Have Noncompete Agreements Evolved Into an Unnecessary Restriction on Job Movement?

Abstract

Noncompete agreements have been widely used by employers in the United States for decades, mainly to guard against loss of business to competitors, as well as to protect valuable proprietary information. Historically this technique has been used by employers for higher level employees, such as management executives, researchers and higher level sales personnel. In this context, the use of noncompete clauses is considered legitimate and fair because it protects valuable business interests by restricting movement of key employees to competitors. However, the use of noncompetes has spread steadily downward, and now covers, in many instances, workers at the mid and lower levels of employment. This means that workers who have little or no access to important proprietary information are being unnecessarily prevented from job movement by restrictive contracts. This article examines the effect of this development on both workers and the economy and explores possible reforms to address overuse of noncompete agreements.