Many working Vermonters continue to struggle to make ends meet. A recent report from the Public Assets Institute, a Vermont think tank, noted that not enough jobs in Vermont pay wages sufficient to support a family. Despite a tight labor market with low unemployment, over the past ten years many workers have seen miniscule or even no increases in their paychecks.
To assist workers struggling to get by, the legislature passed bills last year that would have raised the minimum wage to $15.00 per hour by 2024 and would have created a paid family leave program. These bills did not become law because the Governor vetoed them. In the coming Session, the legislature likely will again pass bills to raise the minimum wage and create a family leave program and may be in a position to override vetoes if they are forthcoming.
I am sponsoring a bill to be introduced early in the Session that would provide an additional approach to addressing stagnant wages. The bill would ban noncompete agreements in employment contracts. Currently, under Vermont law, an employer can require an individual to agree not to work at a competing company for a period of time if they leave the job. Such a noncompete agreement can suppress wages and keep would-be job seekers unemployed. If an employee is unable to readily leave one job for another due to such an agreement, that employee has less ability to negotiate for better wages. In addition, with a noncompete clause, a worker is forced to stay longer at one job, thus reducing the worker’s mobility and ability to earn a living.
My bill favors open competition and employee mobility, both of which are undermined by noncompete clauses. Eliminating noncompete clauses can help to keep Vermonters gainfully employed, able to provide for themselves and their families, and not reliant on government assistance.
Other states have taken similar approaches, including Massachusetts, which passed a bill to regulate noncompete agreements last year. The bill that I am sponsoring is modeled after a California law. Barring noncompete clauses in California has not limited the innovation and economic growth in that state. Indeed, worker mobility in California has allowed knowledge to be shared (so-called knowledge spillovers across firms and industries), which in turn has produced more innovation.
The bill would provide certain exceptions to the prohibition on noncompete clauses. Parties could enter such agreements as part of the sale of a business or the dissolution of a partnership. In addition, the ban would not prohibit an agreement related to the protection of trade secrets or confidential information.
After I introduced a similar bill last year, I heard from a number of Vermonters, including a labor lawyer who provided real-life Vermont examples of the downsides of noncompete clauses. But I also heard from an employer who was troubled by the bill’s implications. There are issues that need a closer examination. For instance, to what extent will employers have less incentive to invest in employee training absent a noncompete agreement that will ensure that the employers will reap the benefits of such training? The pluses and minuses deserve to be fully vetted, which is the task of the committees that would have jurisdiction over the subject matter of the bill, likely the Commerce Committee and the General Housing and Military Affairs Committee, which addresses labor issues. Neither committee was able to take up the similar bill last year. I’m hopeful that the ideas contained in the reintroduced bill will be fully considered in the upcoming biennium.