White House Suggests Ban on Non-Compete Agreements for Some Workers

In late October, the White House again asked states to ban non-compete agreements for low wage workers and those that do not have access to trade secrets.  Non-compete agreements prohibit employees from working for competing companies and help to secure trade secrets for many companies across America.  The Obama administration suggests that the ban would create a more competitive labor market and promote faster wage growth.

The administration believes that non-competes restrict workers from essentially acting as free agents.  Vice President Biden said “[Workers] can’t reach their true potential without freedom to negotiate for a higher wage with a new company, or to find another job after they’ve been laid off.”  The administration also wants to see a ban of non-competes that are not accepted by the employee before the offer is accepted or before a promotion is accepted.  And if an employee is laid off, then the non-compete should become void.

On the other side of the argument is the National Federation of Independent Businesses, which believes that there are good reasons for many businesses to require non-competes and that a blanket ban of non-compete would not be viable.

Practically speaking, the White House’s proposal simply seeks to do what courts do every day – determine whether a non-compete is reasonable and therefore, enforceable.  That analysis already considers the employee’s role in the company, his or her access to confidential information and trade secrets, and the circumstances surrounding the signing of the agreement.  The balancing performed by courts takes into consideration an employee’s right to work and the fact that non-competes and other restrictive covenants such as agreements that prohibit former employees from soliciting customers and employees can serve a very important function in stabilizing our nation’s businesses large and small.  For example, they help to ensure that businesses do not spend money training employees who have access to confidential and proprietary information only to have those employees leave, take all of that knowledge they would not have had but for their employment with the company, and then use it to unfairly compete against their former employer.

If you would like to discuss drafting, enforcing, or defending against the enforcement of non-compete agreements or other restrictive covenants, then please contact Tomlinson & Shapiro at (312) 715-8770.

Michael Shapiro
(312) 715-8770