The White House said Tuesday that it would start urging states to challenge the widespread practice of employers requiring prospective workers to sign noncompete clauses before they can be hired.
The administration said the practice likely hurts both workers and the broader economy by limiting the ability of people to seek better employment.
Noncompete clauses in employment contracts typically state that a worker cannot take a job at a competitor after they quit, are fired or laid off until after a specified time period passes, often several months to a year or more. The clauses were originally associated with workers who knew trade secrets, but the practice has become more widespread as a means for employers to prevent workers with special skills from quitting.
The administration estimated that about 30 million workers, or about one in five, and about one in six college-educated employees were subject to the clauses.
Jason Furman, chairman of the President Obama’s Council of Economic Advisors, said the practice should be curtailed because it is unfair to workers. “If you have less of an ability to threaten to leave one job for a better job then you have less of an ability to earn,” he said.
The administration did not announce any new rules. Rather, it issued a “call to action” for states to address the issue by passing legislation or upping enforcement. The practice is prohibited in California, North Dakota and Oklahoma, and several others have limited the practice or considered prohibitions.
Furman noted that even in those states where the practice is not allowed, it often persists because many employees don’t know about the prohibition. “In a number of places noncompete clauses are not enforceable, but they show up in contracts anyway,” he said, leaving workers with the impression that they have no choice but to abide by the clauses.
“Folks, no one should have to sit on the sidelines because of an unnecessary noncompete agreement. We have the most dynamic, productive workers in the world, but they 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.
