Nothing brings out business caterwauling like a sweeping new government regulation. The party-line vote to ban most noncompete agreements in employment was no exception. The U.
S. Chamber of Commerce and Business Roundtable almost instantaneously sued and will likely succeed in blocking the rule. This will result in a loss of potential gains for workers, consumers and the economy, and Congress should act to limit most such coercive arrangements.
Noncompete clauses limit employees from taking jobs in the same industry or geographic area. Some block former employees from starting similar businesses. Those may make sense for executives and highly skilled workers with direct access to trade secrets who develop new processes and designs or craft competitive strategies.
Valid proprietary interests, however, could be addressed less intrusively by nondisclosure agreements. Without credible justification, noncompetes have been imposed on security guards, college interns, janitors, baristas, hairstylists, schoolteachers, physicians in clinical positions and many entry-level workers. Those protect established businesses from competition but suppress worker mobility, innovation and wages.
It takes only a few days on the job to get fast-food workers up to speed, but many impose noncompetes on those workers. A study of 156 large chains found 60% impose no-poaching rules on franchisees, and McDonald’s, Burger King and other franchisers’ practices are being challenged in court. Some hourl.