I don’t think I’ve ever dedicated a post to a newspaper article but a recent New York Times article entitled “How Noncompete Clauses Keep Workers Locked In” does a great job addressing the human toll of non-competes. Here is a link to the article. The article is generally anti-non-compete when it comes to lower paid workers but cites some examples where they can make sense. The article also focuses on the ramifications of more and more non-competes, they drive wages down.
To me the most interesting focus is on the use of non-competes to control work experience:
The growth of noncompete agreements is part of a broad shift in which companies assert ownership over work experience as well as work. A recent survey by economists including Evan Starr, a management professor at the University of Maryland, showed that about one in five employees was bound by a noncompete clause in 2014.
As someone who represents folks/companies on both sides of the non-compete equation I’m not sure I would agree with the claim that non-competes use is on the rise or that one in five employees is bound by one. Regardless, they are out there and in numerous industries. The publicity we most often see deals with bad non-competes, like the Jimmy Johns non-compete from a few years ago.
The economics of enforcing bad non-competes doesn’t work. It is expensive to sue someone and get a temporary restraining order. Plus, in most circumstances lawyers are going to confront judges that don’t want to prevent a former employee from working in an industry that they may have been tied to their entire working life. As we have discussed here on numerous occasions, the better odds on protecting a business is through enforcement is through non-solicitation agreements that prevent a former employee from calling on customers and hiring away employees.
Non-competes will continue to be dealt with on a state by state basis. There is not going to be some federal legislation that kills them. Employers should use them sparingly and in instances where they make sense – for highly paid employees that have received access to to true trade secrets/proprietary information or received serious training. Employers that use them must also enforce them. Simply drafting them and not enforcing them is bad policy and undermines an employers ability to enforce them in the future.
