American businesses keep looking for ways to keep wages low. One way they have been able to do that is because since most people’s health insurance is obtained through their employment, that makes it difficult for people to leave since that would require them to find new health care providers, assuming the new employer does provide health insurance. And during the period between jobs, you would not have insurance. For many people, the least troublesome option is to stay with the same employer until it becomes intolerable.
But other measures exist to prevent workers from leaving for other jobs. Businesses sometimes have what are known as non-compete clauses in their hiring contracts. These serve to limit their employees from joining a competitor or starting a competing business if they should leave the company. The restrictions apply for a period of time, to a geographic region, or both, and are supposedly designed to prevent the employee from using knowledge and skills learned at the company against their former employer after they leave.
Usually these kinds of clauses only apply to high-level employees such as executives, scientists, and engineers who have access to valuable company information that would be useful to competitors. But in the April/May 2020 issue of The Progressive, Sharon Johnson writes that some companies are using them to bind low-level employees who did not have any valuable information so that they cannot leave for higher wage or better jobs.
A 2016 Treasury Department report found that 18 percent of American workers, including 15 percent of those without a four-year college degree and 14 percent of those earning less than $40,000 a year, have had to sign non-compete agreements.
The use of non-compete agreements has serious long-term consequences. Workers cannot bargain for higher wages and improved benefits because employers know they cannot leave for similar jobs elsewhere. Wages stagnate, making it difficult for workers to keep up with the rising cost of living and to save for their children’s education or their own retirement.
“Many workers, especially women and people of color who have suffered sexual harassment and other forms of workplace abuse, stay in dead-end jobs because they lack savings to support themselves during the period of no wages,” says Orly Lobel, professor of labor and employment law at the University of San Diego School of Law.
Employees who do leave often start over in new occupations and industries where their skills are less applicable and their pay lower, Lobel adds.
Non-compete agreements also keep employees from starting their own businesses, which hits individuals hard because they often can earn more as entrepreneurs than they do as employees, she explains.
Low-wage workers eager to land jobs don’t scrutinize the huge stack of forms employers have them sign and don’t try to negotiate better terms the way engineers, executives, and other highly paid workers do.
While it’s unlikely that a court would order an employee who cleans offices or buses dishes in a restaurant to pay damages and legal fees to a former employer for violating a non-compete agreement, the mere possibility of being taken to court is enough to keep home health care aides, janitors, and fast-food workers trapped in jobs they want to leave, Lynch says.
Single parents struggling to feed their children and couples worried about paying next month’s rent don’t have the savings or emotional stamina to get through the litigation, which could drag on for years.
Non-compete agreements also intimidate prospective employers. Lynch cites a case in which a school refused to hire his client after the principal received a letter from the former employer.
“The school didn’t want to incur legal expenses fighting the janitorial service,” Lynch says. “It was cheaper and easier to give the job to someone else who had the same skills and similar experience.”
Some states like California, Montana, and Oklahoma do not recognize non-compete contracts but many employees are not aware of this or do not have the resources to challenge these companies. Some state attorneys general are now filing lawsuits against companies that abuse these clauses. Negative publicity also helps, as happened with Amazon that was using them against warehouse employees, even temporary ones, that would have prevented them from working anywhere else for 18 months. Amazon stopped doing so because of negative publicity after an article appeared in The Verge about this practice.
Another way to keep wages low is highlighted in the same issue of the magazine by Bryce Covert who writes about how companies are trying to get state legislatures to pass what are known as ‘preemption’ laws that would prevent cities and counties from passing minimum wage laws that are higher than the state minimums, as they have done in several major cities.
Currently, twenty-five states have laws preempting local governments from raising their minimum wages, according to the National Employment Law Project. A number of states also block better workplace benefits and rights.
These laws have concrete consequences: In the twelve cities and counties that tried to raise their wages only to have the efforts be stymied by state preemption, the group found some 346,000 workers lost out on an extra $1.5 billion annually—nearly $4,100 per person.
Activists are fighting to repeal such laws and just succeeded in Colorado. They lost in 22 other states but are going to try again this year. This is the kind of issue that Democrats should be fighting hard for. It has real, tangible consequences for people.