Business Question: Non-competes for min wage workers?
I can see non-competes in positions where the individual is privy to highly-sensitive or critically strategic, but for minimum-wage workers?
Please weight in and tell me if I'm just completely misreading this.
Please weight in and tell me if I'm just completely misreading this.
Non-competes, however, deal with the employee after they leave the employ of the employer. Once they leave, that individual is no longer an agent of the company and with that loss of agency goes any claims of the employer to image. But if one allows for corporations to restrict the free flow of labor - even from one competitor to another - one is engaging in the same kind of heavy-handed market tampering we so deride when it spawns from government.
I can agree to a non-compete when it is to protect intellectual property such as the case of unique business processes or proprietary knowledge, but this is talking about minimum-wage workers and assembly line processes any customer who watches the sandwiches being made can easily derive. I just can't see the justification for a non-compete in this circumstance. And especially where we are dealing with those of limited means (resources for litigation, public awareness,etc.), and limited options (knowledge, training, etc.), I have to question what market-based mechanism would be effective feedback in such a circumstance.
Oh, I know you're not. ;) The question I raise, however, is that a non-compete tampers with a third-party, and therefore becomes an external matter. I'm just evaluating the various external feedback mechanisms available to counteract such bad behavior. So far the only ones I can think of are litigation (contract dispute) or legislation (declaration that such contracts are inherently unenforceable such as this legislation).
I'm not seeing how the market-based approach you are advocating would actually act as an effective check. Here's why:
First of all, the very employee base we're talking about aren't employable at that many jobs due to a lack of skills. They also have limited means as a result, meaning that their mobility is _very_ low. Their ability to pick and choose which businesses they apply for a position at is limited.
Second, your model assumes that there are a plethora of competitors for those workers. In a good economy, that may be the case. In an economy like what we have right now, I'd argue it's not. When that meager share of positions lacking a non-compete are gone, workers are left with few options.
Third, if they leave the employ of one of those businesses constrained by a non-compete, their free movement in the market is hampered.
Last, the labor supply also is decreased for competitors of those businesses every time an employee is hired. Every person that leaves the employ of a business constrained by a non-compete actually is taking _two_ people away from competing businesses: the one who left and the new entry who takes their place.
Again, in a robust market, with high demand for low-skill workers, that mechanism _might_ be able to somewhat check the non-compete, but in a low-demand market, I see no effective market-based solution.
“Congress shall make no law abridging the freedom of production and trade...” - Ayn Rand /Atlas Shrugged
Trade is not limited to transactions between business - but between any two parties who agree to a set of terms for trade of their products and/or services. This is no different.
Precisely, and that's why I am questioning this in the first place, because a non-compete is essentially an attempt at market manipulation for labor. They are trying to circumvent the very market feedback mechanism that keeps wages competitive. +1
Should a business do this? I think it depends on the industry. Should the government get involved? No. After all, if the employees don't want to get involved in a non-compete, then they can choose to work elsewhere.
My concerns expand, however, because of the eventuality of people being hired subject to non-competes. When those people leave that employer, the entire labor force for that industry effectively shrinks by the number of people with enforceable non-compete agreements. So other companies are effectively being choked to some degree of a ready supply of cheap labor and most especially the ones most trained to capitalize on that kind of job due to prior experience. The Blimpies or Subway down the street can't hire the most qualified, productive candidate - the one that just left Jimmy Johns'!
I agree with you that it doesn't make sense for Jimmy Johns to attempt to enforce such non-competes, I'm just trying to figure out _if_ there is a market-based force that counteracts such bad behavior or if there was no resort but the heavy hand of government. I'm racking my brain and just not coming up with the options.
I'm most curious as to whether or not anyone can ask or answer the question of What Was/Is JJ's trying to Accomplish with their non-compete clauses?!
If the workers are low-wage, 'can't tie their own shoelaces' kinds of people, why do you discuss fears that they'll steal recipes or procedures and bring/sell them to competitors?! What alternative employer would hire the 'shoelace crowd' member because they had a market-influencing trade 'secret' in their pocket?
And which shoelaces-untied employee would be operating at such a level as to freaking OPEN their OWN store in competition?!
Without more WTF was JJ's trying to accomplish 'information,' this 'discussion' seems really silly.
Sure, we generally oppose government intrusion into free trade and person-to-person and person-to-employer contracts, so those are nice reasons to oppose such regulations, but I think this discussion needs to go three or four more onion-peeling levels down into WTF prompted it in the first place first!
