To Compete, or Noncompete: Beware of this relic of the Old Economy when developing your career
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To Compete, or Noncompete Beware of this relic of the Old Economy when developing your career. Paul Drzaic The nature of company-based employment in the United States has shifted dramatically over the past generation. For a large part of the last century individuals would start and end their career with one company. The system was paternalistic, with the company providing health care, pensions for retirement, and other benefits, in return for the employee loyally sticking with the company through thick and thin. Growing a company’s employment base was a matter of pride for CEOs. Fast forward to the present. The reality now is that individuals in the United States will work for multiple companies during their careers, shifting jobs and companies as different fields and product areas grow and die. Keeping the number of employees low is a corporate imperative. A person starting a career today may work for as many as 10 different companies before retirement. Additionally, the temptation for entrepreneurship is strong, and many people participate in the small company economy, hoping to participate in the Next Big Thing. Companies both large and small go through times of boom and bust, with employment levels fluctuating with their own, impenetrable rhythm. All of these changes have led to a much more dynamic economy in the United States and worldwide, with companies (and target research areas) starting, growing, and dying at an accelerating pace. Workers in the private sector are expected to take responsibility for their own career development and finances, being able to withstand occasional layoffs and job shifts. Whether one views these changes as a benefit or curse is irrelevant, as there are no indications that this situation is changing any time soon. As a matter of social policy, it would seem prudent to have a system that recognizes that frequent career changes is now the status quo, and encourage the dynamics and economic benefits that entrepreneurship provides. In fact, many states look longingly at regions like the
Silicon Valley in California, and are actively promoting entrepreneurship in their areas as a way of driving economic growth. Many states have economic development organizations geared at promoting entrepreneurship within their regions. Sadly, getting in the way of these trends is a holdover from the old economy, namely, noncompete agreements. The purpose of a noncompete clause in an employment contract is to restrict the ability for individuals to move to an employment situation where they would compete with their current employer, for the purpose of protecting the interests of their current employer. There is a bewildering patchwork of rules, as what is permitted in noncompete contracts varies from state to state. About all that is common across these jurisdictions is these clauses must be limited in terms of time, usually lasting one or two years. From an employer’s perspective, non-
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