Commentary | You might think that there couldn’t be a more absurd example of a company using noncompetes to hold down wages than going after a janitor, but you’d be wrong.
One of the central contradictions of capitalism is that what makes it work — competition — is also what capitalists want to get rid of the most.
That’s true not only of competition between companies, but also between them and their workers. After all, the more of a threat its rivals are, and the more options its employees have, the less profitable a business will tend to be. Which, as the Financial Times reports, probably goes a long way toward explaining why a $3.4 billion behemoth like Cushman & Wakefield would bother to sue one of its former janitors, accusing her of breaking her noncompete agreement by taking a job in the same building she had been cleaning for the global real estate company but doing it for a different firm.
Now, the company claims this wasn’t a noncompete per se but rather a “non-service” agreement meant to prevent a competitor from easily taking over the management of a building. But the effect is the same: limiting your current employees’ future choices.
See, it’s not that keeping this specific cleaner from leaving is somehow vital to Cushman & Wakefield’s business — although, of course, the firm is obliged to say otherwise. (It would be “irreparably harmed,” its lawyers said, “the extent of which cannot be readily calculated.”) Rather, what’s important is keeping all of its workers from leaving for better pay. Especially when a few of them had already been defecting to its top competitor.
Because that’s really what this is all about: whether workers are allowed to leave for greener pastures or their bosses are given the green light to put up such high fences around them that they’re forced to stay. In other words, it’s about power: who has it and who doesn’t. Or, more precisely, whom we give it to and whom we don’t. If we create a legal framework that puts workers on an equal footing, then they can go get a raise without having to wait for their employers to deign to give it to them. But if we don’t, then those bosses, secure in the knowledge that their employees can’t easily leave, can get away with offering only minuscule pay increases, if that.
You might think that there couldn’t be a more absurd example of a company using noncompetes to hold down wages than going after a janitor, but you’d be wrong. Amazon.com used them for warehouse workers. Jimmy John’s for sandwich-makers. Camp Bow Wow, a doggy day care chain, for dog-walkers.
In any case, the point is that noncompetes, which used to be about keeping top executives from taking trade secrets to rival firms, have now become much more common among all types of workers.
Indeed, according to University of Maryland economist Evan Starr and his co-researchers from the University of Michigan, J.J. Prescott and Norman Bishara, noncompetes cover 18 percent of all U.S. workers and have covered 38 percent at some point in time. And while it’s true that they’re still more prevalent among high-wage workers, noncompetes do cover a full 14 percent of workers without college degrees.
Companies have started suing over them more frequently, too. A Wall Street Journal analysis, for one, found that noncompete lawsuits increased by 60 percent between 2002 and 2013.
Not that companies even need to do this to intimidate workers. The mere existence of a noncompete, whether it would be fully enforceable in a given state, can have what economists call a “chilling effect” on workers. That’s because most people don’t moonlight as labor lawyers. They don’t know which noncompetes are and aren’t legal where they live. All they know is that they signed something that they couldn’t afford to fight in court.
It’s this perception of a legal threat, Starr, Prescott and Bishara found, much more than the reality of whether they could actually be sued that explains why people turn down job offers because of noncompetes. The predictable result is that workers with noncompetes tend to stay in the same job a lot longer. So it should be no surprise, as the U.S. Treasury points out, that noncompetes are also associated with lower wage growth. It isn’t easy to negotiate a raise when you can’t use other offers as leverage.
As for the case between Cushman & Wakefield and its erstwhile janitor, it’s still being decided. In the meantime, though, the judge has granted a temporary injunction against the company’s former cleaner, barring her from working at her new job for the next few months. Neither side returned a call seeking comment.
It’s a reminder that markets are about more than just supply and demand. Markets are also about, well, the market itself. In particular, the rules we give it and how we interpret them. Which is to say – while it’s unequivocally good news that job openings outnumber unemployed people by more than at any point in 40 years and the unemployment rate is the lowest it’s been in almost 50 years – the economy still won’t be as good as it could be for workers if we’ve stacked the deck against them. This is what happens when we make it harder for workers to sue over stolen wages, as the Supreme Court just did, or make it easier for companies to do so over noncompetes.
And that’s the real problem. It’s just a fact of life that capitalists want to take the competition out of capitalism. But it’s something different altogether when the courts and the government try to help them.
That’s a new Gilded Age.