Washington D.C. — U.S. Senator Marco Rubio (R-FL), Chairman of the Senate Committee on Small Business and Entrepreneurship, convened a hearing titled, “Noncompete Agreements and American Workers.”
A live-stream of the hearing can be found on the committee’s website here.
Chairman Rubio’s opening remarks as prepared can be found below.
Chairman Rubio: “I want to thank you all for being here.
“I also want to welcome our witnesses for being willing to share their time and perspective.
“I am pleased to hold today’s hearing to explore the proliferation of noncompete agreements among American workers across sectors and wage levels, and to examine the effects of noncompete agreements on the American working people.
“I have stated before, in various settings, my strong belief that American economic policy is not paying enough attention to the well-being of American workers.
“The foundation of our ability to grow and support strong families and thriving communities is the availability of dignified work for the workforce.
“We’ve seen three years of strong economic growth, but even so, we have millions of people who struggle to find dignified work—people who feel forgotten and left behind.
“Our shared belief in this country has always been that if you work hard, you could support a family, buy a home, own a car, and live out the American dream.
“That dream is under strain as people face an economy whose structure has been changing dramatically, an economy that doesn’t seem to adequately value the contributions that workers make, or the right that working people have to share in the value they create for their employers.
“The cost of that strain is very real.
“It is felt by our fellow Americans and their families every day.
“It is our job to put forward policy solutions that address this challenge, and promote the well-being of all American workers by placing their contributions at the center of our policy decisions.
“The power of competition to drive prosperity has always been an essential component of American economic success.
“And that brings us to the subject of noncompete agreements, which is the focus of today’s hearing.
“Noncompete agreements prohibit employees from joining, or starting, a competitor after they leave their current employer, usually within specified geographic and time boundaries.
“They have traditionally been justified as a way to protect a firm’s trade secrets, and prevent former employees from taking such secrets to a firm’s competitors.
“In the same vein, noncompetes have also been justified as a way to protect a firm’s investment in a given employee—say, in job-specific training.
“On this logic, it makes sense that the use of noncompete agreements has traditionally been focused on senior employees with meaningful access to critical trade secrets.
“But in recent years, noncompetes have become widespread across numerous sectors, numerous job functions, and a wide range of wage levels.
“About one in every five American workers is bound by a noncompete agreement.
“As much as forty percent of all American workers have been subject to a noncompete at some point in their career.
“Approximately fourteen percent of all workers who earn less than $40,000 a year are bound by a noncompete agreement.
“Fifteen percent of workers without a four-year college degree have a noncompete agreement.
“I will leave it to our panel to expand on what the real-world effects of this trend are.
“But the effects are straightforward to summarize:
“The research makes clear that the proliferation of noncompete agreements depresses wages, reduces worker mobility, and hinders the formation of new businesses.
“By restricting an employee’s freedom to seek a better employment deal elsewhere, noncompete agreements reduce a worker’s ability to increase their wages—both by limiting their ability to find higher-paying work with a new employer, and by giving their current employer greater leverage over their pay levels at their current job.
“One study –conducted by one of our witnesses, Mr. Starr – used Oregon as a case study, which banned noncompetes for lower-wage and hourly workers in 2008.
“The study found that after the ban, average wages increased by up to 6 percent. Among those hourly workers actually subject to noncompetes, the increase may have been as high as 14-21 percent.
“There is story after story of American workers – security guards, textile workers, construction workers, hairstylists, even minimum wage sandwich makers – having their financial and personal lives deeply disrupted and harmed when former employers sought to enforce noncompete agreements against them.
“Oregon is not alone in having taken action in light of the damaging effects of noncompetes on working people.
“Numerous states have passed legislation to restrict the use of noncompete agreements to varying degrees.
“California, North Dakota, and Oklahoma ban them entirely.
“A growing number of other states have prohibited the applicability of noncompetes to workers who earn below a certain income, applying an income threshold of one variety or another in an effort to protect working families from the wage-depressing and opportunity-limiting effects of noncompetes.
“It is important to understand that in many cases, especially when it comes to workers who are not at the top of their respective working environments, noncompete agreements are not freely negotiated.
“Workers are often asked to sign agreements late in the onboarding process. Sometimes they are pressured into signing after they have started a new job.
“Nearly 70 percent of workers who have signed a noncompete received the agreement after the offer letter, and approximately one quarter of these workers were asked to sign the agreement on their first day of work, not before – perhaps after having turned down other job opportunities, at their moment of least negotiating leverage.
“So those who might defend noncompete agreements by pointing to the right to freely enter contracts must remember that these contracts, in important respects, are often not freely entered into.
“There is a more basic freedom at stake: the freedom to compete.
“American workers have the right to compete in the market.
“They have the right to offer their labor to the highest bidder.
“It is wrong—both as a matter of smart economic policy, and as a matter of basic morality and decency—to deny them that right.
“That is why I have introduced the Freedom to Compete Act, which would ban noncompetes for workers below certain income levels.
“This approach is similar to that taken by numerous state governments, who like me, believe that our most urgent first step needs to protect the most vulnerable workers in our society from the harm of unjust noncompete agreements.
“My friend Senator Young, also a member of this committee, has introduced the Workforce Mobility Act with Senator Murphy, which would ban noncompetes more broadly, in almost every case at all income levels, more in the model of the three states that have done the same. I thank him for his work on this topic.
“Senator Young, myself, and a bipartisan group of Senators have also asked the GAO to examine these trends and report to us. That study is currently underway.
“There is perhaps room for debate about whether noncompete agreements are useful tools for executives and other high-level workers.
“But the broad harm that noncompetes have caused to American working people is beyond dispute.
“The need for federal action on noncompete agreements is an idea whose time has come.
“This is a debate that Congress urgently needs to have.
“The working people we represent deserve no less.
“The policy innovations that will guide our economy to better value the contributions of working people will need to speak to a wide range of issues.
“Noncompetes are only one such issue.
“But they are an essential one.
“So I am very pleased to welcome all of you to this critically important discussion.”