May 2016

Both the White House and U.S. Treasury Critical of Noncompetes

May 10, 2016

Early this month the White House issued a report titled, Non-Compete Agreements: Analysis of the Usage, Potential Issues, and State Responses. The conclusion of this 16 page report is as follows: In some cases, non-compete agreements can play an important role in protecting businesses and promoting innovation. They can also encourage employers to invest in training for their employees. However, as detailed in this report, non-competes can impose substantial costs on workers, consumers, and the economy more generally. This report informs future discussions and potential recommendations for reform by providing an overview of the research on the prevalence of noncompetes, evidence of their effects, and examples of actions states are taking to limit the use and enforcement of unnecessary non-competes. There is more work to be done. The Administration will identify key areas where implementation and enforcement of non-competes may present issues, examine promising practices in states, and identify the best approaches for policy reform. Researchers must continue to assess and identify promising policy reforms and the potential impact of those reforms including unintended consequences. Ultimately, most of the power is in the hands of State legislators and policymakers in their ability to adopt institutional reforms that promote the use and enforcement of non-competes in instances that appropriately weigh their costs and benefits and in ways that provide workers appropriate levels of transparency about their rights. Among many interesting points…

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