Banning noncompete agreements would be good for workers and the economy

When I saw the news on Thursday that the Federal Trade Commission wanted to ban most noncompete agreements, I thought of a friend I’ll call Eric who had a stressful experience with these contracts almost a decade ago.

Eric had recently earned his MBA and was working at a small consulting company in the Midwest. He wanted to change jobs, but had signed a sweeping noncompete agreement with his employer that prohibited him from working for a competing company for two years anywhere in North America.

Unfortunately, the agreement wasn’t specific about which companies were considered competitors. Eventually, Eric took a job at a software company that helped customers solve some of the same kinds of problems as his old consulting firm. He hoped that software was different enough from consulting that he wouldn’t get into legal trouble.

But a few months after switching jobs, Eric got a cease-and-desist letter from his old firm.

Eric was lucky enough to get some pro bono legal advice through a family connection. The lawyer told him he’d probably win in court, but the contract was so vaguely written that it was impossible to be sure. And while the lawyer was willing to help him negotiate a settlement, Eric would have to pay hefty legal fees if the case went to trial.

For months, Eric worked at his new company with the threat of a career-destroying lawsuit hanging over his head. With a mortgage and a young daughter, he couldn’t afford to lose his job. But he also couldn’t really afford to fight the case in court.

“It was the worst time of my life,” Eric told me. “I was constantly worried.” Eric said he battled depression, lost friends, and “was not a great spouse during that time period.”

Eric ultimately reached a settlement. Its terms were confidential and prohibited him from disparaging his old employer, which is one reason I’m not using his real name in this article. He says that he wound up taking a three-month break from his new job “to make the problem go away.”

Eric’s story is far from the worst abuse of noncompete agreements I’ve heard about. Back in 2021, I wrote about three nurses who were ordered to stop practicing their profession in Wyoming. One was forced to take a new job across state lines that paid less and required a two-hour commute; she burned through ...