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Non-compete agreements becoming standard in many low-skill jobs

| Mar 30, 2015 | Business Formation And Planning |

We have previously written about the proper use of non-compete agreements, as well as their legal limitations. In most cases, non-compete agreements serve a vital purpose: They prevent employees from taking proprietary knowledge and information and giving it to competing companies.

In order for non-compete agreements to be enforceable, they must meet several criteria. First and foremost, they must be considered “reasonable.” Unfortunately, an increasing number of large companies are including non-compete clauses in contracts with low-level employees; the terms of which are anything but reasonable.

Perhaps the most egregious example is the agreement that Amazon makes its warehouse employees sign. As most readers know, Amazon operates large warehouses where workers hurry to fulfill shipping orders as quickly as possible. The work and working conditions are often grueling, and the pay is often a few dollars above minimum wage.

Although the work is difficult, it is still manual labor. Workers do not obtain any valuable trade secrets or other knowledge/skills that would threaten Amazon’s success if these employees went to work for a competitor. Yet warehouse employees – including those working seasonally – are required to sign non-compete agreements so broad and strict that they seemingly prevent former employees from working anywhere else.

Employees are prohibited from working for a competitor for 18 months after the end of their employment. The duration alone might be considered reasonable. But Amazon’s geographical operations zone is nearly global. And because the company has been dubbed the “everything store,” drafting a comprehensive list of Amazon’s competitors would be nearly impossible.

In essence, Amazon’s non-compete agreement practically requires warehouse workers to go without a job for 18 months after leaving the company. Wording in the agreement even seems to point out how unreasonable the agreement is. It reads, in part: “”Employee recognizes that the restrictions in this section 4 may significantly limit Employee’s future flexibility in many ways.”

If Amazon ever tried to enforce these agreements in court, it seems likely that the company would lose. Unfortunately, Amazon and other companies likely include these inappropriate non-compete agreements because they know that most employees cannot afford a court battle in the first place.

If you own a business where trade secrets and intellectual property must be protected, non-compete agreements would be necessary and appropriate. Among low-wage and low-skill workers, however, such agreements would not be necessary and may not be enforceable.

Source: The Verge, “Exclusive: Amazon makes even temporary warehouse workers sign 18-month non-competes,” Spencer Woodman, March 26, 2015