The agreement included a non-compete clause prohibiting Merberg from working at any of the company’s competitors for twelve months after leaving. Merberg, who had recently completed a Ph.D. in mathematics, didn’t consider how this might later affect him.
At the end of 2017, he was offered a data scientist job at another health care company, called Quartet Health, also based in Manhattan. Along with different and more interesting responsibilities, the position came with a $25,000 annual pay raise. By that time, Merberg knew there was “some degree of rivalry” between the two companies and started to worry about the agreement he had signed.
“I did do my due diligence and ran things by an employment attorney, and he assured me that I was on solid legal ground,” Merberg says in an interview.
But when AbleTo learned of Merberg’s plans to take a job at Quartet, it summoned him to a meeting with the company’s chief executive officer. “He just told me, ‘We have the best lawyers, and our lawyers told us we have an open and shut case,’” Merberg recalls of the meeting. The next day, he received a cease-and-desist letter from AbleTo.
“If you proceed to become employed by Quartet Health, please be assured that AbleTo will take all steps necessary to enforce and protect its rights with respect to your continuing obligations to the Company, including, but not limited to, initiating an action in court to secure your compliance and obtain damages related to any misconduct,” the letter said.
Merberg went back to his lawyer, who tried working out an agreement between the two companies. But eventually, faced with the risk of legal action, Quartet rescinded its offer. (Quartet declined to comment for this article. AbleTo did not respond to requests for comment.)
As I listened to Merberg recount his ordeal on a recent phone call, waves of déjà vu came over me.
Nearly three years ago, I left a staff reporting job at the legal news site Law360 to take on a reporting role at Reuters. When I applied for the new job, I didn’t know that my employment contract with Law360 included the provision that I couldn’t work for another company “providing legal news and data services” for an entire year after leaving.
Two weeks after I started my new job, Law360’s lawyer sent a letter to Thomson Reuters’ general counsel, alleging that I had access to “critical and sensitive confidential and proprietary information.” The letter asked the Reu-ters lawyer to “take immediate steps” to ensure I didn’t disclose any of these trade secrets. Two days later, I was fired. My case was highlighted in an article on non-compete clauses in The Wall Street Journal.
Merberg and I are not alone. In 2016, the Obama White House estimated that thirty million American workers, or 18 percent of the workforce, were covered by non-compete agreements.
Non-compete provisions are often buried deep in the piles of paper passed to employees on their first day of work. They’re similar in that regard to mandatory arbitration provisions, which bar workers from bringing collective claims against their employers in court.
In 2016, Sprouts Farmers Market was hit with a proposed class action lawsuit after an online scammer convinced a member of the company’s payroll department to share thousands of employee W-2 forms, which contain Social Security numbers. One plaintiff, former Sprouts cashier Debra Price, alleged her identity was stolen by someone trying to claim a tax refund in her name. As a result, her refund was delayed by the Internal Revenue Service.
“The significance of a W-2 loss is orders of magnitude above the data breaches you typically hear about, which is credit card information being stolen,” says David H. Miller, a Denver attorney who is representing the plaintiffs against Sprouts. “These are things that live with people.”
But when Price and others tried to sue Sprouts collectively, the company brushed them off, pointing to arbitration requirements in the documents that all employees must sign when they take a job.
Mandatory arbitration clauses began proliferating in the American workplace after 1991, when the Supreme Court first ruled them enforceable. Since the early 2000s, the share of workers subject to such provisions has nearly doubled, according to researchers at the Economic Policy Institute. At their last count, 56.2 percent of non-union private-sector employees—sixty million Americans—worked under a mandatory arbitration agreement.
Just over 30 percent of those agreements also included class action waivers, which force employees into arbitration alone. For most low-wage workers, class action lawsuits are the only viable way to adequately address wage theft or workplace discrimination. Finding a lawyer to take on a single, low-value case can be next to impossible.
In May, the Supreme Court dealt a huge blow to American workers, ruling in Epic Systems Corp. v. Lewis that those class action waivers are legally enforceable. Labor experts expect they will now become even more common.
The court’s ruling means that Price and other employees in similar situations won’t be able to bring their claims against Sprouts collectively. “Because of the decision in Epic we are agreeing that the majority of the class claims will be sent out into individual arbitrations and the general class claims will be abandoned,” Miller explains.
“Industries and employers have glommed onto this idea that they can make people give up their rights by simply offering them a job and, as a requirement of employment, requiring them to ‘agree’ to give up their right to proceed collectively,” says Miller.
From an employer’s point of view, non-compete clauses are meant to protect its stock of so-called human capital.
“Typically the concern is, we’re going to bring someone in, invest in this person, give them all our confidential information, train them, give them access to clients, promote them nurturing relationships with clients, at the risk of that person taking all that information to the benefit of a competitor,” says Ron Chapman Jr., a lawyer at the management-side labor firm Ogletree Deakins. Chapman frequently helps clients write employment contracts that include non-compete and arbitration clauses. “The concern is that the investment we’re making in an employee will be turned against us.”
Companies prefer arbitration, Chapman says, because it’s faster and cheaper than taking a dispute to court. “The more employees they have, the more sites they have, the more states they operate in, the greater their risk of litigation,” he says. “And the greater the risk of litigation, the greater the risk of experiencing the flaws in our litigation system.”
And so corporations have adopted draconian employment contracts that hedge their risks at the expense of individuals who stray from company policy.
