Personal Finance

Can a Former Employer Keep You From Getting a Job?

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OK, free market defenders, time to stand up and be counted. Do you believe in competition, or not? Aptly named “non-compete clauses” are creeping into standard employment agreements across a host of low-wage industries, according to a story in The New York Times. One such clause prevented a 19-year-old college kid from getting a job as a camp counselor because she’d worked for another nearby camp the year before. Hair stylists are being shut out of jobs at competing salons. Yoga instructors. Interns. My God, interns!

I’ve written extensively on the problem of leverage in the workplace, particularly at the tail end of a recession. Companies do well as the economy improves, enjoying the fruits of greater competition for jobs and higher productivity from slimmed-down workforces. Firms lay off workers quicker than they hire them.

Meanwhile, workers remain scarred by the trauma of layoffs and tend to put up with more, even as things start to improve. Among the stuff they are apparently putting up with are non-compete agreements that prevent workers from….well, working…even after they leave their current employers. Ever after they have long since stopped getting paychecks from employers. Even after they receive no benefits from employers. Even if they gained no benefit whatsoever from the non-negotiated agreement in the first place. (How do I know it’s non-negotiated?  Who in their right mind would agree to such a thing?)

Non-competes have been relatively common in high-tech industries for a while. Highly-paid Silicon Valley programmers would sign them to make employers feel better about the risk that a coder might leave, steal some intellectual property and set up a competing business. That’s rational enough. And in an environment of abundant labor, an engineer could actually expect to be paid more in exchange for signing such an agreement, or take less money working at a firm that might not require it. Even in that context, non-competes are as bad as they sound — is it good for America to declare some part of the economy an anti-competition zone? — but reasonable people can disagree on that.

Where It Stops Making Sense

Non-competes for camp counselors? Folks who spray pesticides at parks? Who would possibly argue for such an abomination? Oh this guy, according to the Times:

“(Non-competes are) used in almost every sector of the economy to the seemingly mutual satisfaction of employers and individuals,” said Christopher P. Geehern of the Associated Industries of Massachusetts, a trade group fighting to defeat a legislative proposal in Massachusetts to rein in non-competes. Yes, I’m sure those out-of-work camp counselors are very satisfied.

And this guy.

“Non-competes reduce the potential for poaching,” said John Hazen, whose paper company makes lottery tickets, another bright spot on the U.S. economy, “We consider them an important way to protect our business.”

Protection or a Trap?

Glenn Fleishman, an Economist contributor, railed about the story recently via Twitter.

“(Non-competes) are offensive to liberty,” he wrote. “I’m surprised (there isn’t) more conservative outrage.”

If your basic sense of fairness isn’t deeply disturbed by this trend, you aren’t paying attention. Every other worker-unfriendly policy of our time is defended by one notion: labor portability. If you don’t like it, you can work somewhere else. In more subtle columns, I’ll tell you many things about labor portability are a farce. Healthcare is one: you can’t just switch jobs if you are afraid of losing your doctor. The sluggish housing market is another. Got a good job offer 500 miles away? Who cares if your mortgage is under water and you can’t sell your house. All these things serve to artificially deflate wages and deflate our national mood, as workers progressively feel more trapped in less-than-ideal situations.

But that’s the subtle argument.  Here’s the blunt one: Labor portability doesn’t exist because THEY SAID SO!

With the stroke of a pen, companies are, incredibly, making it impossible for employees to make a living if they quit. I’m being redundant because it matters so much. Even long after former workers have severed their relationships with corporations. Even after they are no longer getting paychecks or have any other relationships, these ex-employees can’t work in their chosen field any longer.

Still can’t find it in your heart to see the absurdity of the situation? Try this on: It also applies if workers are fired.  These agreements literally give bosses the power to make workers destitute on a whim. Talk about leverage.

Oh, and one more thing. Who is paying for all this? You are. What happens to workers who are fired are cannot find employment in their line of work? They collect unemployment insurance, of course. In a very real way, you are subsidizing employers’ ability to place workers in something quite like indentured servitude.

It’s time to get angry. Companies and their clever lawyers have already eliminated your right to sue them and have your day in court. Now they are trying to eliminate your ability to work freely. Where will it end?

Employers of America, there is another way to make it hard for workers to leave. PAY THEM MORE!  Or, train nice bosses that garner affection and loyalty. Or offers lots of vacation time.  Or….

This story is an op/ed contribution to Credit.com and does not necessarily represent the views of the company or its affiliates.

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