Cheers!
I was under the impression that the non-compete was supposed to restrict certain business related processes that were exclusive to that particular business (client lists, vendors, etc.) but saying that because my job consists of slicing a bun on it and putting meat, cheese, and condiments consists of an "exclusive process" is a bit ridiculous. Perhaps JJs has a secret way of wrapping their sandwiches, that, if it got out, would hurt their business.
Second question: Does non-compete makes sense for low wage employees? In my opinion, yes. There are jobs that employ untrained people (in that field, at least) and teach them proprietary skills. The eventual output of that job may be worth more than the minimum wage, but while a person is learning, their output is often much less than they are being paid. A business will be faced with only hiring skilled workers at much higher rate (in order to still have the non-competes), thus eliminating the training opportunities for the new cadres and eventually leading to monopolies, or not hiring at all, thus limiting expansion, again leading to monopolies. Bottom line – ANY TIME the government gets involved, everybody loses. Besides, non-competes for unskilled low wage labor such as delivery drivers is not really enforceable anyway – the prosecution costs will be much higher than anything that the company will ever collect; who would be such an idiot as to do that?
"There are jobs that employ untrained people..."
ALL jobs are like that. There is _always_ an initial period of training and familiarization during which the productivity of the worker is less than their compensation in the initial stages. Businesses accept this, and the most recent business studies place turnover costs at about $10,000 per individual (obviously less for a minimum wage job - this study was for office jobs). So I'm not really buying the rest of that argument. I can also turn it around by saying - aren't you actually allowing a monopoly on labor and driving up prices by enabling businesses to engage workers with non-compete agreements? Of course you are.
"ANY TIME the government gets involved, everybody loses."
I agree, which is why I am trying to ascertain how the market can address the issue by itself. In a tight job market like the present, I'm not sure any non-legislated provision will be successful. That's why I opened this thread - to solicit options. So far, I have been drawing blanks.
"non-competes for unskilled low wage labor ... is not really enforceable"
I don't have any idea one way or another. The case law I'm familiar with is more about non-competes for managers and such. This is the first time it's been debated for low-skill workers. My question is if they aren't willing to enforce them, why make them sign in the first place?
The dangers with non-compete agreements are that the employer bears the burden of proof and they have to show several key items with respect to getting a ruling of enforcement:
1. That the non-compete does not prevent the person from being gainfully employed at a wage commensurate with their skill level.
2. That any employment entered into materially harms the previous employer either A) because the prior employee could not perform the duties of their new job _without_ relying on proprietary knowledge or trade-secrets obtained from the prior employer OR B) that they opened up their own shop in the same industry targeting the same customers with the same products (even this one is subject to some judicial discretion/interpretation) in violation of their agreement.
Given the nature of your business, these arguments are going to be a hard sell to a judge on a ruling of enforcement based on 1 (above) alone. Only 2B is an open-and-shut case, really. Hopefully you never have a previous employee as unscrupulous as to cause you concern.
One, it is a contract between consenting parties. Whether they are low wage or high wage – it’s an agreement between the parties and the federal government doesn’t really have any business meddling in this. This would be an issue for local courts to deal with – assuming the previous employer bothers to go that route in the first place.
Two, whether minimum wage or not – they can still learn trade secrets. This case said JJ only had SOME of their employees sign non-competes. One would think they are having employees with sensitive information to sign these verses everyone (like sandwich artists). Such as to delivery drivers who know where larger client deliveries may being made, or what suppliers they may be getting products from. Trust me that matters. I have know people to leave an employer and go to another and then try to use their knowledge to bring part of the previous employers customer base with them – or give their new employer information about where to get supplies cheaper – or better supplies because they know the sources. This legislation says the people making less than $15 per hour would also qualify. I have had access to a LOT of very sensitive information of many companies while making less than this limit. Pay is not a determining factor as to whether or not they could take damaging information to a competitor.
Three, judges in local courts, can hear the details in a case to decide if the non-compete is overly restrictive - given the particular case’s circumstances. Let it be a local issue where it belongs, where agreements between consenting, contract signing adults may be heard. Why would JJ bother to take a previous employee to court unless they were doing something with their new employer to cause them financial harm? They would have to be awfully vindictive to bother going after them otherwise – and even if so – they did sign a contract.
Ayn Rand and Objectivism is not in support of big government regulation – but is in favor of courts hearing cases involving disputes. The federal level is there to defend rights, and whether to uphold a contract signed between adult consenting parties is not a rights issue.