Madam President, if you were working for the sandwich shop Jimmy John's--I don't know if the Presiding Officer has ever had a Jimmy John's sandwich. It is a pretty good sandwich. If you were working…
Madam President, if you were working for the sandwich shop Jimmy John's--I don't know if the Presiding Officer has ever had a Jimmy John's sandwich. It is a pretty good sandwich. If you were working for Jimmy John's sandwich shop in the middle of the last decade, around 2014, 2015, 2016, you might have been required to sign a contract with Jimmy John's to make sandwiches. Buried in that contract, as a fast food worker at Jimmy John's in 2014, 2015, 2016, was something called a noncompete clause.
A lot of Americans have heard of noncompete clauses. They think of them as applying to executives, individuals who make a lot of money, who possess really intricate, detailed information about a product. But Jimmy John's made everybody who came to work in many of their sandwich shops sign a noncompete agreement. The noncompete agreement for Jimmy John's sandwich makers said that if you ever left Jimmy John's, you would not be able to work at any business within 2 to 3 miles of any Jimmy John's for any company that made over 10 percent of its revenue from selling ``submarine, hero-type, deli-style, pita, and/or wrapped or rolled sandwiches'' for 2 years. Low-income, minimum-wage workers at Jimmy John's, if they tried to leave that job, were prohibited from going to work for Subway or going to work for D'Angelo's or maybe even, according to this definition, McDonald's or Burger King.
Of course, that sounds patently ridiculous. Why would you need to protect the intellectual secrets of sandwich making at Jimmy John's by applying noncompete agreements for these low-income workers? But this wasn't and isn't an anomaly. In fact, one out of six hospitality restaurant workers, by some studies, has a noncompete agreement. Today, noncompete agreements apply to one in five American workers. That is 30 million workers.
Amazon warehouse workers were required for a long time to sign noncompete agreements. I read a story the other day of a company called Camp Bow Wow that pays people to pet-sit. They required their pet sitters to sign noncompete agreements.
The reason that noncompete agreements are being used at industrial- level scale today is not to protect the trade secrets of sandwich making or pet sitting; it is to keep wages down. It is to prevent low- income workers from being able to go out and get a better job and thus pressure their existing employer to increase wages. This practice has become pervasive throughout our economy, and it is just a fundamental restraint on free trade.
Now, many of these noncompete agreements end up being nonenforceable. A lot of State laws don't allow you to have a noncompete agreement for a low-wage worker. But in practice, it doesn't really matter because when that individual tries to leave and they get told they can't because of a noncompete agreement, they don't know that it is nonenforceable in State law or if they do know, they don't have the resources to contest the cause in a court of law. So what do they do? They just end up staying.
The FTC filed a complaint in January of this year against two Michigan-based companies that required their security guards to sign noncompete agreements prohibiting them from working for a competing business within a 100-mile radius. Despite the fact that these security guards were making very low wages, the company's noncompete included a restriction that required the employee to pay a $100,000 penalty for any alleged violation of the clause. The intention here is simply to bind the employee to the company, to give them no ability to bargain for a higher wage because they might be able to get a better wage somewhere else. There is no proprietary information that those security guards possess.
What is equally interesting is that there is increasingly great data to show that there is actually no reason to have noncompete agreements even for higher income workers. The imposition of noncompete agreements on low-wage workers is primarily about just trying to restrain wages, but the imposition of noncompete agreements on higher income workers is about impeding innovation. It is about a company that doesn't want competitors, so they bind their executives to noncompete agreements such that their executives can't go work for a competing company or can't go out and start a company that may compete.
What is so maddening is that there are plenty of protections in our existing law that protect companies from intellectual property theft or patent theft. If what you worry about is your trade secrets being appropriated by a competitor, well, the law already protects you from that. You don't have to deny your employees or your executives the ability to go work for another company.
California rightly has the reputation as probably the world's center of innovation, right? More startups, more world-changing companies have come out of California than any other State and probably than any other part of the world. California was the first or one of the first in this country to ban noncompete agreements. California decided it didn't need noncompete agreements to protect intellectual property in a State that probably has a greater interest in protecting intellectual property than any other State. In fact, California's economic engine is dependent on their prohibition of noncompete agreements because by prohibiting noncompete agreements, California has a culture in which startups are encouraged, in which executives can leave one company and start another.
Eric Yuan was an executive at Cisco Webex. If he wasn't working in California, he might have had a noncompete agreement applied to him, but he didn't, and so he could leave and start a company that was arguably competing with Cisco Webex--a company called Zoom.
To many economists on the right and the left, this is becoming a no- brainer. Noncompete agreements are bad for wage growth. Noncompete agreements are bad for innovation. Noncompete agreements are bad for low-income workers. Noncompete agreements are bad for high-income workers.
So today I am on the floor to talk about what the data tells us about noncompete agreements as a means to encourage my colleagues to take a look at a piece of legislation that we are introducing today, the Workforce Mobility Act, a pretty simple piece of legislation that would ban the use of noncompete agreements for both high-income and low- income workers.
It is a bipartisan piece of legislation. Senator Todd Young, Senator Kevin Cramer, Senator Tim Kaine, and I are introducing this bill today. I don't know that there is another policy that the four of us can find common ground on, but we find common ground on this issue because maybe if you are a progressive, you come to this issue through the rights of workers and boosting their wages. If you are a conservative, you come to this issue through the restraint on free trade that exists through the perpetuation of noncompete agreements. But all across America, this is a pretty bipartisan issue, and here in the Senate, it is bipartisan as well.
I am glad that the FTC, just a week or so ago, announced that they were going to undertake a rule to ban noncompete agreements. I congratulate the Biden administration and the FTC for taking a leadership role. It may be that that rule, once it is adopted and in place, will do the work of this legislation, but we know that rules are only as good as the commitment of one particular administration.
So my hope and my recommendation is that no matter what the FTC does when it comes to restrictions on noncompete agreements, that we pass the Workforce Mobility Act so that we provide a guarantee in the law that noncompete agreements are not going to stand in the way of wages rising or small businesses starting.
There is a lot of public support out there as 92 percent of voters think that it is way too hard today to start or grow a new business and as 80 percent of voters--again, across party lines--support policies that allow people who want to start a new business more freedom by reducing the restrictions that come when you try to venture out on your own. Increasingly, one of the primary restrictions that exists for people who want to start a new business, who want to become entrepreneurs, are these noncompete agreements.
So I am coming to the floor today to recommend this bipartisan piece of legislation to my colleagues, to point to the States that have already adopted these restrictions, and to show how not only does the sky not fall when you get rid of noncompete agreements but that startups flourish and that wages increase.
Finally, I come to recommend to my colleagues that, in an environment where it is going to be a little harder to find agreement between Republicans and Democrats, this is a place where we can find that common ground. In one piece of policy, we can stick up for low-income workers and the free market. This is something that we can do together to help raise wages and to help power our economy.
