Social Innovation
day one project

Banning Noncompete Agreements to Create Competitive Job Markets

01.22.21 | 2 min read | Text by Mark Lemley & 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: