With the loss of jobs that came with the economic downturn, some states are considering banning or at least placing a moratorium on enforcement of non-compete agreements. The ability to move between jobs or to take a new job within a chosen field, free from the restrictions of a non-compete agreement, would boost employment rates some believe.
Many point to California when extolling the virtues of disallowing non-competes in employment contracts. The success of Silicon Valley may very well be in the ability of highly-skilled employees to move between companies to find the right fit for themselves and their employers, rather than being artificially restricted to one employer in the area. Employees who are able to move are also able to share ideas and spread innovation moreso than those who are restricted by a non-compete.
Elsewhere in the United States, non-compete agreements are typically enforceable if they are limited by time and geography. That means that a non-compete that intends to restrict a former employee from taking similar work in a specific territory for a year or two may be enforceable whereas a five year or lifetime restriction generally will not be enforceable.
California does place limits on an employee’s ability to legally share information with a new company in the same industry. Trade secrets remain protected; a former employee cannot simply divulge all of that company’s operating secrets to a new company when he or she changes jobs.
Source: Thomson Reuters News & Insight, “Analysis: Unleashing job hoppers could give economy a bounce,” April 25, 2013
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