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Why are non-compete agreements popular?

On Behalf of | May 5, 2017 | Nacht Law in the News |

This article “Companies Compete but Won’t Let Their Workers Do the Same” is a thoughtful piece and there is much I agree with, especially in regard to lower wage workers and the depressing effect of non-competes on wages. But the author fails to note the real reason why non-competes are popular: companies invest in their employees in developing relationships with customers and in learning technology. Smaller companies that don’t have non-competes for key personnel are difficult to sell. And companies take a real risk that employees will simply learn from the experience of a job and hand a customer list on a platter to the competitor. So in the absence of a non-compete, many companies won’t invest or trust their employees. That can slow the growth of companies.

Moreover, in some states, companies pay employees to sign a non-compete. In the Midwest, companies don’t need to do that. That is wrong. Companies should pay a premium for workers limiting post-job options.

But California is hardly the panacea the author claims. I have represented many employees who have been threatened with aggressive approaches to trade secrets violations by their former California employer. In other words, when the former employer can’t use a non-compete, they find other paths.

Are non-competes over-used?  Undoubtedly.

Should the public and Congress take notice?  Yes.

Should they be eliminated?  No.

Resource:  “Companies Compete but Won’t Let Their Workers Do the Same“.  by Orley Lobel, The Opinion Pages, NY Times. 4 May, 2017, Web.