Non-competes are Bad for Employees and the Economy

As a long-standing advocate against non-competes, I support new federal action to ban them.

I’ve seen first-hand the impact non-compete agreements have on people’s lives. They restrict the choices people can make for themselves and their families and damage careers. We’ve been working for a number of years to stop the use of these harmful agreements.

So, I was very encouraged to see Friday’s White House Executive Order asking the Federal Trade Commission to ban non-competes. It is an important step to advance employee rights and economic growth.

The free flow of talent and ideas creates innovation. When that movement is restricted by non-compete agreements, it is bad for employees, companies, and the economy.

Freedom to Change Jobs is a Fundamental Right

Employee rights have always been important to me. The fact that, through non-competes, corporations can limit a former employee’s freedom to make personal choices which influence their livelihoods and career growth is just wrong. It hurts families by restricting mobility and income potential. And these impacts are playing out at a significant scale across the U.S. as 1 in 5 American workers are subject to a non-compete.

It makes sense that employees have responsibilities to their employer during their time with the company. The employee joined of their own free will and is getting compensated. Companies should not have lingering power over prior employee’s lives.

Employee Freedom Increases Productivity

Some companies believe non-compete agreements work to their advantage. I disagree. Employees that feel trapped by their employer are less engaged and less productive. It’s better for people to move on if they would like to. Leaders should focus on fostering an environment where employees want to be, rather than putting energy into controlling or intimidating employees with non-compete agreements.

Employee Freedom Grows the Economy

Banning non-competes is good for the economy because each person is free to move to the job where they can contribute and learn most. In California this mobility of talent was the spark that created many tech companies, large and small. Silicon Valley would not have been possible if the state allowed non-compete agreements.

While most states have some restrictions on non-competes, a proliferation of newer state laws is worsening the problem. Reality is, we now live in a ‘work anywhere’ world. Mobility of talent should not be hampered by state-specific regulations. Without this patchwork of state regulation, a universal pool of free-flowing talent and ideas can be a major driver for the U.S. economy. This is another reason action at the federal level to completely ban non-compete agreements is so important.

Our Stance

Veeva’s position on non-competes is clear. We have never asked employees to sign non-competes and never will. We also offer legal protection if a Veeva employee is threatened by a past employer over a non-compete.

What Can You Do?

Policymakers, by banning non-competes, you can create an environment for innovation and economic growth. If you are on the management team of a company that uses non-competes, take action to eliminate them. If you are seeking a new job, consider not joining a company that asks you to sign a non-compete agreement.

Hope for the Future

The White House Executive Order was a good step in the right direction, and I look forward to a time soon when non-competes are only a memory of how things used to be.

Additional Resources

Veeva Systems Files Suit to Fight Unfair Business Practices That Limit Employee Rights

NPR: Biden Issues Executive Order Asking FTC To Ban Or Limit Non-Competes

The Economist: America Would Benefit if Workers Had Greater Freedom to Choose Their Next Employer

Harvard Business Review: How Noncompetes Stifle Performance

Founder and CEO of Veeva. Advocate for corporate social responsibility.