A while back, sandwich chain Jimmy John’s came under some pretty heavy scrutiny for forcing its employees to sign non-compete agreements as a condition of their employment. Agreements such as these aren’t all that uncommon in the American economy these days, but what made Jimmy John’s case different was the fact that they were not employing what we’d call skilled workers. Instead, they were simple sandwich makers.
Why would Jimmy John’s want low-wage sandwich makers banned from seeking employment with a competitor? Simply put, so they can stop them from seeking raises or getting other offers — to cut down on labor and retainment costs. This rubbed a lot of people the wrong way and led to some significant backlash. As a result, legislators nationwide went to work trying to ban non-compete agreements.
That work is ongoing, though public attention has shifted to other matters. Recently, however, there have been some new, surprising developments. Workers and people advocating for the ban of non-compete agreements now have a powerful new ally in the fight: President Barack Obama and the White House.
Now in the final days of his presidency, Obama has publicly announced support for banning non-compete agreements, which the White House claims hurts worker mobility for low-wage workers.
A non-compete agreement ban?
According to a report from NBC News, the Obama administration’s goals in seeking a non-compete ban are to make the labor market more competitive and grow wages. The ban is only a suggestion, there are no executive orders or legislation planned, and is more of a call of attention to the issue.
Some of the problems created by these agreements are that workers are legally barred from seeking jobs if they’re laid off, or pushed out of their jobs for some other reason. It also makes it hard for workers to seek raises or promotions by soliciting better offers, which runs counter to the “free market” ideals many Americans champion.
“(Workers) can’t reach their true potential without freedom to negotiate for a higher wage with a new company, or to find another job after they’ve been laid off,” Vice President Joe Biden said.
If such a ban were to actually materialize, it would more than likely come at the state level. Businesses in certain industries use non-competes for different reasons, and in some cases, those reasons are valid. For example, Apple would want an employee to sign one if an employee was working on an experimental new technology. It would be disastrous for that employee to jump ship over to Google or Microsoft, taking valuable knowledge with them.
But when it comes to a company like Jimmy John’s? That argument doesn’t really hold up.
The pros and cons
The White House and many workers’ rights groups think this is an effort and policy worth pursuing. But it begs the question of whether banning non-compete agreements is actually a good idea. If Obama were to issue an executive order doing away with them, that would be a fairly big overreach. Instead, he’s trying to use his influence to sway opinion. What can that tell us?
Likely, it’s not necessarily a good idea in all cases. When it comes to a company like Jimmy John’s? Forcing low-wage, low-skilled workers into contractual traps probably isn’t good for the overall economy. But there are legitimate reasons for doing so in other industries.
Those who disagree with a ban will say that if applicants don’t like the policy, they can go work someplace else. That’s true, but the problem is that many of these workers don’t realize what they’re getting themselves into. That’s the crux of it all.
The Obama administration has made its view clear on this issue. The next administration may not see it the same way. The good news for workers’ rights activists fighting these types of contractual “gotchas” in low-wage, low-skill work environments? Policymakers are taking notice, and though they’re not issuing executive orders or anything like that, they’re voicing concern.