This rollback of rights is particularly insidious in the United States, where workers, if they are lucky enough to be permanent employees at all, depend on employment for social benefits like health insurance and sick leave. In a recent survey conducted by health insurance providers, 56 percent of employees said employer-sponsored health coverage was a key factor in their choice to stay at their current job.
In other words, it’s possible to call these contracts a new kind of indentured servitude.
Elizabeth Anderson, a philosophy professor at the University of Michigan, uses another term.
“We are told that our choice is between free markets and state control, when most adults live their working lives under a third thing entirely: private government,” she writes in her 2017 book, Private Government: How Employers Rule Our Lives (and Why We Don’t Talk About It).
There is no free market of the working world, Anderson argues, with employers competing on a level playing field for the labor of workers who can pick and choose the best offer.
“The reality is that workers at work are under government,” Anderson tells me. “And libertarianism, far from preaching the liberty of individuals, is actually preaching their subjection to the authority of bosses.”
Orly Lobel, a law professor at the University of San Diego, has tracked the rise of restrictive employment clauses.
“I think it very much is all part of a single story of stripping employees contractually out of their substantive legal rights and protections that we’ve put together as a society on both the federal level and the state level,” says Lobel. “As a law professor, I can say very clearly that you can have a lot of stuff that’s under protection but without the process and procedural ability of justice, you have no substantive protections.”
My Law360 contract included a clause that I not make any “disparaging remarks” or “otherwise cast negative light on the company”—not just for the duration of my employment but “any time thereafter,” including right now. It also included an “acknowledgement of reasonableness,” which stipulated that “the company would not have entered into this agreement but for the inclusion of” the restrictive clauses.
“At the different stages of your employment, there’s not really a negotiation around the contract, and there’s not really a lot of clarity about what will be enforceable and what won’t,” Lobel notes. “Even when employees are more sophisticated and they try to negotiate, a lot of these restrictive clauses are nonnegotiable.”
Chapman, the attorney who helps employers draft their contracts, states that these clauses “are negotiable 100 percent of the time [on signing] in the sense that the individual doesn’t have to accept or continue employment with the company if he or she doesn’t want to agree to the terms of the document at issue.” In other words, if you don’t want to sign, you don’t have to work here.
But in most cases, it never even comes up as a topic of discussion. As Lobel puts it: “Employees are generally risk-averse and not super sophisticated about what is enforceable and what is not, so they’ll generally follow the language of what’s in the contract.”
University of Maryland business professor Evan Starr, an expert in non-competes, has found that these clauses cause employees to stay at their jobs longer and switch to other fields when they leave. This is true, according to Starr, even in states where non-competes have been deemed unenforceable.
“Part of the pernicious element of what goes on with these is that it takes everything out of the public sphere,” says Celine McNicholas, the Economic Policy Institute’s director of labor law and policy. “So it’s very hard for worker advocates to understand and insist on policies that address what workers are encountering on the shop floor. It takes all of that and makes it secret.”
Reporting on these issues, which I have done for the past several years, is made more difficult by the fact that many restrictive employment contracts are designed to keep things secret. Few cases are litigated or otherwise make it into the public eye. Arbitration cases are generally decided behind closed doors, and the decisions aren’t readily visible to the public. Workers under non-competes are typically loath to go on the record.
There is some indication that the tide of public opinion is turning against restrictive employment contracts. In the context of the #MeToo movement, many reporters have shed light on the ways in which arbitration agreements have kept workplace sexual harassment allegations in the dark.
But non-compete provisions and arbitration clauses also prevent workers from protecting their rights to a safe workplace and a fair wage. Even in situations where there is no serious mistreatment that would rise to the level of illegality, provisions like these limit our ability to pursue careers that make us happy.
Some state legislators are floating bills to restrict the use of arbitration agreements, but many are limited to sexual harassment claims. State attorneys general in Illinois and New York are investigating non-compete use, but their efforts are mostly focused on minimum wage workers, where non-competes are most obviously unnecessary.
Jane Flanagan, head of the Illinois Attorney General Workplace Rights Bureau, which led the charge against Jimmy John’s restaurant chain for its use of non-competes in the employment contracts of sandwich makers, says the state has found non-compete clauses in small mom-and-pop shops as well as large corporations. “It’s hard to look in one place and find them all.”
Ultimately, the only real fixes will come from Congress, which has the power to ban non-compete agreements and write legislative fixes to address the U.S. Supreme Court’s recent ruling. A movement to overhaul employment contracts need not be under the purview only of the left. American monopsony—in which employers control the labor market—has gotten so out of control that it’s even being critiqued by mainstream think tanks like the Brookings Institution and conservative groups like the American Enterprise Institute.
“There is little doubt that shifting market power has contributed to income inequality, wage stagnation, and sluggish economic growth,” University of Chicago law professor Eric Posner and Princeton economics professor Alan Krueger wrote in a Brookings report earlier this year. They called on Congress to ban non-competes and “no-poaching” agreements altogether.
In many ways, Adam Merberg was lucky in his non-compete experience. He’s a highly skilled employee who makes more than $100,000 a year, and he was able to find another job within two months of his ordeal with AbleTo.
But his story also exemplifies how broken employer-employee contracts are. Merberg did everything right: He hired a lawyer; he negotiated. But even after spending nearly $3,500 on those efforts, he still couldn’t break the contract. What then are marginalized, low-wage workers to do when they must sign away their rights as a condition of employment?
Original Article
Source: progressive.org
Author: Stephanie Russell-Kraft
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