WASHINGTON – Thursday, U.S. Senator Todd Young (R-Ind.) and Chris Murphy (D-Conn.), led a bipartisan letter calling for a Government Accountability Office (GAO) investigation into the use and abuse of non-compete agreements.
Non-compete agreements were intended to protect companies’ trade secrets, but too many workers are now subjected to arbitrary limitations. Non-compete agreements keep workers trapped in their jobs. This hinders innovation and limits workers’ ability to negotiate with their employer for higher wages or leave for a better opportunity, like starting a small business. Research shows that nearly 40 percent of American workers have been constrained by non-compete agreements at some point in their careers, and that they are common even among low-wage workers. One recent study found that 12 percent of workers earning less than $20,000, and 15 percent of workers earning between $20,000 and $40,000, are subject to non-compete agreements.
“We are concerned that the use of non-compete agreements on a large scale could slow economic and wage growth, reduce productivity and competition in labor markets, and create significant barriers to entrepreneurship and innovation,” the senators wrote. “In recent years, the wide use of non-competes has spread from highly technical fields into less technical and lower wage work, where they might reduce wage and benefit competition among employers and restrict employees’ upward mobility – for no good reason.”
The senators added, “Academic experts and commentators from across the political spectrum have raised serious concerns about the use and abuse of these clauses, and members of Congress in both parties have introduced legislation to reform them. At the same time, this discussion would benefit from more information regarding the prevalence of such contracts, in both low-wage and high-wage occupations, and their actual effects on employees, firms, and the economy. Accordingly, we are requesting that GAO review the available research on the use of these agreements and the impact of non-compete contracts on the nation’s workforce.”
On Wednesday, Senator Young discussed non-compete agreements with expert witnesses during a Committee on Small Business and Entrepreneurship hearing. To watch his conversation, click here or on the image below.
