WASHINGTON–U.S Senator Chris Murphy (D-Conn.) on Wednesday spoke on the U.S. Senate floor on the Workforce Mobility Act, legislation he reintroduced to limit the use of non-compete agreements, which constrain almost one in five American workers. Murphy highlighted the impact of non-competes on workers across industries and income brackets and how these agreements stifle innovation. 

On the widespread use of non-compete agreements, Murphy said: “The reason that non-compete agreements are being used at an industrial level scale today is not protect the trade secrets of sandwich making or pet sitting. It is to keep wages down. It’s to prevent low income workers from being able to go out and get a better job and thus pressure their existing employer to increase wages. This practice has become pervasive throughout our economy, and it is a just fundamental restraint of free trade.”

Murphy highlighted the FTC’s recent complaint against two security companies that required their employees to sign non-compete agreements preventing them from working for a competing business within a 100-mile radius: “Despite the fact the security guards were making very low wages, the company's non-compete included a restriction that required the employee to pay $100,000 penalty for any alleged violation of the clause. The intention here is simply to bind the employee to the company to give them no ability to bargain for a higher wage because they might be able to get a better wage somewhere else. There's no proprietary information that those security guards possess.”

Murphy debunked the justification for the use of non-competes for high income workers: “[T]he imposition of non-compete agreements on higher income workers is about impeding innovation. Right? It's about a company that doesn't want competitors, and so they bind their executives to non-compete agreements such that their executives can’t go work for a competing company or can’t go out and start a company that may compete. What is so maddening is that there are plenty of protections in our existing law that protect companies from intellectual property theft or patent theft.”

Murphy added: “And so to many economists on the right and the left, this is becoming a no brainer. Non-compete agreements are bad for wage growth. Non-compete agreements are bad for innovation. Non-compete agreements are bad for low income workers. Non-compete agreements are bad for high income workers.”

Murphy concluded: “[I]n an environment where it is going to be a little harder to find agreement between Republicans and Democrats, this is a place where we can find that common ground. In one piece of policy, we can stick up for low income workers and the free market. This is something that we can do together to help raise wages and to help power our economy.”

Last month, Murphy, Young, Kaine, and Cramer applauded the FTC’s proposed rule banning employers from imposing non-compete agreements on their employees.

A full transcript of his remarks can be found below:

“Mr. President, if you were working for the sandwich shop, Jimmy John's – I don't know if the presiding officer has ever had a Jimmy John's sandwich, it's pretty good sandwich – if you were working for the sandwich chain, Jimmy John's in the middle of the last decade around 2014, 15, and 16, you might have been required to sign a contract with Jimmy John's to make sandwiches and buried in that contract as a fast food worker at Jimmy John’s in 2014, 2015, 2016 was something called a non-compete clause. 

“Now a lot of Americans have heard of non-compete clauses. They think of them as applying to executives, individuals who make a lot of money, who possess really intricate, detailed information about a product.

“But Jimmy John's made everybody that came to work in many of their sandwich shops sign a non-compete agreement. The non-compete agreements for Jimmy John's sandwich makers said that if you ever left Jimmy John’s you would not be able to work at any business within two to three miles of any Jimmy John's for any company that made ‘over 10% of its revenue from selling submarine, hero style, deli style pita and or wrapped or rolled sandwiches for two years.’

“Low income minimum wage workers at Jimmy John's if they tried to leave that job were prohibited from going to work for Subway or going to work for D’Angelo’s or maybe even, according to this definition, McDonald's or Burger King. Now of course that sounds patently ridiculous. Why would you need to protect the intellectual secrets of sandwich making at Jimmy John's by applying non-compete agreements for these low income workers? But this wasn't, and it isn't an anomaly.

“In fact, one out of six hospitality restaurant workers by some studies have non-compete agreements. Today, non-compete agreements apply to one in five American workers – that's 30 million workers. Amazon warehouse workers were required for a long time to sign non-compete agreements. I read a story the other day of a company called ‘Camp Bow Wow’ that pays people to pet sit. They required their pet sitters to sign non-compete agreements.

“The reason that non-compete agreements are being used at an industrial level scale today is not protect the trade secrets of sandwich making or pet sitting. It is to keep wages down. It’s to prevent low income workers from being able to go out and get a better job and thus pressure their existing employer to increase wages.

“This practice has become pervasive throughout our economy, and it is a just fundamental restraint of free trade. Now, many of these non-compete agreements end up being non enforceable. A lot of state laws don't allow you to have a non-compete agreement for a low wage worker.

