This week, Florida Sen. Marco Rubio has taken to talk shows and Twitter to promote his newly filed Freedom to Compete Act, which would ban the use of noncompete agreements for certain low-wage workers. It’s a smart move for him to talk about an issue with potential bipartisan appeal. After all, allowing people to move to new jobs and having a free labor market should be something we can all agree on. When employers limit that mobility, it threatens innovation and economic growth. Sadly, though, Rubio’s bill is little more than window dressing and falls far short of what is needed to protect workers’ freedom to change jobs.
Noncompetes have traditionally been used for high-ranking employees to prevent them from taking trade secrets or confidential information to a competitor, but an increasing number of employers (nearly 20 percent, according to a recent study) are using noncompetes to keep a broader range of employees in place.
As former government lawyers, we’ve spoken with many low and moderate wage employees subject to noncompetes: fast-food workers, custodians, receptionists, customer service representatives, nurses, and health care aides, among others. The Rubio bill would ban noncompetes for a mere fraction of these workers because it links coverage to federal overtime eligibility, which currently exempts a significant number of workers. While the bill might allow a minimum-wage fast-food worker to head for the door, it would leave the assistant manager of that location covered by a noncompete, as long as she made more than $23,660 per year—precluding her from getting a job at a different restaurant that pays more, is closer to home, or that gets her away from a harassing boss. Even if that monetary threshold is increased by several thousand dollars, as the Labor Department is expected to propose, far too many workers will still be excluded in Rubio’s framework.
Under Rubio’s proposal, what would actually happen if an employer violates the law and imposes a noncompete on low-wage workers? Impacted workers could get only “legal and equitable relief,” but there is no mention of penalties or other punishment that would more easily convince an employer not to violate the law. As we’ve seen in our investigations, noncompetes are typically enforced informally, so even a noncompete that may not hold up in court can have a big impact: An employer can intimidate workers into not looking for a new job just by mentioning the existence of a noncompete, because what worker wants to risk being sued? We’ve also spoken with employees who have had job offers rescinded when their current employer calls the new boss and warns of the noncompete. Because the very existence of a noncompete can chill employee mobility, the law must impose real costs for using them illegally.
Critically, the Rubio bill does nothing at all for mid- and upper-level workers. But surely they, too, should have some protections from out-of-control noncompetes. For example, the now-infamous Jimmy John’s noncompete sought to restrict employees from working for any business that earned more than 10 percent of its revenue from selling “submarine,” “hero-type,” “deli-style,” “pita,” and/or “wrapped” or “rolled sandwiches” within three miles of any Jimmy John’s Sandwich Shop anywhere in the country. This is patently unreasonable—not just for minimum wage–line employees, but also for Jimmy John’s managers and mid-level staffers. Some states have case law providing needed guardrails to protect against such overreach. For example, in New York and Illinois, noncompetes can only be used to protect an employer’s legitimate business interest, and must be reasonably limited in terms of how length of time and geographic scope. Any federal statute about noncompetes should contain similar restrictions. (The Rubio bill does not.)
Many employees, meanwhile, aren’t even aware that they signed a noncompete until they try to leave their jobs. To them, their noncompete “agreement” was just one more box they clicked online during the employee onboarding process on their first day. Any bill on noncompetes should require employers to provide meaningful notification to workers—before they accept a job—that a noncompete will be a condition of employment. (Again, the Rubio bill does not.)
Some states have begun to take action. Noncompetes have long been unenforceable in California, although there are no penalties for employer misuse. Illinois and Massachusetts also recently passed laws on noncompetes, with similar bills introduced in almost a half-dozen states. The Center for American Progress recently issued a report on noncompetes, with sensible recommendations for needed legislation. And the Workforce Mobility Act, which Connecticut Sen. Chris Murphy proposed last year would prohibit noncompete agreements for pretty much all employees, with a penalty of up to $5,000 per week of violation, as well as punitive damages.
Rubio’s bill on noncompetes is an echo of the foolhardy proposal he floated last summer to create paid family leave by allowing people to borrow from their Social Security retirement money. In both cases, he has tried to position himself as a moderate who cares about ordinary people. But ordinary people deserve meaningful solutions and his flimsy proposals offer no real fix. Congress should pass a law restricting noncompetes, but in a way that will truly provide all workers with the freedom to seek a better life.