Nobody likes non-competes except business owners/leaders trying to use them to protect their business. It is the proverbial political softball that some legislatures attempt to address every session. In May the Obama Administration took on non-competes and released a report entitled “Non-Compete Agreement: Analysis of the Usage, Potential Issues, and State Responses”. The report is a precursor for further discussions with the Administration convening “a group of experts in labor law, economics, government, and business to facilitate discussion on non-compete agreements and their consequences.” There is nothing within the report that even hints that non-compete agreements have any redeeming traits whatsoever.
Some observations/thoughts:
- The numbers relied upon (number of folks subject to non-competes, rise of non-competes etc.) are not reliable – it’s almost impossible to determine how many folks are subject to non-competes or restrictive covenants of some type – the Administration has done the best it can with what is out there;
- It is unclear what falls within the scope of a non-compete – does this include non-solicitation provisions, anti-raid provisions, garden leave provisions etc. ?
- A number that is very interesting is that only 24 percent of employees report they possess trade secrets – not sure if that number is remotely accurate but I do agree with the conclusion that trade-secrets do not drive non-compete activity;
- The report focuses on the use of non-competes for folks that make less money – that makes sense and has been an issue we have discussed here – non-competes don’t make sense for fast food workers;
- The biggest stretch I see is the conclusion that workers in states with lower levels of non-compete enforcement have higher wages – the basis for that conclusion seems really thin along with the data cited;
- Worker’s don’t understand non-competes – maybe some, but I think the average worker is smarter than the reprort gives them credit for; and
- Some employers use non-competes that aren’t enforceable – agree.
Though I don’t agree with a number of items in the report I’m glad the discussion is taking place. It will be interesting to see what recommendations come from the Administration. Bottom line is this is a state by state issue and federal legislation is unlikely on this type of issue. Plus, who knows if the Obama administration could actually pass non-compete legislation. I’ll leave that to the political experts. We’ll keep you posted on developments.
