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Are Non-Compete Clauses Stifling Employee Mobility?

Patents, copyrights, and non-compete agreements have an important place in the ever-changing landscape of innovation. Without them, intellectual property theft and espionage could, and likely would, run amok. Ideas, which can be even more valuable than tangible products, need to be protected. Yet, such provisions can also have the effect of hindering employee mobility.

The recent furor in the media is over non-compete agreements aimed at low wage workers, specifically Jimmy John’s employees. However, this is just a symptom of the recent proliferation of such agreements. How can we protect intellectual property, without handicapping workers’ mobility at the same time?

[pq]A balance needs to be struck between the interests of the company and the interests of the worker.[/pq]

When used excessively or improperly, these agreements can act like licensing requirements for florists. These laws make it difficult for workers to employ their skills, rendering them less profitable and productive. Who benefits from having a skilled technician out of work for months, especially when there is already a shortage of high skill workers? According to a Brookings Institute report from 2012, manufacturing and technology jobs were going unfilled in the height of the recession.

The U.S. Congress is considering a national law, which could change the game entirely, as most of these regulations are currently made by states. As the law stands, non-compete laws can drive talent to other regions, stifling innovation and entrepreneurship in some areas. In his recent article in The Atlantic, James Bessen argues that one of the reasons Silicon Valley was so successful is because California has relatively lenient non-compete laws. According to Bessen, Massachusetts regularly enforces non-compete agreements. This could prove to be a serious obstacle in Boston’s quest to create an “Innovation District.”

In America, the land of opportunity, innovation and entrepreneurship are being stifled by restrictive laws. If all knowledge is treated like a trade secret, how can workers collaborate and build on different ideas? The vast majority of workers are not engaging in “economic espionage,” but are simply trying to make a living doing the fulfilling work that they have been trained for.

Additionally, non-compete agreements will be a disincentive for young people looking into career options. This generation is increasingly disinclined to settle into one company, or even one career, for the rest of their lives. Being strong-armed into working for one company will not be enticing to inquisitive minds. This could further exacerbate the skills gap in the current workforce.

A balance needs to be struck between the interests of the company and the interests of the worker. In the long run, this will benefit the employer, the worker, and the consumer.