US

Opinion: My company banned non-compete agreements. Others should, too

Non-compete agreements are clauses inserted into employment contracts prohibiting employees from leaving to join a competitor or start a competitive business. They often include time limitations (e.g. two years after leaving) and geographic limitations (e.g. within 100 miles).

Many people think non-competes only affect TV personalities or high-level executives with access to company secrets. They assume these agreements are rarely, if ever, an issue for the majority of workers. This couldn’t be further from the truth.

Non-competes impact every level of the economy, with working-class employees bearing the brunt of the pain — especially those who live outside big cities with healthy job markets. In small towns, these agreements can severely limit or totally eliminate their ability to pursue other job opportunities.

In a survey from the Economic Policy Institute, almost half of companies reported requiring some of their employees to sign non-compete agreements, and nearly a third responded saying they required all of their workers to sign one.
For many workers, even the threat of a non-compete agreement and legal action limits their mobility and choices. The Economic Innovation Group found that 40% of workers said they turned down opportunities from competitors because they were told of non-compete agreements, even though these workers were in states where the agreements are prohibited.

As CEO of Thumbtack, a company that helps customers find and hire local service professionals, I hear firsthand from plumbers, photographers and painters who are often stuck waiting out oppressive non-compete agreements or are forced to move to start their own business. These skilled workers are prevented from leaving one employer to join a competitor that might offer a higher salary or better benefits. This is limiting both their income potential and ability to provide value to their local communities.

At Thumbtack, we have chosen to eliminate non-compete agreements for all employees regardless of location, role and salary. It is always hard to see a talented and valued employee leave for another opportunity, but I see that our employees’ freedom to work wherever they want in the future benefits not only them, but our industry overall.

American unemployment claims are on the rise again for the first time in 4 months

A culture of job-hopping was one of many factors that led to Silicon Valley’s boom. Some of the most innovative and prosperous companies were founded by individuals who were able to leave their company and take risks by starting something fresh. Everyone should have that ability, regardless of what state they reside in.

Congress should institute a complete federal ban on non-compete agreements. There is momentum on this issue — last year US senators Chris Murphy of Connecticut and Todd Young of Indiana introduced the bipartisan Workforce Mobility Act to prohibit the majority of workforce non-compete agreements. The Federal Trade Commission has also indicated its interest in using its rule-making power to limit the use of non-compete agreements and held a hearing in January to examine the issue.
I recognize that waiting on Washington to act has not always been a winning strategy. We are encouraged that seven states, including California, Oklahoma and North Dakota, took action to limit non-competes in 2019, and I hope more states ban the use of these agreements outright.

A real conversation about how to empower workers at every level is long overdue. For too long, companies have claimed to support workers while tying them up in legal contracts that limit their opportunities. If companies want to be pro-worker, ending non-compete agreements for all employees is a good place to start.

Today I call on all my fellow business leaders to stop putting artificial caps on their employees’ ambitions and to ban non-compete agreements for all workers in every state immediately.

All working Americans deserve better. Improving the working experience in our country is a complex task, but this factor is wholly and straight-forwardly in our power to change. We can take action now — for the workers, for our communities and for the future.

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