A.G. Underwood Announces Settlement With WeWork To End Use Of Overly Broad Non-Competes That Restricted Workers' Ability To Take New Jobs
News from the New York Attorney General's Office
FOR IMMEDIATE RELEASE
September 18, 2018
Attorney General's Office Press Office / 212-416-8060
A.G. UNDERWOOD ANNOUNCES SETTLEMENT WITH WEWORK TO END USE OF OVERLY BROAD NON-COMPETES THAT RESTRICTED WORKERS’ ABILITY TO TAKE NEW JOBS
Nearly All U.S. WeWork Employees Will Benefit from Settlement -- Which Results in the Full Release of Over 1,400 Employees Nationwide (Including 800 in New York) from Non-Competes, and Far Less Restrictive Non-Competes for Another 1,800 Employees Nationwide (Including 1,400 in New York)
NEW YORK – New York Attorney General Barbara D. Underwood today announced a major settlement with WeWork Companies, Inc. – which provides a network of shared spaces for rent and associated services to clients in the United States and internationally – ending WeWork’s use of overly broad non-compete agreements for nearly all of its employees nationwide. WeWork, the second-largest private office tenant in New York City, is headquartered in New York and all New York employees were required to sign such agreements.
“Workers should be able to take a new job without living in fear of a lawsuit from their former employer,” said Attorney General Underwood. “Yet too often, non-compete agreements are misused, especially when it comes to low-wage workers – limiting employees’ mobility and opportunity and preventing businesses from hiring the best person for the job. Today's settlement is a key step forward for WeWork's thousands of employees in New York and across the country, and should serve as an example for all businesses as we continue our efforts to end the use of these overly broad non-competes.”
As of April 2018, WeWork employed nearly 3,300 people in the United States, of which nearly 2,300 were in New York. Nearly all employees – except for about 100 executive (or “Leadership Level”) employees – will benefit from today’s settlement.
Prior to today’s agreement, WeWork used non-compete agreements that prohibited all employees from working for competitors after leaving the company, regardless of job duties, knowledge of confidential information, or compensation. The agreement not only applied to executive and senior staff, but also broadly to all levels of employees.
Acting on information that WeWork routinely required its employees to sign a contract that included a non-compete restriction, the Attorney General began an investigation. The investigation found that WeWork had been requiring employees at nearly all locations nationwide to sign an agreement containing a non-compete restriction as a condition of employment. Separately, but concurrently, the Illinois Attorney General began its own investigation into WeWork’s use of non-competes. New York and Illinois worked together to reach a coordinated resolution of the two investigations.
Today’s settlement will result in the full release of over 800 rank-and-file employees in New York from their non-compete agreements. In addition, as a result of the investigations by New York and Illinois, WeWork will adopt the same policy nationwide, releasing over 600 additional employees from non-competes. These 1,400 employees now fully released from their non-compete agreements include cleaners, mail associates, executive assistants, baristas, and more, some of whom are paid as little as $15 an hour.
Another nearly 1,800 employees – including nearly 1,400 in New York – who were previously bound by non-competes will now be bound by far less restrictive terms. These include: a non-compete period shortened from one year to six months after employment ends; a dramatically smaller geographic restriction, from any geographic areas in which WeWork operated to just a 15-mile radius of only those WeWork locations engaged in the business lines in which the employee worked; and a much more narrowly-defined scope of competition, limiting the ban to the specific business lines in which the employee worked. These 1,800 employees include community leads, community managers, interior designers, architects, senior software engineers, and more.
WeWork must notify all current employees and all former employees who left within the past 12 months of these changes. It must also submit semi-annual reports to the Attorney General on certain changes to or uses of its non-competes for two years – including reporting the application of non-compete agreements to a new job category.
New York law permits non-compete agreements but they are generally intended to be used in very limited circumstances, such as to protect an employer’s trade secrets and confidential information or prevent employees from taking specialized skills they gained on the job to a competitor. A non-compete agreement’s restrictions must be no greater than necessary to protect the legitimate interests of the employer.
In response to growing misuse of non-compete agreements, Attorney General Underwood is also releasing “Non-Compete Agreements In New York State – Frequently Asked Questions.” This guidance provides easy-to-understand answers to common questions workers have regarding the law on non-competes.
The New York Attorney General's office has proposed legislation to curb the rampant misuse of non-compete agreements. The office has already reached a number of settlements to limit the use of non-compete agreements at other companies, including Jimmy John's, Law360, EMSI, and more. Additional investigations remain ongoing.
Employees who believe they are subject to an overly broad non-compete agreement are encouraged to contact the New York Attorney General’s office at 212-416-8700 or email email@example.com with questions or concerns.
This matter was handled by Civil Enforcement Section Chief Mayur Saxena, Assistant Attorney General Lawrence Reina, and Volunteer Assistant Attorney General Elisabeth Schiffbauer, all of the Labor Bureau, which is led by Bureau Chief ReNika Moore and Deputy Bureau Chief Julie Ulmet. The Labor Bureau is part of the Division of Social Justice, which is led by Executive Deputy Attorney General Matthew Colangelo.
“WeWork’s non-compete agreements restricted employees by preventing them from moving into new job opportunities,” Illinois Attorney General Lisa Madigan said. “Today’s settlement puts an end to WeWork’s unnecessary use of non-compete agreements and removes career obstacles for current and former employees, allowing them to make better decisions for their lives.”