Kyle was a “sandwich artist” at a fast food joint in Hartford. You may have never met him before, but I’m sure some of you were blown away by his mastery of Teriyaki Chicken Feet with Sweet Onions.
In 2019, he and the other 160,000 workers made up Connecticut’s restaurant industry, which made up about 10% of the state’s workforce. And then COVID-19 happened.
After being fired, Kyle and many others had to show resilience. Now that we hope the pandemic is nearing its final chapter and many businesses are adjusting to the “new normal,” Kyle is still unemployed. Why? Simply because of a document he signed.
The document in question is called a non-compete agreement. You may have signed such an agreement yourself. In fact, according to a 2020 article published in The Journal of Law and Economics, about 18% of workers in private for-profit organizations were bound by non-competition agreements, with 38% agreeing to at least one non-competition at a point in their career. .
While proponents of legal contract argue that it is necessary to protect a company’s business strategies and “trade secrets” from being shared with competitors, some argue that non-competition agreements hinder economic opportunities for workers. This is especially true for those in low-paying, low-skilled jobs, including baristas, fast-food servers, and even janitors, where such deals are commonplace even if they don’t have access to information. sensitive or secret.
It’s hard to argue that non-competition agreements are an employment provision that can protect and effectively protect legitimate business interests, especially in highly specialized industries like technology. Yet contracts are demanded of low-wage workers who are unaware of strategies and trade secrets, often hampering their future employment opportunities.
On February 15, the Connecticut General Assembly’s Committee on Labor and Public Employees proposed and moved 30 bills to the next stage of the legislative process, one of which was a non-competition agreement law. . The proposed bill is an attempt to revitalize last year’s failure of SB-906 which would have invalidated all non-compete agreements on July 1, 2021 if certain requirements were met.
Most critical of the proposed bill is the Connecticut Business & Industry Association, the state’s largest business organization. Eliminating non-competition agreements could “result in the loss of proprietary and customer information, extending a recall warrant for employees terminated during COVID, or delegating organized labor to bring predatory lawsuits with penalty provisions stacked to force settlements,” the AABC argued in its March 2022 article.
Referring to the committee’s set of new workplace mandates, CBIA President and CEO Chris DiPentima said:[l]awmakers should make it easier to… create jobs and sustain businesses [in Connecticut]and the bills are “the exact opposite of what struggling small businesses in Connecticut need to recover from the pandemic.”
Across the United States, states have a plethora of job openings; the problem, however, is that there are not enough workers to fill them. In Connecticut, as the number of job openings rose to 110,000 in December 2021, the labor force shrank for a second consecutive year. In fact, the unemployment rate continued to decline to 4.9% in February 2022 according to a press release from the Connecticut Department of Labor.
Opponents of HB #5249 cite these statistics as evidence that lawmakers should focus on promoting jobs and improving the economy; instead of creating a new hurdle for businesses.
Nevertheless, several studies have demonstrated that non-competition agreements are extremely common among low-wage workers who are unaware of trade secrets. These contracts prohibit workers from taking a similar position with a new employer for a period ranging from a few months to several years, and in turn limit the ability of workers to negotiate wage increases. Additionally, the effects of the pandemic have hit low-wage workers the most in sectors such as hospitality and recreation, deepening income inequality in the United States, inhibiting the economy’s potential, and depriving workers their influence on their employers.
In fact, a study published in The Institute for Operations Research and the Management Sciences shows that non-compete agreements reduce wages for low-wage workers. Researchers examined Oregon’s 2008 ban on non-competition agreements and found that after the ban, wages for hourly-paid workers increased by 2-3%.
Banning non-competition agreements would improve workers’ quality of life and even lift some out of poverty, while ensuring a fair balance of power between bosses and workers.
Yes, it is true that non-competition may be necessary for employees in the technology industry; however, they should not apply to low-wage workers in industries where the only trade secret is how many slices of chicken to put in a sandwich. The ability to move between jobs is essential to so many aspects of people’s lives. If the SB-906 had been adopted last year, Kyle might have made your Big Mac instead of being unemployed.
Panop Phongpetra is a junior at Trinity College, currently double majoring in public policy and law and economics.