In 2014, Keith Bollinger, a textile worker in North Carolina, did what many of us have done at some time in our lives – he moved job when he found better-paid employment in another factory. At which point TSG Finishing, the company whose employment he left, sued him. A three-year court battle ended with Bollinger without either job, and with his savings completely wiped out. Why? Because, he had, without realizing it, signed a ‘non compete’ agreement, designed to prevent him from leaving his employer for a competitor. These contracts have long been routine among senior executives. But now they are being used by companies to restrict the job opportunities of blue collar workers like Bollinger. And in restricting their job opportunities they also reduce workers’ bargaining power, and hence lower wages.
One academic study found that 37 per cent of US workers have signed such agreements some time in their life, and that 18 per cent (almost 30 million workers) were currently working under such agreements. Given that many workers who sign such agreements do not realize that they have, the real figures are likely to be much higher.
Even ordinary unskilled manual jobs often involve such contracts. Amazon, for instance, requires its warehouse workers, including seasonal hires, ‘not … [to] engage in or support the development, manufacture, marketing or sale of any product or service that competes or is intended to compete with any product or service sold, offered or otherwise provided by Amazon’ for 18 months after leaving the company’s employment. Fast food workers, too, have their hands tied in this fashion. The sandwich chain Jimmy John’s prohibited its employees from working at any other restaurant that sells ‘submarine, hero-type, deli-style, pita and/or wrapped or rolled sandwiches’ within two miles of a Jimmy John’s shop for up to three years after they were employed by the firm.
The consequence of such contracts is to give employers ownership over work experience as well as over work. It also creates a rigged labour market, reduces workers’ bargaining power, and helps keep wages artificially low. ‘Stricter non-compete enforcement’, according to a US Treasury Department report, is ‘associated with both lower wage growth and lower initial wages.’ ‘People can’t negotiate when their company knows they won’t leave’, as Sandra E Black, economics professor at the University of Texas at Austin, puts it.
A recent New York Times article told the stories of the kind of blue collar workers who now get sued for changing jobs, including
Timothy Gonzalez, an hourly laborer who shoveled dirt for a fast-food-level wage, was sued after leaving one environmental drilling company for another. Phillip Barone, a midlevel salesman and Air Force veteran, was let go from his job after his old company sent a cease-and-desist letter saying he had signed a noncompete.
Many workers don’t even realize that they have signed such deals. Non-compete contracts are often given to workers to sign after they have started work. ‘All I heard — at that age and the situation I was in — was just, ‘If you want a paycheck, sign here,’ and so I signed there and went to work’, Gonzalez told the New York Times.
The rigged labour markets imposed by non compete agreements are a scandal. Yet, there has been little outcry about them. Contrast that with the hostility created towards immigration, and the vocal campaigns to reduce immigration levels, supposedly because immigrants drive up unemployment and drive down wages (when, in fact, there is little solid evidence for this). It’s not just a rigged labour market, but a skewed public debate.