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.
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Photo: Thomas Heylan via Flickr