Monday, July 8, 2013

Pasquale on From Status to Contract to Fealty

ContractThanks to Mike Zimmer (Loyola-Chicago) for bringing to my attention this post on the Concurring Opinion Blog from Frank Pasquale entitled: From Status to Contract to Fealty.

Here's a taste:

“Consent” can be a near-universal solvent in employment law, eviscerating rights that would be considered basic outside the workplace. Soon after Independence Day, Alana Semuels reported a new twist on the trend: contracts to tie even low-wage employees to a given workplace, on penalty of not working at any competing business for months or a year afterward:

Mazhar Saleem is bound to his employer by a number of contracts that made it hard to earn enough money to live, but also hard to go work anywhere else. He drives a town car for a company in New York as an independent contractor, rather than as a full-time employee. That means he doesn’t get benefits, never gets overtime, and isn’t guaranteed set hours.

But he also signed a non-compete contract when he started working, meaning he can’t drive a car for anyone else in New York. So even if his employer doesn’t give him any work, he’s not allowed to go find it elsewhere. . . .

In a recent case in Worcester, Mass., three women working at a hair salon tried to leave after theirconditions at work deteriorated. All three received cease and desist letters when they started working elsewhere, because they had signed non-compete clauses. They had to wait a year for the clauses to expire before they could work in the area again.

In fact, these exclusivity clauses even extend to the hunt for temporary, no-benefits work, as Fed governor Sarah Bloom Raskin found out at a job fair:

‘So what I need to do is put in my resume and then I’ll be able to get this job?’ And she said ‘yes.’ And I said: ‘while I’m waiting can I go to some other firms and throw my resume into their databases as well?’ And she said ‘oh no, you can’t do that, because you’re going to sign a letter of intent.’ And that letter of intent is basically an exclusivity agreement that says that by putting your resume in here you agree to not put your resume anywhere else.

Corey Robin explains the tricky issues these cases raise for advocates of “freedom of contract.” Libertarians often point out a paradox of democratic theory: a dictatorial party could win an election, then decide “no more elections.” Is not something similar happening when bosses, emboldened by a terrible job market and a near-infinite supply of cheap labor, bind employees like the hair salon did? If workers have neither voice (no union) nor exit (no chance to seek better employment), what’s left but loyalty? Or, to put it feudally, fealty?

I appreciate Frank' post, but wonder whether these covenants for lower paying jobs would be enforceable in most states given the lack of unqiue protectible legitimate business interests (though the hair stylist situation may be a closer situation).  I am also skpetical that the letters of intent can keep the employees from applying to other employers in the at-will world in which we live.

Of course, the lack of employee sophistication and lack of access to knowledgeable attorneys who know the employment law in this area makes these developments troubling nonetheless.


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Right - the lawyer's first thought is "that's not gonna be enforceable." Unfortunately lawyers are almost the only people who think that way. Not sure if you meant that low-wage employees are particularly unsophisticated, which may be true, but when it comes to non-competes you have to go a decent way up the ladder or be in a specialized profession before anyone becomes too sophisticated.

Posted by: Alek | Jul 9, 2013 6:55:31 AM

"I wonder whether these covenants for lower paying jobs would be enforceable in most states" -- totally misses the point. Low-wage workers are "self-enforcing" the contracts because they have no idea that they might be unenforceable. Also, given the attorney's fee provisions in these same contracts, the price of "testing" a non-compete clause in court and losing is unbearably high.

Posted by: Simon | Jul 9, 2013 8:11:15 AM

I agree with Paul, and I want to add that there's another, more fundamental reason that these contracts are void: They violate the Thirteenth Amendment. Under decisions like Shaw v. Fisher, 102 S.E. 325 (S.C. 1920),the Amendment guarantees not only the right to quit, but also the right to seek employment elsewhere. Shaw struck down the tort of "harboring" (meaning employing) a worker who is under contract to another, reasoning that if no one else could have employed the worker during the term of his contract, then "the result would have been to coerce him to perform the labor required by the contract; for he had to work or starve.”

As the sesquicentennial of the Thirteenth Amendment approaches, we labor law folks might want to consider whether we want to pay more attention to the one currently operative constitutional provision that directly addresses labor. Frank Pasquale's post reminds of Adam Smith's observation that because "the pride of man makes him love to domineer, and nothing mortifies him so much as to be obliged to condescend to persuade his inferiors," employers will generally prefer the service of slaves to that of freemen.” We can see that tendency today not only in the contracts that Frank highlights, but also in the persistence of human trafficking, the assault on collective bargaining, and the structure of the global economy, which permits the free international movement of capital but not of labor. Maybe the Thirteenth Amendment is more relevant today than would appear at first glance.

Posted by: James Gray Pope | Jul 9, 2013 8:35:23 AM

I agree with what everyone here has said. But I definitely take to heart what I understand Alek and Simon to be saying. It may take quite some time before local judges are "guided" not to simply enforce what seems to them to be clear contractual language. As luck would have it, a close, young relative of mine brought me an employment contract a few days ago to look over before she signed. Much of the "rights waiver" and non-compete language in that agreement seemed to me questionable if not outright unlawful. There were other elements of the agreement that were unquestionably unlawful. My advice to her was to seriously consider not taking the job. But I'm not sure she is in a position to walk away. Moreover, I'm hearing more and more (anecdotally) that these provisions are becoming the standard. I can't help but think that there is some pretty serious signalling going on as a result of recent S. Ct. opinions. Even the small employers seem to be getting the message. It's open season.

Posted by: Michael Duff | Jul 9, 2013 12:53:38 PM

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