Press Releases | Forced arbitration

News from EPI More than a quarter of private-sector workers are subject to noncompete agreements

At least 36 million workers—27.8% of the private-sector workforce—are required to enter noncompete agreements, according to a new report from the Economic Policy Institute. The estimate confirms the pervasiveness of noncompete agreements and shows a substantial rise in noncompetes compared with a 2014 survey, which found that 18.1% of workers were covered by noncompetes.

The report, authored by Alexander J.S. Colvin from Cornell University and EPI’s Policy Director Heidi Shierholz, is a comprehensive look at the extent of noncompete agreements, which are employment provisions that ban workers at one company from working for, or starting, a competing business within a certain period of time after leaving a job.

The report uses data from a national survey of private-sector U.S. employers in which 49.4% of responding establishments indicated that at least some of their employees were required to enter into a noncompete agreement. Nearly a third (31.8%) of responding establishments indicated that all their employees were required to enter into a noncompete agreement.

“Noncompetes limit competition among businesses and stifle workers’ wage growth—given that changing jobs is where workers often get a raise. These restrictive agreements are not only inflicted upon high-wage workers, but also low-wage workers living paycheck-to-paycheck,” said Colvin. “The rise of noncompetes is likely an important contributor to stagnant wages and declining job mobility in the United States in recent years.”

The report analyzes noncompetes by establishment size, state, industry, average wage level, and typical education level. Additional key findings include:

  • Establishments with high pay or high levels of education among workers are more likely to use noncompetes, but noncompetes are also common in workplaces with low pay and low levels of education. More than a quarter (29.0%) of responding establishments with an average hourly wage below $13.00 require noncompetes for all their workers.
  • Noncompetes are widely used nationwide, with more than 40% of establishments in each of the 12 largest states having at least some employees covered by noncompetes. This includes 45.1% of establishments in California, despite noncompetes being unenforceable under California state law.
  • More than half (53.7%) of responding establishments that have mandatory arbitration procedures, which bar employees from going to court to resolve workplace disputes, also require at least some of their employees to enter into noncompete agreements.

“Noncompetes are part of a disturbing trend of employers requiring workers to sign away their rights. As employers increasingly use restrictive contracts like noncompetes and mandatory arbitration to undermine workers’ rights, there is an urgent need for stronger worker protections, including prohibiting noncompete agreements,” said Shierholz.

Colvin and Shierholz recommend a variety of policy solutions to prohibit noncompete agreements, including federal and state legislation and regulation from the Federal Trade Commission (FTC). Congress is currently considering bipartisan legislation, the Workforce Mobility Act of 2019, to prohibit noncompete agreements, while the FTC is reviewing a petition seeking a rule prohibiting noncompete agreements as an unfair method of competition.