Let’s Just Ban Non-Compete Agreements Nationally


The White House is propagating the conventional wisdom about non-compete employment clauses:

The main economically and societally beneficial uses of non-competes are to protect trade secrets, which can promote innovation, and to incentivize employers to invest in worker training because of reduced probability of exit from the firm. However, evidence indicates that non-competes are also being used in instances where the benefit is likely to be low (e.g., where workers report they do not have trade secrets), but the cost is still high to the worker.

This is in response to the increasing use of non-competes among low-income workers, which is a particularly egregious bit of overreach. You may recall the case of Jimmy John’s, which apparently considers its sandwich-making process so unique and innovative that it forces its employees to sign non-competes. No working at Subway for you!

I have a different view of this whole thing since I’ve spent my entire life in California, where non-compete agreements have been generally unenforceable for over a century. As near as I can tell, we nonetheless have a thriving software market, plenty of lawyers, a prosperous content industry (Hollywood), and a generally dynamic economy. Our lack of non-competes doesn’t seem to do us any harm at all. In fact, it might be responsible for a lot of our growth.

So forget the difference between high-powered jobs and sandwich makers. If it were up to me, I’d just outlaw non-competes nationally. It would help empower workers and it would probably be an overall net positive for the economy. The corporate hacks would howl, but they all do business in California and know perfectly well that they can survive just fine without them.

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