Kyle was a ‘Sandwich Artist’ at a Hartford fast food outlet. You may have never met him before, but I’m certain some of you were transported by his mastery of the Sweet Onion Chicken Teriyaki Footlong.
In 2019, he and the other 160,000 workers made up Connecticut’s restaurant industry, which accounted for around 10% of the state’s workforce. And then COVID-19 happened.
After being laid off, Kyle and many others had to be resilient. Now that we hope the pandemic is approaching its final chapter and many businesses are adapting to the ‘new normal’, Kyle still remains unemployed. Why? Simply because of a document he signed.
The document in question is called a noncompete agreement. You may have signed such an agreement yourself. In fact, according to a 2020 article published in The Journal of Law and Economics, approximately 18 percent of workers at private, for-profit organizations were bound by noncompete agreements, with 38 percent agreeing to at least one noncompete at some point in their careers.
While proponents for the legal contract claim it is required to protect a company’s business strategies and ‘trade secrets’ from being shared with competitors, some contend that noncompete agreements inhibit economic opportunities for workers. This is especially true for those who are in low-paying, low-skill jobs including baristas, fast-food servers, and even janitors, in which such agreements are a commonplace even though they do not have access to sensitive or secret information.
It’s hard to argue with the fact that noncompete agreements are an employment provision that can effectively guard and protect legitimate business interests, especially in highly specialized industries like technology. Yet, the contracts are being required of low-wage workers who are not privy to business strategies and secrets, often hindering their future employment opportunities.
On February 15, the Connecticut General Assembly’s Labor and Public Employees Committee proposed and moved 30 bill concepts to the next stage of the legislative process, one of which was an Act Concerning Non-Compete Agreements. The proposed bill is an attempt to revitalize last year’s failed SB-906 which would have invalidated all noncompete 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 noncompete agreements could “result in the loss of proprietary and customer information, extending a mandate for recalling employees laid off during COVID, or deputizing organized labor to bring predatory lawsuits with stacking penalty provisions to force settlements” argued the CBIA in its March 2022 article.
Referring to the package of new workplace mandates advanced by the committee, CBIA president and CEO Chris DiPentima said “[l]awmakers should be making it easier…to create jobs and keep companies [in Connecticut]” and the bills are the “exact opposite of what Connecticut’s struggling small business need to recover from the pandemic.”
All over the U.S., states have a plethora of job openings; the problem, though, is there are not enough workers to fill them. In Connecticut, while the number of job openings rose to 110,000 in December 2021, the labor force declined for a second consecutive year. In fact, the unemployment rate continued to drop to 4.9 percent in February 2022 according to a press release by the Connecticut Department of Labor.
Opponents of H.B. No. 5249 point to these statistics as evidence that legislators should focus on encouraging employment and improving the economy; instead of creating yet another obstacle for businesses.
Nonetheless, several studies have demonstrated that noncompete agreements are extremely common among workers with low pay who are not privy to trade secrets. These contracts prohibit workers from taking a similar position at a new employer for a period ranging from months to years, and in turn limit the ability of workers to negotiate for wage increases. What’s more, the effects of the pandemic have hurt low-wage workers in industries like hospitality and leisure the most, worsening the income inequalities in the U.S., inhibiting the economy’s potential, and robbing workers of leverage against their employers.
In fact, a study published in The Institute for Operations Research and the Management Sciences illustrates that noncompete agreements reduce pay for low-wage workers. Researchers looked at Oregon’s 2008 ban on noncompete agreements and concluded that after the ban, wages for hourly paid workers increased by 2 to 3 percent.
Banning noncompete agreements would improve the quality of life for workers and even lift some out of poverty, while also ensuring an equitable balance of power between bosses and workers.
Yes, it is true noncompetes can be necessary for employees in the tech 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 switch between jobs is critical to so many aspects of people’s lives. Had the SB-906 passed last year, Kyle may have been crafting your Big Mac instead of remaining jobless.
Panop Phongpetra is a junior at Trinity College, currently double-majoring in Public Policy & Law and Economics.