Unreleased Rage

[May 23rd, 2007] When Encompass Teleservices Inc. closed its doors earlier this month, many of the Beaverton call center's 300 employees got a nasty jolt beyond bounced paychecks.

Even though most were making little more than Oregon's $7.80-an-hour minimum wage, non-compete clauses in their contracts prohibit them from going to work for any other company that serves the cell-phone industry as Encompass did.

"I signed a non-compete about a year ago when I was hired," says Warren Ingram, 38, who was making $10.75 an hour when Encompass closed.

There's no hard data on how widespread non-competes are in Oregon. An "enforceability index" compiled by a legal research firm called the Bureau of National Affairs, however, found that only four states have non-competes that are enforced more stringently than Oregon's.

Originally, says Commissioner Dan Gardner of the state Bureau of Labor and Industries, non-competes were designed to prevent high-level employees from taking company secrets, customer lists or other proprietary information to a competitor. In recent years, however, Gardner says employers have attached contractual restrictions to much lower-level jobs, including maid-service workers, tire changers and even parking-lot attendants (see "Clash of the Parking Titans," WW, Jan. 29, 2003).

Gardner is in a position to know, because BOLI is the first stop for many aggrieved employees. (Encompass' lawyer couldn't be reached for comment about the non-competes and employee filings with BOLI alleging the company bounced their paychecks.)

Gardner sponsored Senate Bill 248, which would fix what he says is one of the most egregious practices—when employers lay workers off but then enforce non-competes to keep them from getting jobs in the same fields.

"Right now, employers can keep workers out for up to two or even three years," Gardner says. "For laid-off workers, we'd like to shorten that to 90 days." Even in instances where companies don't enforce non-competes, Gardner says that if low-wage employees "believe they're enforceable, for all intents and purposes, they are."

Gardner and another of the bill's proponents, the Oregon Trial Lawyers Association, would like to see other significant changes in non-compete clauses. They want the state to exempt hourly workers and define a pay level below which salaried workers would also be exempt.

"Employers already have the benefit of confidentiality agreements, the Uniform Trade Secrets Act and other legal remedies that give them full protection," says Nick Fish, a Portland labor-side employment lawyer who testified in favor of eliminating non-compete clauses.

Fish, a two-time Portland City Council candidate, says economically diverse and vibrant states, such as California and Texas, generally do not enforce non-compete clauses. "But in Oregon," he adds, "employers routinely use such contracts as leverage against employees."

Currently, the primary opposition to BOLI and OTLA's position on non-competes comes from the powerful American Electronics Association, which represents many of the state's high-tech companies, such as Intel Corp., Tektronix Inc. and Lattice Semiconductor Corp.

"We've heard concern about this bill from our largest members to our smallest," AEA lobbyist Jim Craven says. "There's a sense that you can invest a lot of time, effort and training in people and see it walk out the door."

Craven disputes the argument that other laws offer employers sufficient protections. "We're concerned about more subtle information," he says. "The kind of knowledge that comes from direct contact with customers and an understanding of the customers' strategy and future direction."

Craven says his group is open to arguments that non-competes may be used too widely and sometimes inappropriately.

"Some of the lawyers who write these contracts may be lazy," he says. "Instead of drawing up a responsible contract, they say to everybody, 'You can't work for another company within 50 miles or for two years.'"

The two sides are trying to hash out compromise language on the bill, which has already passed the Senate, before a hearing in front of the House Judiciary Committee on Thursday, May 24.

"Any characterization that we're trying to kill the bill is wrong," Craven adds.

As for Warren Ingram, regardless of the outcome of the bill and the non-compete he signed, he's looking to change careers.

"I'm done with call centers," Ingram says.