Does making tasty sandwiches count as a trade secret?

Silly as it may sound, this is a complicated question both for employers with proprietary practices or products and for their employees.

Democratic senators Al Franken (Minn.) and Chris Murphy (Conn.) don’t find it complicated at all and thus have introduced legislation to ban non-compete clauses in worker contracts for low-wage workers. Called the “Mobility and Opportunity for Vulnerable Employees (MOVE) Act” this bill would ban non-compete clauses for workers making less than $15 an hour or $31,200 annually, or the minimum wage in the employer municipality. It applies to those working for chains or in warehouses making food or deliveries.

What prompted this reach into private workplace negotiations was a leaked version of sandwich chain Jimmy John’s employee non-compete agreement in Huffington Post last year. The hoagie chain requires that all employees sign a non-competition clause agreeing not to work at “any business which derives more than 10% of its revenue from selling submarine, hero-type, deli-style, pita and/or wrapped or rolled sandwiches” for two years after they leave.

Competition is defined as restaurants “located with three miles of either [the Jimmy John's location in question] or any such other Jimmy John’s Sandwich Shop.” That puts any deli or lunch spot, including major chains like Subway and Quizno’s. Perhaps hyperbolically, Huffington Post suggests the agreement amounts to a 6,000-square mile blackout area in each of 44 states and Washington, D.C.

For low-wage workers who may have to work multiple jobs to make ends meet in this economy or for those who move from job-to-job, that could severely limit their ability to find work.

The issue is not an easy matter to resolve: low-wage workers need to be able to  change jobs and make use of their skills acquired at the previous job, while, if an employer really does have trade secrets, developed through research or years of practice, the company wants to hold onto them. And the bans could be abused. What if an employer simply wants to make it harder for a competitor to hire workers? 

The Washington Post has more on the pros of the Franken-Murphy bill:

With the economy gaining steam, and the unemployment rate dropping, more workers are starting to look around for better jobs. But some of them are discovering their options are far more limited. They are the ones who have signed “non-compete agreements,” which prevent them from going to work for their employer’s competition.

"From 2008 to 2013, you didn’t hear anything about this stuff, because people weren’t mobile," says Christopher Collins, director of the Center for Advanced Human Resource Studies at Cornell University. "It’s always when the economy ticks back up, and people worry that they’re going to lose talent, that people start thinking about this stuff."

A recent study found that 12.3 percent of workers across all income levels reported being bound by a non-compete — although the incidence is much higher among computer engineers than line cooks.

Currently, non-competes are governed by a patchwork of state-level regulations, some of which are coming under scrutiny. Massachusetts, for example, is considering almost banning non-compete agreements completely — following the lead of California, where such accords have long been unenforceable, contributing to a freedom of movement and ferment of ideas that gave rise to what we know today as Silicon Valley.

But is this really a problem that requires federal intervention?  We don’t know how many low-wage workers are affected by non-compete agreements. Only 12.3 percent of the workforce across all income levels report being bound by them and the incidence of non-compete clauses tends to be much higher among knowledge workers such as engineers or scientists.

Courts also tend to side with employees, not enforcing non-compete clauses unless an employer can show it was legitimately trying to protect information rather than keeping workers from defecting to the competition down the street.

If few workers are affected why are these senators trying to use federal law to ban non-compete clauses? It might be simply that it is an an easy way to look like you’re helping low-skilled workers.

Also, what are the unintended consequences? There may be good reason for some low-wage workers to sign non-compete agreements such as being privy to information and processes that give companies an advantage.

In addition, if it’s the purview of states to regulate workplace practices, why should Congress overstep its jurisdiction?

Not liking a private policy is not a justifiable reason for government to overstep its boundaries. Unless, non-compete clauses are creating a heavy burden for more than just a handful of workers, why is this even an issue?