Blog Layout

Will Congress Outlaw Non-Compete Agreements for Low-Wage Employees?

outlaw non-compete picA new bill set to go before Congress deals with non-compete agreements. The Senate Democrats have introduced the bill calling it the Mobility and Opportunity for Vulnerable Employees (MOVE) Act. If passed, the MOVE Act would amend the Fair Labor Standards Act (FLSA) to prohibit the use of non-compete contracts with low-wage employees.

Under the bill, the definition of “low-wage employees” includes hourly employees that earn less than $15 per hour or the applicable state minimum wage, whichever is greater, or a salaried employee that makes $31,200 per year or less. The bill implements the FLSA definitions of “employer” and “employee.” The MOVE Act would require an employer who employs low-wage employees to post a notice of the MOVE Act in a conspicuous location on its premises. If an employer wishes to enter non-compete agreements with employees who do not qualify as low-wage workers, the employer must make a disclosure of the requirement “prior to the employment of such employee and at the beginning of the process for hiring such employee.”

Enforcement of the MOVE Act would be performed by the Secretary of Labor, who is granted the authority to investigate and enforce complaints in the same manner as other claimed violations under the FLSA. The bill proposes a $5,000 civil fine for every employee that is the subject of a violation.

This legislation appears to be in response to the increasing use of non-compete agreements with low-wage workers, which was brought to light when Jimmy John’s restaurant came under fire for using these types of contracts with all its employees. The questionable clause in Jimmy John’s agreement prohibited its employees for two years from working at any food service venue that obtains 10% or more of its income from the sale of “submarine, hero-type, deli-style, pita and/or wrapped or rolled sandwiches” within three miles of a Jimmy John’s restaurant. A class action lawsuit was filed, but thus far the plaintiffs have not experienced much success.

Due to the differing state laws regarding the enforceability of non-compete agreements, having the courts make this determination will likely lead to inconsistent results. It will be interesting to see if Congress steps in to resolve the issue.

If you are interested in learning more about non-compete agreements or how we can assist you with your business-related needs, contact the knowledgeable lawyers at The Swenson Law Firm to schedule an appointment.

Share by: