WASHINGTON–U.S. Senators Chris Murphy (D-Conn.), Todd Young (R-Ind.), Elizabeth Warren (D-Mass.), Marco Rubio (R-Fla.), Ron Wyden (D-Ore.), and Tim Kaine (D-Va.) on Tuesday released a new report by the U.S. Government Accountability Office (GAO) which found the use of non-compete agreements (NCAs) is widespread throughout the U.S. labor market and serves to protect the stated interests of businesses while restricting job mobility, lowering wages for workers, and discouraging innovation.
In 2019, the Senators requested a nonpartisan GAO investigation into the prevalence and effects of NCAs on workers and the economy as a whole. Their letter cited concerns about the spread of these agreements from highly technical fields into lower wage work, and the impact they could have on entrepreneurship and innovation, economic and wage growth, and productivity and competition in labor markets.
GAO reviewed existing studies, surveyed 446 private sector employers, and conducted a separate survey of 25 state attorney general offices on state statutes related to NCAs. GAO also interviewed stakeholders, such as worker advocates, employer groups, and researchers, and reviewed relevant federal laws.
In its report, GAO estimated that 18% of workers were subject to NCAs at the time the study was conducted, and 38% of workers have been subject to an NCA at some point in their career. Over half of the 446 private sector employers responding to GAO's survey reported that at least some of their workers had NCAs. While many employers report using NCAs to protect their business interests, including trade secrets and client lists, GAO found that the use of NCAs is not limited to executives, but rather extends to hourly and low-wage workers who are unlikely to have access to the types of confidential information employers seek to protect.
GAO found that workers’ job mobility is reduced in states that are more likely to enforce NCAs, while state bans on NCAs for certain workers increased workers’ wages, on average. The studies reviewed by GAO also showed that enforcement of NCAs may restrain the creation of new businesses, especially in the tech and science industries, because of increased probability of litigation and greater costs of recruiting and hiring staff.
“The GAO’s report confirms what workers, advocates, and entrepreneurs have said for a long time: non-compete agreements depress wages and stave off competition. It’s a bad deal for low- and high-income workers, but it’s also a bad deal for our economy at a time when we should be encouraging more innovation, not less. This report makes clear that it’s time for Congress to pass legislation to protect workers and encourage more economic development,” said Murphy.
“This Government Accountability Office report confirms what we have long known: the vast majority of non-compete agreements restrict job mobility and stifle economic growth,” said Young. “Congress should pass our bipartisan Workforce Mobility Act to rein in the use of non-competes. The reforms in our bill will assist workers and entrepreneurs so they can freely apply their talents where their skills are in greatest demand, making our economy more dynamic.”
“This GAO report makes it crystal clear: non-compete agreements restrict job mobility and lower wages, keeping tens of millions of workers from changing jobs and creating new businesses,” said Warren. “The Biden administration has taken significant action to end this anticompetitive practice, and it needs to continue to stand up for workers and stand firm against corporate interests.”
“Non-compete agreements should protect a company's trade secrets, not trap workers in jobs or suppress wages. This report once again confirms the detrimental effect that the spread of non-competes has on our workforce. Our economy must enable workers and entrepreneurs to apply their abilities where their skills are most valuable. My Freedom to Compete Act would prevent employers from using non-competes in employment contracts for certain entry-level, low-wage workers," said Rubio.
“I’ve been sounding the alarm that non-compete agreements hurt workers’ wages, stifle innovation and economic growth, and only serve the selfish interests of big corporations,” Wyden said. “The new GAO report released today highlights the problems of non-compete agreements – particularly their impact on limiting workers’ fundamental freedom to change jobs. I’ll fight tooth and nail for fair labor laws that protect workers and promote the creation of new businesses in Oregon and nationwide.”
“This report underscores how non-compete agreements suppress wages, particularly for low-income workers, and hinder our economic growth,” said Kaine. “We should pass our bipartisan bill to limit the use of non-compete agreements.”
In February 2023, Murphy, Young, and Kaine reintroduced the Workforce Mobility Act, bipartisan legislation to limit the use of non-compete agreements that negatively impact American workers. In January 2023, Murphy, Young, and Kaine applauded the Federal Trade Commission’s proposed rule banning employers from imposing non-compete agreements on their employees.