Skip to main content Accessibility help
×
Hostname: page-component-848d4c4894-v5vhk Total loading time: 0 Render date: 2024-06-15T23:41:09.028Z Has data issue: false hasContentIssue false

8 - Noncompete Agreements

Published online by Cambridge University Press:  08 February 2024

Brianna L. Alderman
Affiliation:
Harvard University, Massachusetts
Roger D. Blair
Affiliation:
University of Florida
Get access

Summary

Here, we focus on non-compete agreements (NCAs). NCAs severely limit job mobility and reduce a worker’s opportunities to exploit their human capital. Most NCAs preclude a worker’s ability to obtain a position with a rival employer for six months to two years after separation. In addition, the former employee may not start their own business in the same industry. The economic result of these restrictions is to reduce the labor supply elasticity, which enhances an employer’s ability to depress employee compensation, other benefits, and working conditions.

Employers argue that they need NCAs for two primary reasons. First, upon separation, an employee could take the former employer’s trade secrets to a rival employer. An NCA may solve this problem because many trade secrets, such as short-run production plans, are short-lived. Second, employers often invest in an employee’s human capital with schooling or training. An NCA provides protection for such investments in human capital.

In this chapter, we examine the pros and cons of NCAs. We also examine the Federal Trade Commission’s proposal to ban all NCAs completely.

Type
Chapter
Information
Monopsony in Labor Markets
Theory, Evidence, and Public Policy
, pp. 125 - 140
Publisher: Cambridge University Press
Print publication year: 2024

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Save book to Kindle

To save this book to your Kindle, first ensure coreplatform@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×