WeWork Settles with New York State Attorney General on Overly Broad Non-Competes
On September 18, 2018, WeWork, a shared-office company, agreed to end its practice of using overly broad non-compete agreements as part of a settlement with the attorneys general of New York and Illinois. The settlement eliminates or reduces the scope of non-compete agreements for nearly all of WeWork’s approximately 3,300 U.S. employees, with the exception of about 100 executive level employees.
Non-compete agreements prevent an employee of one company from working for a competitor, typically for a certain amount of time after the employee leaves the company and within a certain geographic area. Traditionally, non-competes were found in fields like technology or sales, where trade secrets are closely held and specialized skills are often required. But now, non-competes are so common that job-seekers might be required to sign one to work as a factory manager, camp counselor, yoga instructor, or even a summer intern.
The WeWork settlement fully releases more than 1,400 rank-and-file employees from their non-compete agreements, 800 of whom work in New York. These employees include executive assistants, baristas, mail associates, cleaners, and more, some making as little as $15 per hour.
The settlement also reduces the scope of non-competes for 1,800 employees who are managers or have specialized skills or knowledge, 1,400 of whom work in New York. For these employees, the non-compete period will be reduced to six months rather than one year, and the geographic scope will be reduced from any geographic area where WeWork operates to a 15-mile radius from the WeWork locations engaged in the business lines in which the employee worked. The scope of competition will be reduced from working for a competitor in any capacity to working for a competitor on the business lines in which the employee worked.
Just because an employer requires an employee to sign a con-compete agreement, it does not necessarily mean that it is valid and can be used against the employee. If the non-compete does not protect a legitimate business interest, like trade secrets or customer lists, for example, it is likely not enforceable. But, many employees don’t know whether their non-competes are enforceable, and the threat of a lawsuit often deters workers from accepting a new job with better pay—keeping wages and worker mobility low. In response to the problem of employers misusing non-compete agreements, New York State has published Non-Compete Agreements in New York State – Frequently Asked Questions, a guide to help answer New York workers’ questions about non-competes.
“Workers should be able to take a new job without living in fear of a lawsuit from their former employer,” said New York State Attorney General Barbara D. Underwood. “Yet too often, non-compete agreements are misused, especially when it comes to low-wage workers – limiting employees’ mobility and opportunity and preventing businesses from hiring the best person for the job. Today's settlement is a key step forward for WeWork's thousands of employees in New York and across the country, and should serve as an example for all businesses as we continue our efforts to end the use of these overly broad non-competes.”