On March 7, 2019, a group of six United States senators from both sides of the aisle submitted a letter to the Government Accountability Office (GAO) requesting a federal investigation into the use of non-compete agreements on the basis that their widening use in recent years raises concerns about their negative impact on both workers and the national economy. Specifically, the letter asks the GAO to assess the following three questions:
- What is known about the prevalence of non-compete agreements in particular fields, including low-wage occupations?
- What is known about the effects of non-compete agreements on the workforce and the economy, including employment, wages and benefits, innovation, and entrepreneurship?
- What steps have selected states taken to limit the use of these agreements, and what is known about the effect these actions have had on employees and employers?
The letter was co-signed by Senators Ron Wyden (D-Ore.), Chris Murphy (D-Conn.), Todd Young (R-Ind.), Elizabeth Warren (D-Mass.), Marco Rubio (R-Fla.), and Tim Kaine (D-Va.). The complete text of the letter is attached.
In their letter, the senators state that they “are concerned that the use of non-compete agreements on a large scale could slow economic and wage growth, reduce productivity and competition in labor markets, and create significant barriers to entrepreneurship and innovation.” They further claim that “[i]n recent years, the wide use of non-competes has spread from highly technical fields into less technical and lower wage work, where they might reduce wage and benefit competition among employers and restrict employees’ upward mobility—for no good reason.” They also state that while non-compete agreements were originally intended to protect companies’ trade secrets, over time they have subjected too many workers to “arbitrary limitations” and keep them “trapped” in their jobs, which hinders innovation and limits workers’ ability to negotiate for higher wages, start their own business or leave for a better opportunity.
Interestingly, each of the states represented by the six senators permit non-compete agreements and, with the exception of Massachusetts, are generally very open and accepting to them. The GAO does not have a specific deadline to complete its analysis, but we will continue to monitor for any updates or further developments.