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Non-Compete Agreements Stifle Workers, Research Says

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Non-Compete Agreement document

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Do the non-compete agreements some companies use to bind employees help or hurt workers? Evan Starr, a management professor at the Robert H. Smith School of Business at the University of Maryland, has studied the issue extensively, with four new research papers on the topic forthcoming in top journals this year. All of the results point to the same conclusion: Non-competes stifle workers.

"Noncompete Agreements in the U.S. Labor Force," to be published in the Journal of Law and Economics, is a systematic investigation of non-competes that studies a nationally representative sample, looking at all sorts of workers. A key finding is that non-competes are found even among low-wage workers.

Collectively, Starr's research shows that workers do better without non-compete agreements. But what about firms?

Firms may be less profitable if they have to pay workers more, Starr says, but there's a benefit too: Without non-competes, firms have unfettered access to the labor market and can hire the workers they want to hire, including those from a competitor.

"It's not really a firm versus worker issue. It could be a win for both," he says.

From University of Maryland
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