Lieff Cabraser Civil Justice Blog
Noncompete Clauses Keep Workers Locked In

Noncompete Clauses Keep Workers Locked In

The use of noncompete clauses in employment contracts has grown enormously. Designed to prevent employees from leaving for a competitor, noncompete agreements also work to bind employees to one company, ultimately making it more difficult for them to get ahead. As noted by the New York Times, this reflects “a broad shift in which companies assert ownership over work experience as well as work,” and the paper further notes that employment lawyers see noncompete agreement usage “exploding.”

According to a survey conducted by economists, about one in five employees in 2014 signed noncompete clauses that barred them from working for competitors. Often, workers are surprised to learn that by agreeing to a noncompete clause, they are signing away their right to leave a company for a competitor. These clauses, often hidden within employment contracts, give a company enormous power over their employees, and a person’s greatest professional assets can be turned into a liability in order to protect the company from competition.

“It’s one thing to have a bump in the road and be in between jobs for a little while; it’s another thing to be prevented from doing the only thing you know how to do,” stated Max Burton Wahrhaftig, an arborist in Doylestown, Pa., who was threatened by his former employer in 2013 after leaving for a better-paying job.

The Times also explained that “when a noncompete agreement is litigated to the letter, a worker can be barred or ousted from a new job by court order. Even if that never happens, the threat alone can create a chilling effect that reduced wages throughout the work force.” Many workers from all different backgrounds and educational levels have only a vague understanding of what a noncompete agreement actually is. However, employees are often asked to sign the contract with limited opportunity for negotiation.

Matthew Marx, a professor at the Sloan School of Management at M.I.T., discovered in 2011 that employees are typically presented with noncompete agreements when they lack negotiating leverage, namely on their first day of work.

“By then, they had said yes to their company, and no to the other companies they were negotiating with,” Mr. Marx said.

Not only do noncompete clauses tie down workers, but nonsolicitation, nonpoaching and nondealing agreements are also often found in employment contracts, making it even harder for employees to find a better opportunity. Though California law prohibits the utilization of noncompete clauses within employment contracts, more steps need to be taken by other states to curb the scope of these noncompete agreements.

Upholding Employee Rights

Lieff Cabraser has a strong tradition of fighting for employee rights across America. Our employment law class action cases challenge discrimination based on employees’ race, color, national origin, religion, age, gender, sexual orientation, or disability; wage violations, including failure to pay overtime, break time, or vacation time; and misuse of employees’ retirement benefits. We also represent employees who “blow the whistle” on wrongdoing by their employers as well as in other cases alleging violations of the law.