Should housekeepers be penalized for using their skills to get better-paying jobs or start their own businesses?
That’s the question attorneys asked when 10 housekeepers were sued in 2014 by their former employer — Chapel Hill-based Custom Maid LLC — in Orange County Superior Court.
Custom Maid required its cleaning employees to sign a non-compete agreement that prevented them for 18 months after leaving the company from soliciting Custom Maid’s clients, recruiting its workers, or owning, operating or managing any cleaning business within 20 miles of Orange County.
When several of them left for other opportunities, Custom Maid sued them. The lawsuits claim the employees started or worked for businesses that competed with Custom Maid, or that they tried to steal Custom Maid’s clients and employees.
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Owner Kelsea Parker testified in her 2015 disposition that the company had 800 clients in the mid-2000s but was down to 180 by 2015. Her company also experienced high job turnover, she said, hiring at least 200 people during that period.
The North Carolina Justice Center defended the workers, claiming non-compete agreements for low-wage workers violate North Carolina public policy and cause undue hardship for unskilled workers by limiting their ability to seek better or different employment.
Several workers left the company and worked independently, cleaning a couple of houses a week, so they could have flexible time with their families, according to court documents. One said a Custom Maid client contacted her, but her other cleaning jobs came through her husband’s construction clients, documents show.
Another went to work for a friend’s cleaning business in Greensboro.
Suit prompts job loss
At least one housekeeper was fired from her new job after her boss learned about the lawsuit, officials said.
“Low-wage workers have a hard enough time making ends meet,” said Carol Brooke, a senior staff attorney with the Justice Center who represented the employees. “They should be able to leave a job without worrying that they will be sued for working in the industry where they have experience.”
Custom Maid settled the case and agreed to remove the non-compete agreement from existing and future contracts with employees. The company also agreed to pay back wages and attorneys’ fees for several former employees.
Experts say non-compete agreements — once reserved for highly-skilled workers and executives – are more common among low-skill, low-wage workers.
A 2016 White House report noted 18 percent of U.S. workers were working under a non-compete agreement, and at least 37 percent had worked under one at some point in their careers. That included 15 percent of workers without a college degree and 14 percent of those earning less than $40,000 a year, it found.
Pros and cons
The primary argument for non-compete agreements, it said, is to promote innovation by protecting trade secrets and encourage worker training. Others argue the agreements stifle economic growth, and limit the labor pool and the spread of ideas and knowledge, while reducing workers’ job mobility and bargaining power.
While courts recognize a legitimate business interest in protecting trade secrets and proprietary client information, judges “tend to rule against enforcing those contracts that do not serve legitimate business interests or place an unreasonable burden on employees,” Justice Center officials said in a recent report.
One of the most shocking examples, officials said, was the non-compete agreement formerly used by the Jimmy John’s company. The agreement, dropped last year as part of a New York settlement, prohibited employees from working for a competing sandwich shop within two miles of any franchise for two years.
“There are no trade secrets to protect in sandwich preparation or proprietary expertise to safeguard in housecleaning,” said Allan Freyer, director of the Justice Center’s Workers’ Rights Project. “Non-compete agreements in low-wage industries only hamper the freedom of business to recruit the best talent, workers to start their own business, and customers to choose the services they want.”