Michigan League for Public Policy: House Bill 4874 to Prohibit Noncompete Agreements (January 16, 2020)

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Testimony of Peter Ruark, Senior Policy Analyst at the Michigan League for Public Policy, presented to the House Commerce and Tourism Committee on January 16, 2020, in support of House Bill 4874 to prohibit noncompete agreements for certain employees. The testimony states that lower-wage workers such as retail and restaurant workers do not possess trade secrets or proprietary information, and that a noncompete requirement takes away a worker's ability to seek better pay or conditions. It describes the bill's salary threshold as $15 an hour, 150% of the minimum hourly wage, or annual compensation of $31,200 adjusted for inflation, whichever is greatest. It urges the committee to pass House Bill 4874.

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MICHIGAN LEAGUE Fon PUBLIC cc

Testimony Presented to the House Commerce and Tourism Committee
House Bill 4874 to Prohibit Noncompete Agreements for Certain Employees

Peter Ruark, Senior Policy Analyst, Michigan League for Public Policy
January 16, 2020

Good afternoon, Chairman Marino and members of the House Commerce and Tourism Committee. My
name is Peter Ruark and | am a Senior Policy Analyst at the Michigan League for Public Policy. The
League Is a public policy research and advocacy organization that promotes economic opportunity for
all. Thank you for letting me testify today in support of House Bill 4874, a bill to prohibit employers from
subjecting lower-paid warkers to noncompete agreements.

We recognize that in some high-paying, professional jobs in which an employee has clients and is in
possession of proprietary information, having the employee sign a noncompete agreement may be
necessary. Our concern is with lower-wage workers for whom this is clearly not the case: retail and
restaurant workers, for example. Such workers do not possess trade secrets or proprietary information,
nor is there a danger that they will take their clients with them to the business across the street. Jn
these situations, a noncompete requirement is clearly an attempt to take away a worker's ability to seek
a job with better pay or work conditions. Even if the noncompete agreement Is not enforced, being
required to sign one can intimidate and discourage a low-paid employee from seeking better work.

In Michigan, many full-time workers, despite working hard, remain below the poverty line or below the
household income level commonly considered “low income.” For some workers, this is due to having
children to support; for others, it may be due to erratic weekly schedules that do not always provide 40
hours per week even if the employee wants it. These workers are also often subject to unpredictable
scheduling, do not have paid sick teave, and are sometimes even vulnerable to adverse work conditions
such as sexual harassment, bullying, or health and safety risks.

Such workers should have the right to seek and find jobs with better pay, benefits or work
environments—this is a core American value. Aliowing businesses to limit a low-paid worker's ability to
find better work takes away that right. This issue goes far beyond employer-employee relationships, as
it’s really about an employer's right to put conditions on the employment of its former employees and
not just its current employees. We believe allowing businesses to dictate the future work prospects of
workers after they have left their employment, for no reason other than to discourage the employees
from leaving their jobs, is fundamentally undemocratic and is a violation of individual liberties,

(over)

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We believe this bill sets a very reasonable salary threshold ($15 an hour, 150% of the minimum hourly
wage, or annual compensation of $31,200 adjusted for inflation, whichever is greatest). If anything, this
threshold ought to be even higher, given that $31,200 is still below the level considered “low income”
for a single parent with one child. But this is a good step, nonetheless, as it will protect the lowest-paid
workers from unreasonable and undemocratic restrictions as they try to become economically self-
sufficient.

We urge this committee to pass House Bill 4874. Thank you.


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