Noncompete Agreements Kill Innovation

Noncompete agreements are used by companies to make sure their former workers will not jump over to their competitors, taking with them precious proprietary knowledge. Of course, those agreements do not take into account the employee's right to choose his employer and earn an honest living.

All of us who work at the software industry, had to sign a NCA at one time or another. I remember reading through my first NCA years ago, looking at the long list of potential competitors to my employer and wondering "can anyone really enforce this agreement?"

I know a guy who worked in a very specialized part of the industry, with a limited number of companies competing in the same space. When treated like crap by his employer, he up and left to join the competition. His former employer sued him, probably to set an example for any future deserters.

But the judge didn't see the NCA as committing. In a ruling I still find funny to read, he said that due to the fact this guy's employment opportunities are limited, he can only be expected to stay at home and not work. Therefore, his former employer should pay him a full salary to stay at home and not compete. That - or let him work wherever he pleases. Furthermore, he charged the former employer the entire trial costs, plus compensation for time lost by the employee.

This interesting article deals with certain aspects of the NCA. It calls it "DRM for humans" and asserts that just like DRM (Digital Rights Management) hurt the recording industry, so will the hi tech industry suffer if stagnation kicks in, due to employees frozen by NCAs.

It further discusses the theory that Silicon Valley in California prospered while Boston's Route 128 stayed behind, due to the California's courts refusal to enforce NCAs.

Freedom as a success accelerant? I can subscribe to this theory.