In January, the U.S. Federal Trade Commission proposed a ban on noncompete clauses in employment contracts. In addition to barring new noncompete agreements with employees and independent contractors, the rule would require employers to rescind existing ones. To understand what a federal ban could mean for workers and businesses, why it's facing opposition, and how employers can prepare, we spoke with Evan Starr, an associate professor of management who studies noncompetes at the University of Maryland's Robert H. Smith School of Business.
This interview has been edited for length and clarity.
MIT Sloan Management Review: How widespread are noncompete clauses, and who is subject to them?
Evan Starr: Surveys show that between 50% and 60% of firms use noncompetes for at least some workers, and about 30% of firms use them for all workers. An estimated 18% to 30% of workers are bound by noncompete agreements.
Executive roles are by far the most common place in which we see noncompete agreements. For other professionals, such as technical workers like engineers and doctors, it's around 50%. But you see them in every corner of the labor market. The typical worker bound by one is paid by the hour and makes at the median about $14 an hour. I've seen noncompete agreements in volunteer contracts and nonprofit organizations, too.
When and how did noncompetes become common in the U.S.?
Noncompete agreements date back to the 1400s, when master craftsmen would train apprentices, who signed agreements that they wouldn't become competitors. That eventually became English common law, which treated these on a case-by-case basis, balancing the need for this restriction against the harm that it did to a worker and society.
Denne historien er fra Spring 2023-utgaven av MIT Sloan Management Review.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
Allerede abonnent ? Logg på
Denne historien er fra Spring 2023-utgaven av MIT Sloan Management Review.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
Allerede abonnent? Logg på
Avoiding Harm in Technology Innovation
To capitalize on emerging technologies while mitigating unanticipated consequences, innovation managers need to establish a systematic review process.
Make a Stronger Business Case for Sustainability
When greener products and processes add costs, managers can shift other levers to maintain profitability.
How to Turn Professional Services Into Products
Product-based business models can help services firms achieve greater scale and profitability. But the transformation can be challenging.
Do You Really Need a Chief AI Officer?
The right answer depends on the strategic importance and maturity of AI in your company.
Where To Next? Opportunity on the Edge
Doing business in regions considered less stable or developed can pay off for companies. But they must invest in working with local communities.
Make Smarter Investments in Resilient Supply Chains
Many companies invest in resilience only after a disruption. Applying the concept of real options can help decision makers fortify supply chain capabilities no matter the crisis.
The Three Traps That Stymie Reinvention
Organizational identity, architecture, and collaboration can be either assets or liabilities to pursuing growth in new sectors.
What Makes Companies Do the Right Thing?
Vaccine makers varied widely in their engagement with global public health efforts to broaden access to COVID-19 immunizations. Ethically motivated leadership was a dominant factor.
Build the Right C-Suite Team for Your Strategy
CEOs can foster a more effective leadership team by understanding when to tap senior executives' competitive instincts and when to encourage collaboration.
A Better Way to Unlock Innovation and Drive Change
A strengths-based approach to building teams can win employee commitment to change and foster an inclusive, agile culture.
