Noncompetes Trap Low-Wage Workers Too (2026)

The image of a noncompete is an executive carrying trade secrets to a rival. The reality includes noncompete agreements low wage workers sign at the hiring desk: sandwich makers, hairstylists, warehouse staff, home health aides, and security guards. The contract says they cannot work for a competitor for months or years after they leave.

The effect is simple. A worker who cannot take a better offer cannot negotiate for one.

Who signs noncompete agreements?

More people than most assume. The FTC, citing survey research, estimated that about 30 million workers, or roughly 18% of the workforce, were bound by one. Studies of the labor force have found that noncompetes cover workers across the pay scale, including a meaningful share of hourly workers without college degrees.

Examples reported in enforcement actions and news coverage include a sandwich chain that required hourly employees to sign, a security company that restricted guards from moving to competitors, and staffing firms that restricted temporary workers. Employers cite training costs, client relationships, and confidential information. For an entry-level job, those justifications are hard to defend. A worker who learns to run a cash register does not carry trade secrets.

Workers rarely negotiate the terms. The document arrives with the other onboarding paperwork, often after the worker has accepted the job and left their prior one. Refusing at that point is not a realistic option.

How does a noncompete lower pay?

By removing the exit. Wages rise when workers can leave for a better offer, and employers raise pay to keep them. A noncompete takes that option off the table. A cashier offered $1.50 more an hour by a competitor cannot accept without risking a lawsuit.

The FTC's 2024 analysis estimated that eliminating most noncompetes would raise worker earnings by about $524 a year on average and increase new business formation. Academic research points the same direction. Studies comparing states and policy changes have found stronger enforcement is associated with lower wages and less job mobility.

The cost is higher when the restriction fits poorly. A fast food shift manager earning $17 an hour who is barred from other restaurants within ten miles for a year has few local options. In a small town, a noncompete can mean leaving the field or the region.

What happened to the federal ban?

In April 2024, the FTC finalized a rule that would have banned most new noncompetes and voided most existing ones for workers below senior-executive level. A federal court in Texas set the rule aside in August 2024 before it took effect, finding the agency had overstepped its authority. The FTC appealed and later moved away from defending the rule, which leaves the question to states.

States vary widely. California, Minnesota, North Dakota, and Oklahoma largely refuse to enforce noncompetes. Many other states ban them for certain roles, such as health care workers or workers under a pay threshold. A few require employers to give notice before hiring. In most of the country, though, a signed noncompete can still be enforced if a court finds it reasonable.

What do workers lose beyond pay?

A noncompete also hits the worker's schedule, location, and plans. A home health aide who wants to switch agencies for better hours may need to move to another county or leave the field. A stylist who wants to open a chair at a different salon waits out the clock. During that time the worker either earns nothing, takes a job outside their trade, or stays put and accepts the existing terms. For a household living near the edge, even a few weeks without income can mean a missed rent payment.

Why do employers use them for low-wage jobs?

Because they work as a retention tool that costs nothing. Raising wages to keep a worker costs money. A noncompete costs a signature. In industries with high turnover, such as retail, restaurants, and home care, the contract reduces turnover without raising pay.

Employers also use the threat of litigation. Even if a noncompete would not survive in court, a cease-and-desist letter can scare a worker into staying put or accepting a lower offer. Few workers can afford a lawyer to test the contract, and many lose jobs or offers before they learn whether it holds.

How does this fit the larger pay problem?

Noncompetes work alongside other forces that suppress low-wage pay. A federal minimum of $7.25, unchanged since 2009 (U.S. Dept. of Labor), sets a low floor. Weak union coverage means fewer workers can bargain together. Unpredictable work, covered in scheduling instability in retail, makes it harder to take a second job or interview elsewhere. And when employers hold both the contract and the schedule, workers lose the ability to move.

Taken together, these rules add up to a labor market in which employers hold the leverage. Workers can still quit, but quitting becomes costlier at every step. The cost shows up as a pay raise that never arrives.

What can you do if you signed one?

Read the terms: duration, geographic scope, and the type of work covered. Courts often decline to enforce overly broad restrictions, especially against low-wage workers, but outcomes vary by state. Check your state labor department's guidance. If you are leaving a job, an employment lawyer or a legal aid clinic can review the document, and many offer free consultations.

For a wider view of what pay should cover, see the living wage guide. The affordability stakes run through the broken American dream.

A noncompete is a contract that nobody negotiates, between parties with unequal power, restricting the one thing a worker can use to demand a raise: the ability to leave. The law lets that arrangement stand in most states. Until it does not, millions of workers earning near the bottom will remain stuck behind a clause that exists to keep their pay where it is.