Amazon is the country’s largest and most sophisticated online retailer, but it still runs largely on manual labor. Scattered around the country are massive warehouses staffed by workers who spend their days picking objects off shelves and putting them in boxes. During the holiday season, the company calls on a huge reserve army of temporary laborers.
The work is repetitive and physically demanding and can pay several dollars above minimum wage, yet Amazon is requiring these workers — even seasonal ones — to sign strict and far-reaching noncompete agreements. The Amazon contract, obtained by The Verge, requires employees to promise that they will not work at any company where they "directly or indirectly" support any good or service that competes with those they helped support at Amazon, for a year and a half after their brief stints at Amazon end. Of course, the company’s warehouses are the beating heart of Amazon’s online shopping empire, the extraordinary breadth of which has earned it the title of "the Everything Store," so Amazon appears to be requiring temp workers to foreswear a sizable portion of the global economy in exchange for a several-months-long hourly warehouse gig.
"It is quite broad in its scope."
The company has even required its permanent warehouse workers who get laid off to reaffirm their non-compete contracts as a condition of receiving severance pay. When Amazon shut down a massive warehouse in Coffeyville, Kansas, earlier this year, hundreds of employees lost work. One laid-off warehouse worker, who earned just over $12 an hour unloading inbound freight at the Coffeyville facility, showed The Verge a clause in her severance agreement that admonished her to "fully comply" with the noncompetition agreement. This worker wished to remain anonymous because of a non-disclosure agreement she signed with Amazon.
"It is quite broad in its scope," says Orly Lobel a professor of labor and employment law at University of San Diego, who has studied noncompetes extensively and reviewed the Amazon agreement.
"During employment and for 18 months after the Separation Date, Employee will not, directly or indirectly, whether on Employee’s own behalf or on behalf of any other entity (for example, as an employee, agent, partner, or consultant), engage in or support the development, manufacture, marketing, or sale of any product or service that competes or is intended to compete with any product or service sold, offered, or otherwise provided by Amazon (or intended to be sold, offered, or otherwise provided by Amazon in the future) that Employee worked on or supported, or about which Employee obtained or received Confidential Information."
Noncompete agreements have traditionally been associated with highly skilled, white collar jobs where, in exchange for signing a restrictive contract, employees might gain specialized training and learn trade secrets that enable professional advancement. More recently, such contracts have been seeping into low-skilled and low-wage occupations that require little on-the-job training.
This trend is likely occurring at least in part because employers know they can get away with it in today’s economy, where jobs are scarce, says Charlotte Garden, a law professor at Seattle University School of Law. "When you have a more vulnerable workforce applying for jobs," Garden says, "they’re not going to attempt to negotiate the terms of the contract they’re handed."
The expansion of noncompetes into low-wage work came to national attention last year, when the Huffington Post reported that Jimmy John’s had some of its permanent workers sign noncompete agreements that covered sandwich sellers within three miles of Jimmy John’s locations. US Congress members called for a federal investigation into the sandwich chain's use of the agreements. The Amazon contract appears more extreme: it is not only being pushed on temporary workers, who will have their opportunities inevitably constrained upon their planned dismissal, but it is also explicit in its potentially limitless geographic reach.
"Employee recognizes that the restrictions in this section 4 may significantly limit Employee’s future flexibility in many ways," the agreement asserts, referencing the section containing the noncompete agreement and three other clauses. "Employee further recognizes that the geographic areas for many of Amazon’s products and services — and, by extension, the geographic areas applicable to certain restrictions in this Section 4 — are extremely broad and in many cases worldwide."
The contract — which was obtained through applying and being accepted to a seasonal Amazon warehouse position — even includes a provision that requires employees who sign it to "disclose and provide a true and correct copy of this Agreement to any prospective new employer [...] BEFORE accepting employment[…]"
Laid-off employees were asked to reaffirm the noncompete contract as a condition of receiving severance: "Employee understands and agrees that Employee has continuing obligations under the Nondisclosure and Noncompetition Agreement reaffirms those commitments in this Agreement, and agrees that, as part of this Agreement, Employee will comply fully with the terms of the Nondisclosure and Noncompetition Agreement."
