Christopher B. Seaman
Volume 72, Issue 4, 1183-1226
Noncompete clauses in employment agreements are both common and controversial. An estimated twenty-eight million Americans—nearly twenty percent of the U.S. workforce—are currently bound by a noncompete. The traditional view that noncompete agreements can facilitate increased productivity by encouraging employers to invest in employee training has been challenged by numerous legal and economics scholars in recent years, who contend noncompetes hinder employment options for skilled workers and limit information spillovers, which are both vital drivers of innovation. Based on these claims, several states have recently limited the enforcement of noncompetes, and legislation is pending at the federal level to effectively ban noncompete agreements for certain types of workers.
Despite their widespread use, empirical research regarding noncompetes is fragmented and incomplete. In particular, there have been few empirical studies based on actual employment agreements. This Article helps fill an important gap in the existing literature. Using a novel dataset of noncompete agreements that have been publicly disclosed in trade secret litigation in federal court, it finds that noncompetes are more frequently enforced against technical and sales personnel, instead of high-ranking corporate executives. In addition, it finds that noncompetes are common for employees with a base salary below $100,000 per year and that California-based employees are significantly less likely to be bound by a noncompete. The implications of these and other findings from the dataset are discussed in the final Part of the Article.