Obama takes aim at workers’ non-compete agreements
President Obama is cracking down on “non-compete” and “no-poaching” agreements that have become notorious in the Silicon Valley for depressing the wages of tens of thousands of technology workers.
The White House announced Tuesday support for federal legislation and various state initiatives that would roll back controversial non-compete agreements, which companies use to prevent their employees from switching teams.
“There is substantial evidence of overuse and misuse of these clauses,” the White House said in a fact sheet.
According to the White House, one out of five workers has signed a non-compete agreement, which Democrats say makes it easier for companies to pay lower wages to retain their best employees. The White House is also looking to restrict “no-poaching” agreements, where companies come to an understanding that they will not try to hire one another’s employees.
The issue is familiar in the Silicon Valley, where more than 64,000 technology workers at companies such as Apple, Google, and Intel negotiated a $415 million settlement in 2015 over allegations that their employers used these illegal hiring practices.
The president’s action stems from an executive order issued earlier this year that aims to increase competition in the labor market. The impact will extend beyond the Silicon Valley to Wall Street and other places around the country.
To address the issue, the White House is backing the Mobility and Opportunity for Vulnerable Employees (MOVE) Act sponsored by Sen. Chris Murphy (D-Conn.), which would prohibit companies from requiring non-compete agreements for employees who make less than $15 an hour or $31,200 annually. Rep. Joseph Crowley (D-N.Y.) is sponsoring a companion bill in the House.
“Non-compete agreements hidden in low-wage worker contracts deliberately trap these workers in low-paying jobs – that’s wrong,” Murphy said.
“Trapping low-wage employees into ‘non-compete’ agreements can prevent workers from finding new, higher-paying jobs, which ultimately hurts families and can slow the growth of the middle class,” added Sen. Al Franken (D-Minn.), who is co-sponsoring the bill.
The White House will also press states to tackle non-compete agreements. It is releasing a report on the various non-compete policies in each state and calling on state legislatures to act.
“Monopsonies are the other side of the coin to monopolies,” the White House said.
“Monopolies occur when companies have outsized market power, so they can set the price of a good or service at a level higher than if there was fair competition,” it explained. “Monopsonies occur when companies with power in labor markets can set the wages they pay at lower levels and hire fewer workers than if there was strong competition.”