It’s unclear whether Amazon has attempted to enforce its noncompete contracts with hourly warehouse workers, and Amazon did not respond when asked about this by The Verge. But the company does have a history of aggressively pursuing such cases against white collar workers. Last year, after a former Amazon marketing manager took a job at Google, Amazon leveled a suit against him that was said to test the limits of noncompete law. The willingness of courts to validate such agreements can vary dramatically across states. But regardless of whether courts are willing to enforce them, noncompetes can still affect workers’ behavior.
Regina Lee, a seasonal Amazon worker who signed a noncompete, takes the agreement seriously. In recent years, as Lee has struggled to find decent-paying work, she has become a both loyal and grateful member of Amazon’s army of seasonal warehouse workers. "Before I worked at Amazon, I applied to Walmart, and I didn't get anywhere, so I'm just happy to have a job," Lee says. "Especially a job I can go back to every winter." Lee says that, during last year’s pre-Christmas rush, Amazon’s human resources team in Coffeyville, Kansas, helped accommodate her when she suffered an allergic reaction that caused her to need to switch to a different job within the warehouse. "It was above and beyond anything my previous employers would have done," Lee said.
"It was above and beyond anything my previous employers would have done."
Lee wants to continue her seasonal work at Amazon, and because of the noncompete that she’s signed, she would be careful if she were to apply for a second job at an Amazon competitor like Sam’s Club, the wholesale subsidiary of Walmart. Lee says, in this hypothetical scenario, she would be clear with the hiring agents at Sam’s Club about the noncompete she’d signed at Amazon and would also contact Amazon to ask for permission for working at Sam’s Club.
"I’d send Amazon a thing and say: ‘I applied at Sam's Club. How do you feel?’" Lee said. "Then it would be up to Sam's Club to hire me and up to Amazon to say yes or no."
Lee’s husband, Ray, is also a seasonal Amazon worker and says that he believes the noncompete contract only applies to trade secrets: "How technical is it to go and box stuff everyday and send it off?" Apart from their Amazon work, the couple has sought work at theme parks and campgrounds and have not had their behavior affected by noncompete agreements.
Several former Amazon workers in Kansas and Tennessee said that they had vague recollections of signing a noncompete agreement but did not give it much consideration. Two workers who had left Amazon warehouse jobs in 2012 and 2013 said they had no recollection of signing a non-compete agreement. It is unclear when Amazon began having warehouse workers sign this agreement, and the company did not respond to questions sent by The Verge about this. Two other Amazon workers approached by The Verge cited the nondisclosure agreement they had signed with the company in refusing to share their experiences for this story.
Amazon did not respond to a question asking for examples of jobs the agreement would bar its former warehouse workers from taking. But it should be noted that some of America’s largest employers, retailers like Walmart and Target, have established across-the-board programs to match prices of goods sold on Amazon.com, bringing the products sold in thousands of retail stores across the country into even more direct competition with those sorted through Amazon warehouses across the country.
"Then it would be up to Sam's Club to hire me and up to Amazon to say yes or no."
Although companies may push noncompetes on low-wage workers to keep trade secrets from leaking, there’s also a more cynical explanation: to simply deprive competitors of employees to hire, according to Lobel. Noncompetes can also depress workers’ wages. Traditionally, a key strategy to keep employees from defecting to a competitor has been simply to offer competitive wages, but a company that uses non-compete agreements can feel less pressure to pay well.
In this way, noncompetes can exacerbate structural inequalities in the current job market, inequalities which themselves make noncompetes easier for companies to demand. In America’s post-recession economy, job seekers continue to vastly outnumber openings for good jobs. In this setting, workers don’t have much leverage when haggling with employers over terms and conditions of work. One effect of this has been the expansion of the so-called "gig economy", where apps like Uber and TaskRabbit draw on a pool of freelancers ready to perform quick jobs that become available with no attendant promise of benefits or job security. Large numbers of unemployed and underemployed have also fueled the boom in temp-agency staffing that has accounted for significant portions of the country’s post-recession job gains.
