No-Competes Create Modern-Day Serfs: But New Law Free Employees

(Photo Credit: LECTRR FOR CONTRAST)

Your job evolved from a medieval relationship. Under feudal contracts, lords provided certain benefits to vassals and serfs—protection from assaults, a private justice system, and a plot of land to work. In return, the lord had the right to demand services (military and jury) and a right to various “incomes” known as feudal incidents.

Fast-forward. Now we have an employment relationship. In the past 30 years or so, “no-competes” have mushroomed. A no-compete is a contract that an employer requires an employee to sign. It restricts the employee from working in some competitive fashion after their employment relationship ends.

No-competes have three key features: duration (usually one year), geography (highly variable), and restricted activities (doing the same job or type of job as before is a common one).

Courts uphold no-competes for professional employees—doctors, lawyers, accountants, etc. The idea is to protect the employer against a former employee who poaches clients and business.

But employers are abusing no-competes. Now, fast-food workers are required not to work within 3 miles of their store for a competitor, just to give an example. The list of employees required to sign no-competes has grown from advanced-degree professionals to, well, you name it— CNAs, warehouse workers, cable installers. In fact, about 20 percent of all employees (that’s about 30 million people!) are under no-competes.

This probably explains—in part—why wages are stagnating. Employers are using these contracts to kill off labor market competition and bidding up of wages.

On Monday, Massachusetts passed a sweeping new law that strictly limits no-competes. It bans these contracts for minors, students, and hourly wage workers. It also introduces important procedural protections, guaranteeing employees notice and an opportunity to consult with an attorney before signing non-compete deals.

If Democrats take control of Congress, this type of law would likely be a legislative priority. Using the Massachusetts law as a model, they might enact similar legislation, perhaps dubbed the Anti-Serfdom in Services Act, or ASS Act. Perhaps the president— known for sticking up for ordinary workers— will sign this law.