“But in practice, it doesn't really matter because when that individual tries to leave, and they get told they can't because of the non-compete agreement, they don't know that it's non enforceable in state law. Or if they do know, they don't have the resources to contest the clause in a court of law. And so what do they do? They just ended up staying.

“The FTC filed a complaint in January of this year against two Michigan-based companies that required their security guards to sign non-compete agreements prohibiting them from working for a competing business within 100 mile radius. Despite the fact the security guards were making very low wages, the company's non-compete included a restriction that required the employee to pay $100,000 penalty for any alleged violation of the clause. 

“The intention here is simply to bind the employee to the company to give them no ability to bargain for a higher wage because they might be able to get a better wage somewhere else. There's no proprietary information that those security guards possess. What is equally interesting is that there's increasingly great data to show that there's actually no reason to have non-compete agreements even for higher income workers.

“The imposition of non-compete agreements on low wage workers is primarily about just trying to restrain wages, but the imposition of non-compete agreements on higher income workers is about impeding innovation. Right? It's about a company that doesn't want competitors, and so they bind their executives to non-compete agreements such that their executives can’t go work for a competing company or can’t go out and start a company that may compete.

“What is so maddening is that there are plenty of protections in our existing law that protect companies from intellectual property theft or patent theft. If all you’re worried about is your trade secrets being appropriated by a competitor, well, then the law already protects you from that. You don't have to deny your employees or your executives the ability to go work for another company.

“California, rightly has the reputation as probably the world's center of innovation. More startups, more world changing companies have come out of California than any other state, probably any other part of the world. California was the first, or one of the first states in this country to ban non-compete agreements. California decided it didn't need non-compete agreements to protect intellectual property in the state that probably has a greater interest in protecting intellectual property than any other state. 

“No, in fact, California's economic engine is dependent on their prohibition of non-compete agreements because by prohibiting non-compete agreements, California has a culture in which startups are encouraged, in which executives can leave one company and start another. Eric Yuan was an executive at Cisco WebEx. If he wasn't working in California, he might have had a non-compete agreement applied to him, but he didn't and so he could leave to start a company that was arguably competing with Cisco WebEx – a company called Zoom.

“And so to many economists on the right and the left, this is becoming a no brainer. Non-compete agreements are bad for wage growth. Non-compete agreements are bad for innovation. Non-compete agreements are bad for low income workers. Non-compete agreements are bad for high income workers.

“And so today, I'm on the floor to talk about what the data tells us about non-compete agreements, as a means to encourage my colleagues to take a look at a piece of legislation that we're introducing today, the Workforce Mobility Act. It's pretty simple piece of legislation that would ban the use of non-compete agreements for both high income and low income workers. And it is a bipartisan piece of legislation. Senator Todd Young, Senator Kevin Cramer, Senator Tim Kaine, and myself are introducing this bill today.

“I don't know that there's another policy that the four of us can find common ground on, but we find common ground on this issue. Because maybe if you're a progressive, you come to this issue through the rights of workers, boosting their wages. If you're a conservative, you come to this issue through the restraint on free trade that exists through the perpetuation of non-compete agreements. But all across America, this is a pretty bipartisan issue. And here in the Senate, it is bipartisan as well.

“I am glad that the FTC just a week or so ago announced that they were going to undertake a rule to ban non-compete agreements. I congratulate the Biden Administration and the FTC for taking a leadership role. And it may be that that rule once it’s adopted and in place will do the work of this legislation. But we know the rules are only as good as the commitment of one particular administration.

“And so my hope and my recommendation is that no matter what the FTC does when it comes to restrictions on non-compete agreements, that we pass the Workforce Mobility Act, that we provide a guarantee in the law that non-compete agreements are not going to stand in the way of wages rising or small businesses starting.

“There’s a lot of public support out there. 92% of voters think that it's way too hard today to start or grow a new business. 80% of voters, again across party lines, support policies that allow people who want to start a new business more freedom by reducing the restrictions that come when you try to venture out on your own. And increasingly, one of the primary restrictions that exists on people who want to start a new business, who want to become entrepreneurs are these non-compete agreements.

“So I am coming to the floor today to recommend this bipartisan piece of legislation to my colleagues. To point to the states that have already adopted these restrictions. To show how not only does the sky not fall when you get rid of non-compete agreements, but startups flourish, wages increase. And to finally recommend to my colleagues that in an environment where it is going to be a little harder to find agreement between Republicans and Democrats, this is a place where we can find that common ground. In one piece of policy, we can stick up for low income workers and the free market. This is something that we can do together to help raise wages and to help power our economy.

“I yield the floor.”

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