaxct same as it was in 1995…while the pigs income has grown 500 percent.

  • Daniel Jones

    If the MOVE Act is enacted, we may finally see the raise to 15 bucks an hour all over.. so the non-compete contracts stay in force.

  • 1standlastword

    Why are some people more deserved of legislative protections while other less fortunate folks aren’t?

    This MOVE act by democrats Frankken and Murphy is a TURD if it doesn’t protect most “ALL” of the people working in low wage jobs. If it only seeks to enfranchise those making $15.00 and more then ‘go back to the drawing board guys!!!’

    Too elitist and not truly progressive

  • Allan Richardson

    Non-compete agreements, along with the pre-ACA health insurance environment, are a clever way to get around that PESKY 13TH AMENDMENT. You can’t OWN your slaves any more, but you can make it economic suicide for them to leave you.

  • toncuz

    Funny…imagine if one corproation told another they could not buy parts from another corporate competitior…that would called “restraint of trade” and illegal.

    Business can have lobbies but the working class can’t have unions…
    Corporations can pay-off Congressmen but poor citizens have to jump through hoops to able to vote.
    Business can destroy your credit but there’s no rating system with half that power for service

    Does anyone see a pattern here? When corporations take over as government, it’s called “corporate fascism”…in fact,,,the original term as described by Mussolini when he invented the first corporate fascist state.

    When are we going to get a spine and start calling the people for pushing corporate fascism in America what they are???