MURPHY: NON-COMPETES STIFLE ECONOMIC GROWTH

Bipartisan Workforce Mobility Act Bans Use of Non-Compete Agreements in Employment Contracts to Build a Stronger Economy

HARTFORD—U.S. Senator Chris Murphy (D-Conn.), a member of the U.S. Senate Health, Education, Labor, and Pensions Committee, Friday held a press conference touting newly introduced bipartisan legislation to protect American workers. Earlier this week Murphy introduced the Workforce Mobility Act, bipartisan legislation to limit the use of non-compete agreements that negatively impact American workers. 

In March, Murphy led a bipartisan Senate letter urging the Government Accountability Office to investigate the use and abuse of non-competes. 40% of American workers have been constrained by a non-compete agreement. These agreements often lack transparency and result in lower wages. Murphy was joined by President of the Connecticut AFL-CIO Sal Luciano and attorney for low-wage workers at the New Haven Legal Assistance Associates James Bhandary-Alexander. 

“Most people think of non-compete clauses applying to higher income workers or workers that are involved in businesses that have a lot of intellectual property, and that is true,” Murphy said. “But what people don't know is that there are millions of workers in low income jobs that have non-compete clauses in their contracts too. These are the workers that, more often than not, have no idea that the non-compete agreement is part of their contract.”

“There's growing evidence that banning the use of these non-compete agreements will add to economic growth,” Murphy said, describing how non-compete clauses reduce the availability and supply of workers, suppress wages which is incredibly detrimental for a high-cost state like Connecticut, and hinder entrepreneurship.  

Murphy closed: “We expect to be adding more co-sponsors on the Democratic and Republican side. This is one of those pieces of legislation has a chance at passage.”

Full transcript of Murphy’s opening remarks below:

“Welcome everyone, thanks for being here. My name is Chris Murphy and I have the privilege of representing Connecticut in the United States Senate. I'm joined here today by Sal Luciano, a good friend and President of Connecticut AFL-CIO, and James Bhandary-Alexander, who is from New Haven Legal Assistance.

“We are here to talk about the introduction of a piece of legislation called the Workforce Mobility Act. This is new legislation that I introduced this week with Senator Todd Young, Republican of Indiana. It is groundbreaking federal legislation, the first of its kind, introduced in the United States Senate that will unlock enormous economic growth potential in the country and in particular here in Connecticut. This bill is simple in its scope: it bans the use of non-compete clauses in employment agreements all across the country.

“What are non-compete agreements? Well, they are what they sound like. They are clauses in your employment contract that prohibit you from going to work for a competitor of your current employer once you leave that company.

“Approximately 20% of workers today have a non-compete clause in their contract and many of those workers don't know that it exists. In fact, 93% of employers don't negotiate the issue of non-compete clauses as part of your employment contract—it’s just stuck in there. In fact, about 40% of all non-compete clauses are stuck in your contract after you agree to the job and the scope of these non-compete clauses is pretty breathtaking.

“Most people think of non-compete clauses applying to higher income workers or workers that are involved in businesses that have a lot of intellectual property, and that is true. Many times, non-compete agreements are applied to individuals who are working in technology firms or are executives at companies in competitive industries.

“But what people don't know is that there are millions of workers in low income jobs that have non-compete clauses in their contracts too. These are the workers that, more often than not, have no idea that the non-compete agreement is part of their contract.

“Maybe the most notable example was the fast food sandwich chain, Jimmy Johns. For years, Jimmy Johns had non-compete clauses in its contracts for fast food workers, meaning that if you wanted to go work for 50 cents more at Subway, or McDonald's, you couldn't because you had signed an agreement working the cash register at Jimmy Johns to not work for any of Jimmy John's competitors. That's ridiculous and it constrained millions of workers to low income jobs.

“There's growing evidence that banning the use of these non-compete agreements will add to economic growth. First, these non-compete clauses reduce the availability and supply of workers. When workers can’t leave their jobs, they aren't available to go work for other companies. So, these non-compete clauses artificially constrained the free flow of labor; which is frankly why a lot of conservative Republicans are starting to be interested legislation like this.

“Second, there's ample evidence to suggest that non-compete clauses suppress wages. We need to be laser-light focused on raising wages right now. People are working today, but they're not making enough money. When you have people working for fast food restaurants that can't go get another job in the fast food industry that pays $1 more an hour, non-compete clauses allow for companies to keep wages low because they don't actually have to compete with other companies.

“And third, there's all sorts of evidence, and this is common sense, that non-compete clauses hinder entrepreneurship. If you can't go start your own company, because you're locked into an agreement at your existing company, then it stops the ability for new companies to form in industries where non-compete clauses are the rule.

“The best reason, or the best evidence, to show how this legislation could unlock economic growth in the country is that there's one state that doesn't allow non-compete agreements, and that's California. Silicon Valley is an example of what happens when you can't put non-compete clauses in your contracts. All of those startup companies in California—they’re a byproduct of California's decision to not let non-compete clauses hinder entrepreneurship.

“Now, it's important to note that this legislation doesn't change the existing law on trade secrets. Thus, it is still and would still be actionable for an employee to take a legitimate trade secret from his current employer and use it to benefit at a future employer. So, there's still plenty of protections built in for companies.

“Lastly, before I introduce Sal and James, let me just talk about why this is important for Connecticut.

“Connecticut has a growing and developing high-tech sector. Financial technology here in Hartford, biotechnology down in New Haven, media technology in Stamford. But because we are a growing high-tech economy, we desperately need to bring in labor from surrounding states. New York and Massachusetts, where much of this labor is, allow for non-compete clauses. They're not amongst the states that have banned them. So, a national ban on non-compete clauses would much more easily allow for the flow of human capital into a growing high-tech market like Connecticut.

“Second, Connecticut is a high-cost state. Thus, we should be desperately focused on increasing wages for everybody, including low income workers. So, when non-compete clauses suppress wages for low- and middle-income workers, it particularly hurts workers here in Connecticut, who are much more sensitive than workers in other places to wage suppression because of the high cost of living here.

“I'm excited about this legislation, the first of its kind in the Senate. Excited to have Todd Young, a conservative Republicans as a co-sponsor. A lot of Republican interest in this bill. We expect to be adding more co-sponsors on the Democratic and Republican side. This is one of those pieces of legislation has a chance at passage. I want Sal first and then James to talk a little bit about their perspective on it.”

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