Non-compete agreements, which prohibit individuals from starting or joining a competing business, stifle competition and harm worker mobility. They prevent workers from seeking out better opportunities and create a chilling effect on entrepreneurship.
Unfortunately, these contracts are increasingly pervasive. One in five employees, or approximately 32 million Americans, are currently bound by a non-compete. In total, 38 percent of workers have signed at least one non-compete agreement in the past.
The Economic Innovation Group supports federal reforms that limit the use of non-compete agreements, which would be among one of the most impactful ways to bolster entrepreneurship and improve the fortunes of workers across the country. The Workforce Mobility Act, bipartisan legislation introduced by Senator Todd Young (R-IN) and Senator Chris Murphy (D-CT), as well as Representatives Scott Peters (D-CA), Mike Gallagher (R-WI), and Anna Eschoo (D-CA), would end the widespread use of non-compete agreements in all but exceptional circumstances, promoting worker mobility and fostering economic dynamism.
Running a rapidly growing business at Steam Logistics, we have seen firsthand how non-compete agreements hurt workers and employers alike, and impede economic growth. They drive talented workers out of industries they’ve developed expertise in and shrink the pool of qualified candidates for employers trying to grow their businesses. The worst part is that non-competes are unnecessary: Employers have many other tools to protect their businesses, such as trade secrets laws and non-solicitation agreements. Saying anyone shouldn’t compete is un-American, and I commend Senators Murphy and Young and Representatives Gallagher and Peters for their legislation to boost competition and strengthen our economy.
President, Steam Logistics
We need to ensure that all US workers have the opportunity to earn a good life where they live. Work should be accessible, there should be dignity in it, and it should give everyone a shot at prosperity. We applaud the bipartisan, bicameral group of policymakers for coming together to narrow the use of non-compete agreements that helps to deliver on this promise.
Senior Vice President for the Economic Program, Third Way
The Workforce Mobility Act’s banning of noncompete clauses will have a major impact on new business growth in America. Noncompete clauses have long been a barrier in the way of entrepreneurs, despite the fact that new and young businesses create nearly all net job growth in America. Noncompete clauses or agreements stifle competition, undermine innovation, limit job growth, and restrict wages.
Founder and CEO, Right to Start
Non-compete agreements are simply inconsistent with a free, open labor market. They cut wages, reduce mobility and hurt workers. The FTC’s recent efforts show that the political tide is turning against them. Congress can now assert its own power, pass a ban on non-competes and deliver results for American workers.
President, R Street
Non-compete agreements restrict workers from pursuing better job prospects; reducing competition in the labor market and overall economic growth. It’s simple – your previous employers should not be able to stop you from going to a new job. Letting workers decide where and how they use their skills will empower them and create a more dynamic job market for the benefit of all.
Employment Policy Fellow, Niskanen Center
Building a 21st-century economy that works for all Americans requires worker empowerment, which requires mobility – the freedom to take a better job or launch a new business. By restricting the enforcement of noncompete agreements to only the most necessary of circumstances, the Workforce Mobility Act empowers American workers and promotes a more dynamic and entrepreneurial U.S. economy, to the benefit of all Americans. CAE thanks Senators Todd Young (R-IN) and Chris Murphy (D-CT), and Reps. Mike Gallagher (R-WI) and Scott Peters (D-CA) for their leadership on this critical issue.
President, Center for American Entrepreneurship (CAE)
Corporate abuse of non-compete agreements is a classic example of the reality, understood by economists since Adam Smith, that workers operate at an inherent disadvantage dealing with employers and need help to advance and protect their interests. Blind faith in markets has led inadvertently to a situation where millions of American workers cannot switch to better jobs, which is the opposite of what a well-functioning market would produce. Senators Young and Murphy, Representatives Gallagher and Peters, and their colleagues deserve great credit for doing exactly what capitalism requires: setting rules within which competition will lead to prosperity for American families.
Executive Director, American Compass
NELP applauds the reintroduction of the Workforce Mobility Act, which would ban non-competes for most workers and, together with the Federal Trade Commission’s rulemaking, would ensure that workers have the freedom to change jobs and the right to seek better pay and working conditions. We urge Congress to quickly pass the Workforce Mobility Act.
Senior Staff Attorney, National Employment Law Project (NELP)
Non-compete clauses strengthen the power of employers at the expense of millions of workers across America. These unfair contracts reduce job market mobility and depress competition among employers for workers’ services, lowering wages and wage growth and impeding new business creation. Banning non-competes across occupations and at all income levels, whether through legislation as the bipartisan group in the House and Senate propose or regulation as the FTC proposed earlier this month, would be a major step in advancing workers’ freedom in the labor market.
Legal Director, Open Markets Institute
Countless studies show that [non-compete agreements (NCAs)] can stifle employees’ wages and limit job mobility. NCAs can also harm employers by limiting the talent pool available for hire. Federal legislation could incrementally or aggressively reform NCAs to promote a more dynamic employment market by removing barriers to employee mobility and fostering competition for talent among employers.
Isabella Hindley and Fred Ashton
American Action Forum in “Noncompete Agreements: Have Employers Gone Too Far?”
Noncompetes are restraints against competition, pure and simple. They violate basic principles of economic freedom fundamental to the American system and secured by federal antitrust laws. Yet the law in most states allows employers to take advantage of workers’ limited knowledge and bargaining power to gain an unfair competitive advantage and prevent workers from achieving their best potential. The Workforce Mobility Act will at last eliminate such practices nationwide, placing all companies on a level playing field, restoring worker mobility, and creating a more hospitable climate for innovation and economic growth, benefiting everyone.
University of Florida
Testimony & Commentary