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Will Rhode Island limit non-compete agreements?



“Want to work? Sign on the line and don’t move.”

Thus reads the headline of a 1998 Providence Journal story on non-compete agreements in Rhode Island. When Ann Marie Warren, then a 42 year old Hopkinton resident, accepted a job at a technical recruiting firm, she was required to sign a contract preventing her from working at any competing company within 18 months of leaving her employer. After Warren was laid off from the technical recruiting firm for unclear reasons, her non-compete contract left her with few employment opportunities. Eventually, she had no choice but to seek a job in a new industry.

More than 20 years later, non-compete agreements—which generally bar workers from accepting employment at companies that rival their current employer—remain as prevalent as they are pernicious. According to a 2015 academic survey, nearly 40 percent of workers in the United States, and 35 percent of workers without a bachelor’s degree, report having been subject to a non-compete agreement at some point.

There has been a “definite, significant rise in the use of noncompetes,” says Orly Lobel, a professor at the University of San Diego School of Law and labor law scholar. Indeed, a survey commissioned by the Wall Street Journal finds a 61 percent increase in non-compete litigation between 2002 and 2013. The contracts, once believed to be the purview of high-powered company executives, are now commonplace among janitors, cosmetologists and sandwich makers. Workers affected by these contracts, whether they face litigation or not, are restricted in their ability to pursue new jobs that offer better pay and opportunities for advancement. In some cases, workers can be pushed out of their preferred industry altogether.

States are beginning to take action to prevent employers from abusing non-compete contracts. In 2018, Massachusetts passed a law which prohibits the enforcement of non-compete agreements against low-wage employees and independent contractors, among other protections. In 2016, Illinois adopted a law limiting the enforcement of non-compete agreements among low-wage employees. California, Oklahoma and North Dakota have banned the enforcement of nearly all non-compete agreements regardless of employee pay level, according to the Center for American Progress.

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Rhode Island lawmakers have an opportunity to follow suit. The Rhode Island Noncompetition Act (H6019/S0698) aims to safeguard the bargaining power and mobility of low-wage workers by limiting non-compete agreement enforcement. If passed, the Noncompetition Act would prohibit the enforcement of the covenants against employees with weekly earnings below approximately $1,000, employees protected by the federal Fair Labor Standards Act and interns.

The bill, introduced by Senator Maryellen Goodwin (Democrat, District 1, Providence) and Representative Christopher Blazejewski (Democrat, District 2, Providence), has the backing of Governor Gina Raimondo, Attorney General Peter Neronha and Treasurer Seth Magaziner. All view it as a step to expand economic opportunity and protect workers’ bargaining power while promoting overall economic growth. “If someone is willing to put in the work to get [training and employment experience],” says Rhode Island Department of Labor and Training Assistant Director Matthew Weldon, “they shouldn’t be prevented from landing a good job in the future because they were required to sign a non-compete agreement when they were an intern or a low-wage worker – that just doesn’t make sense.”

Lawmakers on both sides of the aisle seem to agree. This week, the Senate Judiciary will consider a bill (S0345), cosponsored by four Democrats and Republican Senator Elaine Morgan (District 34, Charlestown, Exeter, Hopkinton, Richmond, West Greenwich), which would prohibit the use of non-compete agreements in the broadcast industry.

In 2015 and 2016, then-Representative Daniel Reilly (Republican, District 72, Portsmouth and Middletown) introduced legislation (H5708/H7687) to prohibit the enforcement of all non-compete agreements, regardless of employee wage level, unless such an agreement was integral to the sale of a business or necessary to protect trade secrets. The bill attracted a bipartisan suite of cosponsors which included members of both Democratic and Republican House leadership. Given the seemingly broad skepticism of non-compete agreements, will Rhode Island soon join Massachusetts and Illinois in limiting their enforcement among low-wage workers? Weldon is optimistic. “I think there’s a good chance that these bills will be voted on this year,” he tells me. “Everyone talks about jobs being a top issue at the State House. This legislation aligns closely with the collective aim to ensure that Rhode Islanders have every opportunity to thrive in this economy.”

Andy Boardman writes about economic policy in Rhode Island. He is on Twitter at @_andyboardman.

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