Most of us do not look closely at the language in a proposed employment contract. We are just too excited to be starting a new job. Fewer than 10% of new employees will try to negotiate their noncompete clauses, according to the U.S. Department of Treasury. https://www.theladders.com/career-advice/this-is-how-non-compete-clauses-hurts-employees
But those noncompete clauses in employment agreements are designed to interfere with our future employment options. Employers use them to deter employees from leaving in order to earn a better wage at a competing company. In many states, a noncompete clause allows a company to limit your employment options for years. Even in states that do not enforce noncompetes, employers may include the clause and threaten to drag an employee through expensive litigation. Just the threat of litigation can be enough for a future employer to withdraw an offer of employment.
State law concerning the enforceability of noncompetes varies quite a bit. That provides researchers with the ability to study how states that strictly enforce noncompetes compare to those that do not. New research published in the Academy of Management found that tech workers in states that more strictly enforce noncompete clauses are at an economic disadvantage compared to their peers in states that less strictly enforce noncompete. The researchers noted that this disadvantage persists for many years. For example, if you start your career in a state that strictly enforces noncompete clauses, your salary will, on average, be persistently less than your peers in states with less restrictive enforcement for eight years, regardless of whether or not you leave the state.
Researchers called this strict enforcement of noncompetes a “lock-in” effect: a binding trap where employees are prevented from earning a competitive wage or leaving for better working conditions. When employers have locked their employees into their jobs, they do not have to offer competitive wages or competitive working conditions. Employers love strict enforcement of noncompetes so they spend a great deal of time and money lobbying state legislators for these laws.
Noncompetes are not just bad for employees — they are bad for a state’s economy. Strict enforcement of noncompetes will encourage those employees who have options to start their careers in other states or move out of state. That creates a brain drain from the state economy.
Bottom line: Get legal advice before you sign an employment agreement — particularly one with a noncompete clause. It is better to deal with this issue up front than to let a noncompete interfere with a potential job offer years from now.
Lisa Bragança recovers losses for investors all over the country, protects whistleblowers, and defends individuals and businesses in government investigations. As a Branch Chief with the SEC Division of Enforcement, Lisa investigated a wide range of investment fraud and Wall Street misconduct. Lisa represents employees in negotiating employment agreements and separation agreements.
You can reach Lisa at (847) 906-3460 or BragancaLaw@gmail.com. You can follow Lisa on Twitter @LisaBraganca.
Disclaimer: This information is for general purposes only and should not be interpreted to indicate a certain result will occur in your specific legal situation. The information on this website is not legal advice and does not create an attorney-client relationship.