Harriet Torry reports in the Wall Street Journal:
Increasingly interns are being asked to sign noncompete, nondisclosure and forced arbitration agreements, restrictions once reserved for higher-ranking employees. Advocates say legal covenants for interns help safeguard trade secrets such as customer lists in an era when it is easy to download information and share it with a competitor. But critics argue the agreements hamper young people’s job opportunities and mobility even before they get a foot on the career ladder. “The idea of noncompetes for interns is ludicrous. Internships are supposed to be for professional development, and are about expanding—not limiting—job opportunities.”
As a junior in college, Delaney Dunne took an internship for class credit and $10 an hour at co-working company TekMountain in Wilmington, N.C.
On graduation day this year, she received a letter from TekMountain’s parent asking about her employment status and reminding her she had signed a noncompete agreement with TekMountain in November 2017 that restricted her employment options.
“I burst into tears hours before I was set to graduate from college,” Ms. Dunne, 22, said. “That noncompete (agreement) that I signed when I was 20 years old was still haunting me.”
Internships have long been an opportunity for inexperienced workers to try out different industries and build valuable contacts. For companies, it is a way to attract future talent.
But increasingly interns are being asked to sign noncompete, nondisclosure and forced arbitration agreements, restrictions once reserved for higher-ranking employees.Advocates say legal covenants for interns help safeguard trade secrets such as customer lists in an era when it is easy to download information and share it, for instance on social media or with a competitor. But critics argue the agreements hamper young people’s job opportunities and mobility even before they get a foot on the career ladder.
Ms. Dunne’s noncompete agreement stated that she couldn’t work for a competitor in software or banking within 15 miles of Wilmington for a year after leaving TekMountain.
Ms. Dunne said she was given the agreement on her first day. “I had no idea what I signed, they didn’t explain it to me.”
After leaving TekMountain, she did a separate three-month internship with nCino, a financial technology company in Wilmington.
In a May 7 letter, TekMountain’s parent, CastleBranch Inc., laid out her obligations under the noncompete agreement, described the confidentiality of its proprietary information as “very serious,” and asked for details about her relationship with nCino. Ms. Dunne said she didn’t respond.
The noncompete “eliminated a good portion of the companies in town in the industry I wanted to be in,” said Ms. Dunne, who is relocating to the Washington, D.C., area for a new job. “I have to leave all of my friends behind and start over.”
CastleBranch’s Chief Executive Brett Martin said: “Our employment agreements are fair. They are not designed to limit the opportunities of young employees such as Delaney, but to protect ourselves and our partners from competitors who could gain access to our intellectual property and confidential business information.” He added: “We have not, and will not, pursue any legal action against Delaney.”
Mr. Martin said the noncompete agreement focused on industries that were direct competitors to CastleBranch.
Noncompete agreements are unenforceable in a number of states, and regulators have clamped down on their use among low-skilled workers like food preparers. While no data exists on how many interns are affected by noncompete agreements, around one in five workers in the labor force overall are bound by such pacts.
“The idea of noncompetes for interns is ludicrous,” said Terri Gerstein, a Harvard University academic who previously served in the New York attorney general’s office. “Internships are supposed to be for educational and professional development, and are about expanding—not limiting—job opportunities.” She said it is unlikely intern noncompete agreements would be upheld in court in most states.
Jessica Jeffers, an economist at the University of Chicago, said noncompete agreements “operate mainly through a deterrent effect”—such as cease-and-desist letters sent to former employees. The noncompete agreements seem to prevent people from leaving or keeping a job, even if they rarely result in a court case, she said.In many industries, nondisclosure and nondisparagement agreements for interns have proliferated too.
Jeremy Mayer, a political scientist at George Mason University, said that last year a student of his demurred from telling the class about his recent White House internship because he was bound by an NDA.
Katharine Marianacci, a career coach at Lehigh University in Bethlehem, Pa., said that NDAs—common in engineering internships—limit the details of work experience students can put on their résumés, or even discuss in job interviews.
When branding themselves for future roles, students “need to be kind of creative in a way that doesn’t share” confidential information, she said.
Legal experts say courts tend to look favorably on agreements that protect companies’ information, but may invalidate those that restrict interns’ or employees’ free speech or movement.
Some interns are pushing back. Harvard Law School students last year set up the Pipeline Parity Project to protest law firms’ use of mandatory arbitration and other restrictions on summer associates. The project discourages students from taking jobs at firms with such policies and began in the wake of high-profile sexual-harassment cases in the legal profession and the broader #MeToo movement.
Mandatory arbitration, which bars employees from suing in court, is common in financial services and law firms. Supporters say arbitration is quicker and less costly than court. It commonly requires complainants to sign nondisclosure agreements as a condition of settlements. While NDAs give both sides privacy in a dispute, critics say they can be used to muzzle alleged victims of harassment and other discrimination.
“People shouldn’t have to give up their legal rights when they come to work,” said Beth Feldstein, one of the project’s organizers.
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