Scrutiny for worker non-compete clauses

Fast food worker Caitlin Turowski had this much in common with high-paid CEOs: When she quit her job, she couldn't work for a competitor.

Hired as a delivery driver for sandwich maker Jimmy John's and later made an assistant manager, Turowski said she signed a two-year non-competition agreement banning her from working for sandwich-making rivals within three miles of a Jimmy John's store. Burned out by long hours and low pay, Turowski quit in July, then took a pay cut to work in insurance telemarketing. She could earn more waitressing or bartending, but fears being sued.

"We're struggling," said Turowski, now a plaintiff challenging alleged wage violations and the non-compete agreement.

Non-competition agreements are better known in contracts for senior executives who have business secrets of interest to competitors. However, court records show the restrictions have also snared maids in Chicago, a nail stylist in Texas, cable TV installers in Michigan and agricultural workers in Washington. In October, Democrats in Congress asked the U.S. Federal Trade Commission and Department of Labor to investigate.

The agreements for low-wage workers might trap them in their current jobs, allowing their employers to pay them lower salaries, experts said. "It has a chilling effect on people actually going out and trying to seek jobs because they fear getting sued," said Kathleen Chavez, an attorney for Turowski and others. "This is not like a high-wage, skilled worker who says, `OK, let them sue me. I'll defend myself.'"

Employers might seek noncompetition agreements because they fear losing money training a worker who quits or who brings business secrets to a rival.

"You certainly wouldn't want anyone to know in the competitive landscape what's around the corner," Home Depot spokesman Stephen Holmes said. The retailer signs non-competes with senior executives.

Researchers say there's evidence non-competes limit pay for executives, and the same trend could hold for the rank-and-file.

"If you can't leave, you don't have leverage," said Matthew Marx, a professor at MIT's Sloan School of Management.

States differ on enforcement. Almost three dozen states allow judges to rewrite defective non-competition agreements, according to Russell Beck, a corporate law attorney who conducts national reviews. In a few states, he said, judges can strike problematic restrictions but keep the rest of the deal. Just under half-a-dozen states require that judges completely toss non-compete agreements if any part of it is legally flawed. Three states ban the agreements.

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Scrutiny for worker non-compete clauses