Earlier this year, President Joe Biden has requested for the Federal Trade Commission to ban non-compete agreements. The restrictive clause has affected thousands of Americans over the years, especially low-wage workers.
According to a recent study by the Journal of Law and Economics, 18% of employees are tied by non-competes. However, one-third of workers are unaware of the requirement until they’ve signed their job offer. Although it might feel misleading, it would not be considered as a work violation if an employer doesn’t tell you about the clause. Before signing, the prospective employee is expected to read through all the contractual terms or hire a lawyer to review a non-compete agreement.
California is fortunately one of few states that do not enforce the validity of non-compete agreements. But this is still a big decision for those who might be telecommuting out of state. According to Bloomberg, if approved, the new policy would ban them for employees earning less than $75,000 a year.
Non-compete clauses have disproportionately shown up more in the contracts of low-wage workers. Not only does it intimidate them from looking for better employment opportunities or second jobs, but it also binds them to their position even amid workplace concerns. Higher-wage workers are likely to find these changes unfair, as they don’t have the luxury of leaving at any time.
The proposal has even left employers skeptical. With non-competes being a popularly used contract across different industries, it’s unclear how it could affect business operations. They are structured to protect “legitimate business interests” by stopping employees from sharing trade secrets, confidential information, working for a competitor, and stealing clients.
It’s too soon to say what the outcome might be and how this will fully affect employment. If you live in the greater Los Angeles area and work out of state, you might be looking for more information about what this means. Our employment attorney is here to answer your questions on the enforceability of covenants to not compete.