Friday, July 31, 2020
Democratic Senators Elizabeth Warren of Massachusetts (and a former Democratic party candidate for President) and Chris Murphy of Connecticut are urging the Federal Trade Commission to take action against non-competes, warning that they will exacerbate the already challenging task of finding employment for those affected by the pandemic. Scholars such as Orly Lobel have written extensively about the effect that non-competes have on employee mobility, and how they may disproportionately affect certain demographic groups (i.e. women, people of color). As I mentioned in a previous post, many states have already started to crack down on noncompete agreements on the grounds that they are unlawful restraints on trade and against public policy. Other states have not. Even in those states that have restricted their use, the non-compete clauses stubbornly remain in employment contracts either because employers haven’t updated their contracts or because they think their employees aren’t aware of the law and think these clauses will serve as an effective deterrent. As I note in my book, The Fundamentals of Contract Law and Clauses, employers should avoid this type of bad faith drafting behavior -- not only is it unethical, but putting clauses that employers know are unlawful in their employment agreement may result in penalties and even jail time in some jurisdictions!