How Noncompete Clauses Keep Workers Locked In

Restrictions once limited to executives are now spreading across the labor landscape — making it tougher for Americans to get a raise.

Keith Bollinger’s paycheck as a factory manager had shriveled after the 2008 financial crisis, but then he got a chance to pull himself out of recession’s hole. A rival textile company offered him a better job — and a big raise.

When he said yes, it set off a three-year legal battle that concluded this past week but wiped out his savings along the way.

“I tried to get a better life for my wife and my son, and it backfired,” said Mr. Bollinger, who is 53. “Now I’m in my mid-50s, and I’m ruined.”

Mr. Bollinger had signed a noncompete agreement, designed to prevent him from leaving his previous employer for a competitor. These contracts have long been routine among senior executives. But they are rapidly spreading to employees like Mr. Bollinger, who do the kind of blue-collar work that President Trump has promised to create more of.

..  one in five employees was bound by a noncompete clause in 2014.
.. Employment lawyers say their use has exploded.
.. part of a “rigged” labor market in which employers “act to prevent the forces of competition.”
.. By giving companies huge power to dictate where and for whom their employees can work next, noncompetes take a person’s greatest professional assets — years of hard work and earned skills — and turn them into a liability.
.. “It’s one thing to have a bump in the road and be in between jobs for a little while; it’s another thing to be prevented from doing the only thing you know how to do,”
.. Noncompetes are but one factor atop a great mountain of challenges making it harder for employees to get ahead.
  • Globalization and automation have put American workers in competition with overseas labor and machines.
  • The rise of contract employment has made it harder to find a steady job. 
  • The decline of unions has made it tougher to negotiate.

But the move to tie workers down with noncompete agreements falls in line with the decades-long trend in which their mobility and bargaining power has steadily declined, and with it their share of company earnings.

.. Mr. Gonzalez started at a little over $10 an hour in a job he described as “pretty much shoveling dirt.” Nevertheless, he signed an employment contract that included a noncompete clause, enforceable for three years within 350 miles of Singley’s base in Columbia, Miss.

.. “It’s ridiculous — it’s slavery in the modern-day form.”

.. employers typically presented workers with noncompete contracts when the employees lacked negotiating leverage, on their first day at work, for instance.

.. Put it all together, and suddenly some of the main avenues for finding a better-paying job — taking a promotion with a competitor, being recruited by an old colleague — are cut off.

.. since few companies want to lose good workers or give out huge raises, these agreements are making their way down the economic ladder to people like hairstylists and sandwich makers, far removed from what is thought of as the knowledge economy.
..  Wages, employment and entrepreneurship are all diminished when workers have little leverage to bargain with their employer or leave a job for a better opportunity.
.. California law prohibits noncompete clauses, contributing to the inveterate poaching with which the state’s technology industry was founded.
.. “It’s not just that it allows employees to leave their company for another job,” said Mark A. Lemley, a professor at Stanford Law School. “It allows them to leave to start new companies.”
.. “If an employer can fire anybody for any reason,” he said, “employees also need to have the right to walk.”
.. Judge Murphy said, “Enforcement of the noncompete provision in the manner articulated” by TSG would effectively bar Mr. Bollinger “from seeking employment anywhere in North America in the only profession he has practiced since graduating high school.”