Employment contracts are generally “take it or leave it,” and are a product of unequal bargaining power (EPI Unequal Power Project). So it’s not surprising that the fine print is loaded with unfair provisions. State legislatures can ban or otherwise regulate the use of these coercive contract provisions.
Three common coercive contracts are:
- Noncompete clauses prohibit workers, after leaving a job, from working for their former employer’s competitors, or starting new businesses in the same field. About one-in-five workers are subject to a noncompete (FTC 2024), and while noncompetes are widely associated with high earners in tech, medicine and business, startling percentages of low-wage workers are subject to them as well. (EPI 2019)
- “Stay-or-pay” provisions, including training repayment agreement provisions (“TRAPs”), specify that workers who leave their jobs before a date decided by the employer must “repay” the employer’s costs of training them.
- Nondisclosure agreements (“NDAs”) require workers to refrain from disclosing various kinds of information about their employers. NDAs are frequently included in settlements resolving discrimination or harassment claims, but are sometimes included in employment contracts up front.
What States Can Do
Noncompetes
The extensive harms of noncompetes are well established. Noncompetes negatively affect labor market competition and depress wages for workers. Noncompetes also adversely impact product and service markets, stifling new business formation and reducing innovation.
Ban and Penalize Noncompetes
Along with California, North Dakota, Oklahoma, and (with some exceptions in its law) Wyoming, Minnesota fully bans noncompete clauses. Minnesota also gives workers whose employers illegally include such provisions in their contracts a private right of action to sue on their own behalf.
Minnesota Statutes § 181.988
Civil Penalties: Colorado law imposes civil penalties of $5,000 per violation on employers who include unlawful noncompetes in their employment contracts, to provide a disincentive for including them.
Colorado HB22-1317
Limit Noncompetes to Higher-Income Workers
Income Thresholds: State law can prohibit the enforcement of noncompetes against workers who make below a specified annual income. Washington state has a highest-in-the-country, inflation-adjusting income threshold in place for enforcement of noncompetes. It currently stands at $123,394 a year (Washington State Department of Labor & Industries).
Washington Revised Code § 49.62
Protect Workers from Related Harms, and Make Them More Costly for Employers
Garden Leave: Massachusetts law requires that employers pay “garden leave” to workers against whom they are enforcing these provisions.
Mass. Gen. Laws ch. 149, § 24L
For Cause Protections: The same Massachusetts law also prohibits enforcement of noncompetes against workers who were laid off or terminated without cause.
Define Noncompetes as an Act of Unfair Competition: California, in addition to banning noncompetes, also defines them as an act of unfair competition.
California Business & Professions Code § 16600
Training Repayment Agreement Provisions (TRAPs)/Stay or Pays
Use of TRAPs and stay-or-pay provisions is unfortunately on the rise, particularly against acutely vulnerable low-wage workers, like nurses (ProMarket 2024). In a typical situation, a company will provide some minimal amount of job training or immigration assistance, place a worker in an unsustainably demanding job, then sue them for thousands or tens of thousands in fees if they try to quit. States can and should act to rein in these terms as well, as New York state’s legislature has done in passing the Trapped at Work Act, currently awaiting the Governor’s signature.
New York Trapped at Work Act (Assembly Bill A584C)
Nondisclosure Agreements (NDAs)
Eighteen states have banned or restricted the use of nondisclosure agreements and non-disparagement clauses as conditions of employment or as features of settlements of harassment and assault claims. These bans and restrictions, alongside federal legislation like the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (“EFAA”), represent some of the most concrete victories of the #MeToo movement.
Such laws do not impede settlements, as indicated by studies of New Jersey’s ban, and of California’s, and these laws enable survivors to share their stories and help protect others from harm.
Bans on NDAs
New Jersey bans NDAs in employment contracts and settlements involving harassment, discrimination, or retaliation.
New Jersey Senate Bill S121
California’s Silenced No More Act makes NDAs in employment contracts and settlements unenforceable regarding details of “unlawful acts in the workplace.”
California Government Code § 12964.5
Washington state’s Silenced No More Act expressly covers NDAs regarding wage-and-hour violations, and discrimination, harassment, retaliation, and assault. It is a violation of the act for employers to request that employees enter into such NDAs, or attempt to enforce them, and employers who violate it are liable for actual or statutory damages of $10,000, whichever is more, plus attorney’s fees.
Washington Revised Code § 49.44.211.
Help Build the Clearinghouse
If you have proposals for pro-worker policies—whether already implemented in a particular state or ones you’d like to see established—we encourage you to share your suggestions. We welcome additions to our clearinghouse that align with one of our five key policy areas. Please send such submissions to .
