The Obama administration has called on U.S. states to ban agreements that prohibits many workers from moving to their employers’ rivals, saying it would lead to a more competitive labor market and faster wage growth.
The administration said so-called non-compete agreements interfere with worker mobility and states should consider keeping companies from requiring low-wage workers and other employees who are not privy to trade secrets or other special circumstances to sign them.
Biden also mentioned that a salesman in Connecticut who was laid off and forced to spend his retirement savings because he was prohibited from accepting other sales jobs.
“(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,” Biden said.
.The problem drew attention from some lawmakers and advocacy groups in June when the attorney general of Illinois filed a lawsuit claiming non-compete agreements signed by employees of fast-food franchise Jimmy John’s were unlawful. The company said it would stop using the agreements in order to settle the case.
The Obama administration on Tuesday also urged states to ban non-compete agreements that are not proposed before a job offer or promotion is accepted and said employers should not be able to enforce the agreements when workers are laid off.
The White House said 20 percent of U.S. workers are bound by non-compete agreements, including 14 percent of those earning less than $40,000 per year.