Recently on this blog, we addressed the topic of enforceable non-compete agreements in the contracts that employees sign upon being hired and assuming certain new positions within the company. As we noted, they’re often used for employees who have special talents or access to valuable information that employers don’t want them talking to a competitor a short period after they resign or are terminated. These employees tend to be in upper management or specialized positions.
However, the use of non-compete agreements has become significantly more common in many different industries and are required of some low-wage workers. These agreements can keep them from obtaining necessary employment in similar occupations if they leave a job.
Many lower-wage workers are required to sign non-compete agreements
In 2016, sandwich chain Jimmy John’s was sued in two states for prohibiting people who worked for them as drivers or sandwich makers to get a job with another sandwich business within 3 miles of any of their restaurants throughout the country. After the lawsuits, they dropped their non-compete agreements.
Non-compete agreements for low-wage workers aren’t as uncommon as many would assume. A 2019 report by the Economic Policy Institute found that nearly 30% of employers whose average hourly wage was less than $13 required all employees to sign non-compete agreements.
Will the FTC decide to limit or prohibit the agreements?
That could change if the Federal Trade Commission (FTC) agrees to President Biden’s request this month that it limit or ban these agreements nationwide. The Biden administration has argued that these agreements make it difficult for employees to seek higher-paying jobs and limit economic growth. The new FTC chairperson seems to agree. She wrote two years ago that these agreements “deter workers from switching employers, weakening workers’ credible threat of exit, and diminishing their bargaining power.”
Because a total ban on non-compete agreements would surely be strongly challenged by businesses, it’s more likely the FTC will make some limited federal restrictions, such as prohibiting them for low-wage employees while continuing to allow them for occupations and industries where employees are privy to trade secrets and other proprietary and confidential information.
Before you sign a non-compete agreement or decide to challenge one you’ve already signed, it’s important to understand the law in Florida and any federal regulations that may apply. Experienced legal guidance can be helpful in both of these situations.