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Austin TX Business Law Blog

Monday, August 31, 2015

Congress Introduces Bill to Ban Non-Compete Clauses Against Low-Wage Workers

Can my employer prevent me from changing jobs to work with a competitor?

Non-compete clauses are an extremely common component to the hiring process, and are used to prevent employees from leaving one company to work at a competitor, presumably taking clientele along in the process. 

In general, a non-compete agreement is enforceable if it is reasonable in scope. In Texas, this means that the agreement must not cover an unreasonably large geographic area (i.e., the entire state of Texas) or last for an unreasonably lengthy amount of time (i.e., ten years). Reasonableness will depend on the nature of the industry, the type of work performed, and the employee’s factual ability to cause financial harm to the first employer. 

However, there is a point where a non-compete clause can go too far, and may actually cross the line into an unlawful restraint on trade. Moreover, as several members of Congress have pointed out, businesses have begun restraining low-wage workers with non-compete agreements as well, creating additional hardship for a population already facing financial struggles. 

In June, 2015, several U.S. Senators introduced the Mobility and Opportunity for Vulnerable Employees Act. This Act, if approved, would prevent employers from attempting to restrain former employees from working for competitors if the workers earn less than $15.00 per hour, less than $31,200 annually, or the minimum wage in the worker’s municipality. 

In the words of Senator Chris Murphy (D-Conn.), non-compete agreements hidden in low-wage worker contracts deliberately trap these workers in low-paying jobs – and that’s unacceptable….I worked hard on this bill because I believe that if you’re making less than $15 an hour, the government has a moral duty to stop companies from exploiting your hard work by preventing you from using your skills and experience to work your way up.”

Currently, a number of low-wage food service companies embed non-compete agreements in employment contracts, preventing counter-service workers from procuring a job at a competitor. 

If you have questions about non-compete agreements, or would like to discuss the proper way to implement this strategy into your hiring procedures, please contact the Kumar Law Firm, serving Austin, Texas and surrounding areas today at 512.960.3808.


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