Non-Compete Agreements are Bad for Business

As you may know, New York and most other states do not prohibit non-compete agreements. In fact, NY courts will enforce these agreements. In California, non-compete agreements have been prohibited since 1850 and many believe that this policy has contributed to the growth of California’s economy and especially so in the technology field.

A while back, the National Law Journal ran an article by Richard A. Booth that suggests that California’s law against non-compete agreements may actually be good for business – especially the technology business. Mr. Booth argues that without non-compete agreements, companies are forced to retain quality employees with equity or other inducements. He also argues that with out the shackles of non-compete agreements, good employees are free to leave less productive companies at will. He suggests that this freedom of movement creates a more efficient marketplace and allows the best employees to be drawn to the best companies.

In New York, by contrast, good employees get trapped with bad companies by non-compete agreements and this hinders growth as human resources get stuck in poorly run companies. The net effect of non-compete agreements is that employees lose the ability to move and the economy is handicapped. Companies can tie up human resources with non-compete agreements. In my opinion, New York should change its ways and stop letting companies hamper the market place with non-compete agreements.