No to Noncompetes, Yes to Innovation

The FTC’s announcement that it plans to adopt a rule banning noncompetes nationwide is more than simply a move to protect workers. It is also a big step forward for competition and innovation and will make businesses stronger in the long run.  Noncompetes have a harmful effect on talent mobility, entrepreneurship, and equality. They restrict employees from switching employers or starting their own competing businesses. Those restrictions depress wages, reduce entrepreneurship, and impede efforts to correct inequities. As California and Massachusetts demonstrate, noncompetes have a major effect on the economy.  Since the 1970s, the computer industry accelerated in California, which deems non-competes void, even as it stagnated in Massachusetts where the use of noncompetes made it harder for employees to start their own ventures. 

There needs to be a balance between workers’ ability to switch jobs and employers’ desire not to see their R&D walk out the door. Every state protects trade secrets, and in 2016 Congress passed the Defend Trade Secrets Act to further provide strong secrecy protections federally. Trade secrecy strikes the right balance with narrower limits on using specific information rather than blanket prohibitions on competition.