WeWork has reached a landmark settlement with New York and Illinois that frees more than 1,400 employees from non-compete clauses in their employment contracts and loosens restrictions on another 1,800.
The settlement resolves investigations by the states’ attorney generals that found WeWork had been routinely requiring even low-level employees such as cleaners and mail associates to sign an agreement containing a non-compete restriction as a condition of employment.
The shared-office company employs nearly 3,300 people in the U.S. and is the second-largest private office tenant in New York City. Only about 100 executive-level employees are not covered by the settlement.
“Workers should be able to take a new job without living in fear of a lawsuit from their former employer,” New York Attorney General Barbara Underwood said in a news release. “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.”
According to the Brookings Institution, 20% of workers with a high school education or less had a non-compete covering their current job.
Companies justify blanket non-compete clauses as necessary with tight labor markets in many parts of the country, but as NPR reports, “regulators are increasingly concerned such legal restrictions are being applied to jobs far down the ladder” and economists worry they could be limiting wage growth by restricting workers’ mobility.
WeWork’s settlement with New York and Illinois will result in the full release of more than 1,400 rank-and-file employees — some of whom are paid as little as $15 an hour — from non-compete agreements. Restrictions on another nearly 1,800 employees will be loosened, for example by shortening the non-compete period from one year to six months after employment ends.
“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,” Underwood said.