Young Leads Bipartisan Group of Senators in Call For Investigation Into Non-Compete Agreements Hurting U.S. Workers
WASHINGTON – Today, U.S. Senator Todd Young (R-Ind.) and Chris Murphy (D-Conn.), led a bipartisan letter calling for a Government Accountability Office (GAO) investigation into the use and abuse of non-compete agreements.
Non-compete agreements were intended to protect companies’ trade secrets, but too many workers are now subjected to arbitrary limitations. Non-compete agreements keep workerstrapped in their jobs. This hinders innovation and limits workers’ ability to negotiate with their employer for higher wages or leave for a better opportunity, like starting a small business. Research shows that nearly 40 percent of American workers have been constrained by non-compete agreements at some point in their careers, and that they are common even among low-wage workers. One recent study found that 12 percent of workers earning less than $20,000, and 15 percent of workers earning between $20,000 and $40,000, are subject to non-compete agreements.
“We are concerned that the use of non-compete agreements on a large scale could slow economic and wage growth, reduce productivity and competition in labor markets, and create significant barriers to entrepreneurship and innovation,” the senators wrote. “In recent years, the wide use of non-competes has spread from highly technical fields into less technical and lower wage work, where they might reduce wage and benefit competition among employers and restrict employees’ upward mobility – for no good reason.”
The senators added, “Academic experts and commentators from across the political spectrum have raised serious concerns about the use and abuse of these clauses, and members of Congress in both parties have introduced legislation to reform them. At the same time, this discussion would benefit from more information regarding the prevalence of such contracts, in both low-wage and high-wage occupations, and their actual effects on employees, firms, and the economy. Accordingly, we are requesting that GAO review the available research on the use of these agreements and the impact of non-compete contracts on the nation’s workforce.”
On Wednesday, Senator Young discussed non-compete agreements with expert witnesses during a Committee on Small Business and Entrepreneurship hearing. To watch his conversation, click here.
Full text of the letter can be found here and below:
March 7, 2019
The Honorable Gene Dodaro
Comptroller General
U.S. Government Accountability Office
441 G Street, N.W.
Washington, D.C. 20548
Dear Mr. Dodaro:
We write to ask the GAO for a review of the effects of non-competition (or non-compete) agreements on workers and on the economy as a whole. Non-competes are provisions in employment contracts that seek to restrict an employee’s ability to work for competing firms, often by prohibiting employees from working in the same industry or geographic area as an employer long after they actually worked for that employer. Employers use non-competes to protect trade secrets, reduce turnover, impose costs on competitors, and protect investments in employee training. However, we are concerned that the use of non-compete agreements on a large scale could slow economic and wage growth, reduce productivity and competition in labor markets, and create significant barriers to entrepreneurship and innovation.
In recent years, the wide use of non-competes has spread from highly technical fields into less technical and lower wage work, where they might reduce wage and benefit competition among employers and restrict employees’ upward mobility – for no good reason. One recent study found that 12% of workers earning less than $20,000, and 15% of workers earning between $20,000 and $40,000, are subject to non-compete agreements. While these agreements are unenforceable in a few states, they may nonetheless deter employees from seeking new opportunities. Other evidence suggests that few workers engage in genuine negotiation over these agreements, and most working under a non-compete were not even asked to sign one until after receiving a job offer.
Academic experts and commentators from across the political spectrum have raised serious concerns about the use and abuse of these clauses, and members of Congress in both parties have introduced legislation to reform them. At the same time, this discussion would benefit from more information regarding the prevalence of such contracts, in both low-wage and high-wage occupations, and their actual effects on employees, firms, and the economy.
Accordingly, we are requesting that GAO review the available research on the use of these agreements and the impact of non-compete contracts on the nation’s workforce. Specifically, we would like GAO to assess:
1) What is known about the prevalence of non-compete agreements in particular fields, including low-wage occupations?
2) What is known about the effects of non-compete agreements on the workforce and the economy, including employment, wages and benefits, innovation, and entrepreneurship?
3) What steps have selected states taken to limit the use of these agreements, and what is known about the effect these actions have had on employees and employers.
Should you have any questions about this request, please do not hesitate to contact our staff.
Sincerely,