Fifty Ways to Leave Your Employer: Relative Enforcement of Covenants Not to Compete, Trends, and Implications for Employee Mobility Policy

Abstract

Covenants not to compete ("noncompetes")

Legal Foundation of Silicon Valley: Lessons for Asian Hi-Tech Districts

“…In high-tech, countless employees flee to smaller and nimbler firms despite the incentives of firms like Google. A study looking at Securities and Exchange Commission filings of CEO contracts of major U.S. corporations revealed 253 out of 375 CEO contracts (67%) contained a CNC (Bishara, 2010;Schwab, 2006). Most restrictions (118) were for two years, one year (80), and three years (29).…”

“…Hence, employers and employees knowing California's stance negotiate under different rules of the game, leading to different strategies by workers and firms. Norman Bishara, a scholar in this area, systematically gauged the strength of CNCs across the United States using the American Bar Association's state by state survey (Malsberger, 2008;Bishara, 2010). He gauged the levels of enforcement across all states but his analysis needs explaining: He ranks Arkansas with 49, Alaska 48, and Oklahoma 47; only within a few points from California but the legal regimes differ in a significant way -those states enforce CNCs and only California and North Dakota voids CNCs.…”

The Law and Ethics of Restrictions on an Employee's Post‐Employment Mobility

“…Pursuant to one form or another of the reasonableness test, the majority of U.S. jurisdictions will enforce noncompetes to some extent . Research shows that most states have what can be construed as a moderate level of noncompete enforcement . There are, however, states that impose a virtual ban on noncompetes .…”

Optimal Enforcement of Noncompete Covenants

“…2 Bishara (2011) gives a detailed account of the variation in enforcement policy across the 50 states. A key drawback of the current debate over enforcement of CNCs is that regulation has been treated as a binary choice.…”

“…Yet, much of the research on CNCs has focused only on states that fall at either end of the enforcement spectrum-states such as California with no enforcement and states like Massachusetts with extremely permissive enforcement-leaving out the vast majority of states in the middle. 2 Bishara (2011) gives a detailed account of the variation in enforcement policy across the 50 states. He rightly points out that researchers have been using a simplistic analysis of CNCs by cherry-picking certain states for analysis while not acknowledging that the strength of enforcement varies across states.…”