Banning Noncompete Agreements to Create Competitive Job Markets

Authors: Mark Lemley and Orly Lobel


Summary 

Competitive job markets are critical to the success of the national economy, spurring innovation while boosting wages and labor equality. The moment is ripe for the new administration to foster competitive job markets by banning noncompete agreements (noncompetes). New empirical evidence shows that noncompetes have harmful effects on job mobility, wages, competition, entrepreneurship, and equality. Yet noncompetes are widely included in employment contracts. And inconsistent state rules on noncompetes (and their enforcement) have led to employee confusion and disputes among state courts.


A tough, consistent federal strategy to eliminate noncompetes is needed. Several recent federal and state initiatives addressing noncompetes have created momentum that the new administration can build on to rapidly address this issue. The Biden-Harris administration should (1) adopt a federal ban on noncompetes, (2) actively educate the public about their labor-mobility rights (and actively support those rights), and (3) take proactive steps to ensure compliance with labor-mobility policy. Specific steps the new administration could consider include:

  • Barring noncompete agreements through legislation or executive order. If barring all noncompetes is not yet feasible, a federal ban on noncompetes imposed on low-wage and unskilled workers would be a good first step.

  • Issuing executive orders that (i) restrict or eliminate government contracting with companies that use noncompetes; and (ii) require employers in states that restrict noncompetes not to sign noncompetes with employees in those states, and/or to give prominent notice of the unenforceability of noncompetes in those states.

  • Requiring employment contracts to include a notice about employees’ right to leave their employer.

  • Banning secrecy imposed by employers regarding salary information.

  • Requiring the Department of Labor, Federal Trade Commission, and Department of Justice Antitrust Division to collaborate to actively enforce laws and policies governing noncompetes nationwide.


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About the Authors

Mark Lemley is the William H. Neukom Professor of Law at Stanford Law School and the Director of the Stanford Program in Law, Science and Technology. He is also a Senior Fellow at the Stanford Institute for Economic Policy Research and is affiliated faculty in the Symbolic Systems program. He teaches intellectual property, patent law, trademark law, antitrust, the law of robotics and artificial intelligence (AI), video-game law, and remedies. He is the author of eight books and 181 articles, including the two-volume treatise IP and Antitrust. His works have been cited 290 times by courts, including 15 times by the United States Supreme Court, and more than 18,000 times in books and law-review articles, making him the most-cited scholar in IP law and one of the four most cited legal scholars of all time. He has taught IP law to federal and state judges at numerous Federal Judicial Center and ABA programs, has testified eight times before Congress, and has filed more than 50 amicus briefs in the U.S. Supreme Court, the California Supreme Court, and the federal circuit courts. Mark is a founding partner of Durie Tangri LLP. He litigates and counsels clients in all areas of intellectual property, antitrust, and internet law. He has argued 27 federal appellate cases and numerous district court cases as well as before the California Supreme Court. He has participated in more than three dozen cases in the United States Supreme Court as counsel or amici. His client base is diverse, including Genentech, Dykes on Bikes, artists, and nearly every significant Internet company.


Orly Lobel is the award-winning author of several books and numerous articles, the Warren Distinguished Professor of Law and the Director of the Employment and Labor Law Program. A graduate of Harvard Law School and Tel-Aviv University, Lobel’s interdisciplinary research is published widely in the top journals in law, economics, and psychology. She has recently been named among the most cited public law scholars in the nation. She is a prolific consultant and expert. In 2020 Lobel advised the Federal Trade Commission and in 2016 Lobel consulted the White House on employment mobility policy, resulting in a presidential call for action. Her scholarship and research have received top grants and awards. She is in high demand as a speaker and commentator at leading associations, companies, and top media, including Intel, Samsung, TED, AlphaSights, New York Times, Financial Times, Harvard Business Review, and Businessweek. Lobel’s research focuses on innovation policy, intellectual property, patents, copyright, trade secrets, trademarks, employment relations, employment and labor law, equality, discrimination, regulation, compliance, enforcement, digital platforms, technology, class actions, automation and work policy.