Noncompete agreements are becoming increasingly common in the workplace. These are agreements saying you can’t work for a competitor of your employer for a period of time, usually a year or two, after you leave. The White House estimates that 18% of workers, including low wage workers, are covered by noncompetes. Jimmy John’s brought these agreements to national attention when they imposed noncompete agreements on their sandwich makers.
Two state attorneys general have recently pursued antitrust claims against Jimmy John’s for their employment agreements, because noncompete agreements are legal under a narrow exception to antitrust laws. Antitrust laws say that companies can’t do anything to prevent or hinder competition. America, after all, is founded on the free enterprise system. Open competition is good for capitalism and good for innovation, which is why we make anti-competitive activities mostly illegal. The White House is also investigating abusive noncompetes and is seeking comments from victims.
Noncompete agreements are supposed to only be for limited purposes, a “legitimate interest” the company has other than preventing competition. Almost every time I’ve defended a client against a noncompete agreement, that so-called “legitimate interest” was supposedly to protect trade secrets. Companies usually claim that preventing employees from working for a competitor is the only way to protect their secret sauce.
That may have been arguable until recently, where there was no federal law providing civil remedies for trade secret theft. But this year Congress enacted, and President Obama signed, the Defend Trade Secrets Act. This new law gives employers federal remedies, including the ability to seize employee property under some circumstances, as well as the ability to recover punitive damages and attorney’s fees, and the ability to get a court order to stop trade secrets from being disclosed. Before the DTSA, employers had to rely on a mishmash of state laws to protect trade secrets, and not all states had trade secrets laws in place.
Now, there is a uniform law with strong remedies (maybe too strong in my opinion, but that’s another story). Which brings me back to noncompete agreements.
Increasingly in America, dog groomers, fast food workers, data entry clerks and other low-level workers are being prohibited from working for competitors of their employer for a year or two after they leave, whether they leave voluntarily or are fired because their boss didn’t like their shirt or was in a bad mood.
Noncompete agreements are bad for business, bad for innovation, and are certainly bad for workers. Employers can use noncompetes to suppress wages, force employees to stay in abusive jobs, and blackmail employees into feeling trapped in their jobs. Now that we have a federal law that gives employers strong remedies against employees who steal trade secrets, why not ban noncompete agreements altogether? Why prohibit employees from being able to take a better job, as long as they don’t take trade secrets along with them?
With the new federal Defend Trade Secrets Act in place, I would submit that noncompete agreements are no longer necessary to protect employer trade secrets. Because they are bad for innovation and workers, and are not the best way to protect trade secrets anymore, noncompete agreements should go the way of foil on TV antennas, lead-based paint and the 8-track tape.
Tell your members of Congress, state legislators and the White House that noncompetes should be extinct like the dinosaurs that they are.
If you need specific legal advice, it’s best to talk to an employment lawyer in your state. For more general information about employment law issues, check out Donna Ballman’s award-winning employee-side employment law blog, Screw You Guys, I’m Going Home her book Stand Up For Yourself Without Getting Fired and her other employment law articles at Huffington Post.