No Exit: Understanding Employee Non-Competes and Identifying Best Practices to Limit Their Overuse

Jane Flanagan Leadership in Government Fellow, Open Society Foundations and Visiting Scholar, IIT Chicago-Kent School of Law

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Evidence suggests that in the past decade employers’ use of non-compete agreements to restrict where and when departing employees can work has been far broader than is necessary or legally permissible, with research showing that two in five workers, or 40 percent of the U.S. labor force, are bound by a non-compete at some point in their careers. Falling largely on the shoulders of low-skilled minimum wage workers, non-competes limit worker mobility and have demonstrable negative consequences for wages and innovation.

In a new ACS Issue Brief, Open Society Foundations Fellow Jane Flanagan shows how the federal government and states have been combating the overuse of non-competes through, among other things, recent legislative initiatives that ban them or limit their impact and the creation of public enforcement schemes that allow employees who are asked to sign illegal non-competes to file complaints with a state agency. And while legislation and litigation are important tools, Flanagan contends that “it would be a mistake to think that the overuse of non-competes and boilerplate contract terms can only be addressed through statutory bans.” Rather, public education and business expectations will also need to adjust to end this phenomena.

Related: Read Jane Flanagan's blog with Terri Gerstein about a Senate bill addressing non-compete agreements.