A lack of negotiating power can lead workers to sign noncompete contracts, Lobel says, and those contracts further erode their negotiating power. Because noncompetes make job loss more perilous by limiting post-employment opportunities, the agreements can tether workers to their current job, making them less likely to address grievances with management or attempt to look for better or more fitting work.
Noncompetes make job loss more perilous
"The decisions of whether to leave or not become distorted by the fact that there's this stick over their heads in the post-employment phase," says Lobel, who examined the economic effects of noncompetes in her recent book titled Talent Wants to Be Free. "People very well might decide that, despite their unhappiness with their job, despite the fact that they think they can do better with another employer, they might decide that it's just not worth the risk and that they should just lay low."
Courts are often reluctant to enforce noncompete agreements that cover the entire United States, let alone the whole world, according to Garden, who notes that the standard of "reasonableness" is the main legal test of the agreements. Yet different states have far different ideas of what counts as reasonable. (In an apparent nod to this, the Amazon contract stipulates that the signer consents that "each and every covenant and restraint in this Agreement is reasonable.") California law bans the enforcement of noncompetes. Oregon, North Dakota, and Colorado have also enacted strict limits on noncompetes. "Then there are states like Texas and Florida and a bunch of others that are on the other end of the spectrum," says Lobel, "that think of it as a simple contract issue, and if you sign the contract and you breach it then, well, you've breached the contract, and they'll enforce it, and they'll give injunctions quite easily."
"They might decide that it's just not worth the risk and that they should just lay low."
Such threats can have very concrete effects on workers. In the case of Jimmy John’s, a number of former workers have sued the company in part for what they call the "oppressive" effects of the sandwich chain’s noncompete clause. One former Jimmy John’s employee in the suit alleges that, after leaving the sandwich chain, she had taken a telemarketing job that paid less than she could have earned bartending — all because of the sandwich company’s noncompete. The AP recently found that Jimmy John’s workers are not alone in suffering real-life consequences of signing the agreements, which, according to court records, have also ensnared nail stylists, maids, and agricultural workers. In Massachusetts, a barbershop forced one of its former hairdressers who had signed a noncompete into unemployment after he took a job at a competitor.
The signing of noncompete agreements are more prevalent in states that are more willing to enforce the contracts, according to preliminary findings of a study conducted by scholars at University of Illinois at Urbana Champaign and the University of Michigan. The paper, which polled more than 10,000 workers across the country with an online survey, also indicates that noncompetes are prevalent in jobs that often require little training. The survey found that at least 12 percent of US workers, or at least 19 million Americans, are working under the agreements. The paper found that roughly 9 percent of transportation and warehousing workers who answered the survey were working under noncompete contracts. (This statistic is an underestimation, says Evan Starr, a co-author of the study, because many people who sign noncompetes are unaware that they’ve done so.) The paper goes on to assert that while the millions of low-skilled workers signing the contracts "are far less likely to bargain over their noncompetes, they receive little in return for signing, but may bear serious costs."
"They receive little in return for signing, but may bear serious costs."
Starr, who reviewed the Amazon agreement, said that while attorneys may differ in their interpretations on which services count as having been "supported" by a warehouse employee, the 18-month duration seems "incredibly long," especially for a temporary job. In the case of a stint lasting three months, the restrictions would stretch six times longer than the actual length of employment, Starr noted in an email. "A restriction like this could only be credible if the type of information the individual learned in a short time could be very damaging to the firms."
Yet Garden, the Seattle University law professor, notes that such a contract being legally enforceable may in fact be entirely beside the point in a low-wage workplace. "One way to look at this is as a kind of invidious approach to having workers sign a contract that is very likely to be unenforceable," Garden says. "Knowing that people who have been working for 10 and 11 dollars an hour are not going to be able to hire a lawyer to fight for them later on."