“Covenants to not compete” with former employers (“noncompetes”) are increasingly required from a wide range of employees, including camp counselors, hairstylists and sandwich-makers. At least half of high-technology employees are required to sign them. Noncompetes have long been a part of the contract law of most states. Only a few states, like California, do not enforce them. Noncompetes are increasingly criticized, however, as suppressing industry growth and employee mobility and prosperity. Congress has demanded that the Federal Trade Commission evaluate the fairness of noncompetes. Massachusetts, Virginia and Minnesota have considered bans on noncompetes, with the support of entrepreneurs and venture capitalists, as well as former employees bound by these agreements. Pro-competition public policies limit the enforcement of noncompetes. Employees thinking of starting a new job or business should consider these limitations as they prepare for their new (self) employment. They should ask themselves these questions: What should I do about my existing employer's noncompete agreement, if I am considering leaving to join another employer or to start a new company? What should I ask a prospective employer about noncompetes before I agree to a new job, or begin work? What are the public policy limitations on noncompete agreements if they cannot be avoided in current or prospective employment? What are the terms of a noncompete agreement that might be open to negotiation, and what should I ask for? If I am prevented from doing the kind of work I want to do because of a noncompete agreement with a former employer, do I have any options?

1. 5 Things to Do Before You Start A New Job
This is not legal advice, which must be based on individual circumstances. This is legal information, and general career and
negotiating advice based on the general trend of state contract law. This law varies among states and other U.S. jurisdictions.
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2. 5 Things to Do Before You Start A New Job
Seventy percent of tech engineers surveyed were told they would have to sign a noncompete agreement only after they
accepted a job offer. One-half were told this only after they started working. See "Matthew Marx: Noncompete agreements and
their impact on employees", Oct. 27, 2011 at http://bit.ly/1GaGdlD.
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"Matthew Marx: Noncompete agreements and their impact on employees", Oct. 27, 2011 at http://bit.ly/1GaGdlD.
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4. 5 Things to Do Before You Start A New Job
Matthew Marx of MIT also found that one-third of tech workers he surveyed switched to different industries in new jobs, many
losing skills and contacts, and taking pay cuts. Efforts to avoid violations of their noncompete agreements appeared to set in
motion negative career detours. See "Matthew Marx: Non-compete agreements and their impact on employees", Oct. 27, 2011
at http://bit.ly/1GaGdlD.
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5. 5 Things to Do Before You Start A New Job
Noncompete agreements are governed by state contract law. Employers say that they use noncompete agreements, rather than
patent and trade secret protections, because they are easier to enforce.
Data shows, however, that the threat of noncompete enforcement drives patent holders from states that enforce them to states
that do not, like California. This is especially true for the highest-performing inventors. Whatever employers gain by threatening
to enforce noncompetes could be, in the long run, less than they lose by driving away their best network of former employees
and their pool of potential recruits.
See "Regional Disadvantage? Non-Compete Agreements and Brain Drain" at http://stanford.io/1qfoXrq.
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Michigan banned noncompetes from 1905 to 1985. Detroit overtook New York and Chicago as the auto manufacturing leader by
1920. Firms started by employees leaving other firms led the way - like Dodge (from Ford) and Chevrolet, Chrysler and Lincoln
(from General Motors).
California has banned noncompetes since 1872. In 1956, New York, Los Angeles and Boston were the centers of semiconductor
manufacturing. Northern California had none. By 1975, Silicon Valley had 15% more high-tech employment than Boston's Route
128. The gap has widened since then.
While noncompete enforcement is not the only factor driving this employment growth, firms founded by former employees of
semiconductor makers became the largest of these firms. One study found a "brain drain" of patent holder employees from
states that enforce noncompetes to states that do not. See "Regional Disadvantage? Non-Compete Agreements and Brain
Drain", July 7, 2011 at http://stanford.io/1qfoXrq.
Another study suggests that the greater success of high-tech clustering in the U.S. compared to Canada might be related to
Canadian law that restricts managers from defecting to competing firms. See "Non-compete covenants: Incentives to innovate or
impediments to growth", Oct. 5, 2010 at http://bit.ly/1vAdAWU.
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These are approximations taken from "Inside-Out: Regional Networks and Industrial Adaptation in Silicon Valley and Route 128",
May 1996, Cityscape at http://bit.ly/1w9Ltmq.
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8. 5 Things to Do Before You Start A New Job
California, North Dakota and Oklahoma do not enforce employee noncompete agreements. In other states, a "reasonableness"
test is applied to them. In order to be enforced, a noncompete must be reasonable in the scope of employee activities covered, in
its geographic scope, and in its time period.
If an employer insists on a noncompete, you should ask that it be limited to the same kind of work that was done for that
employer, defined as narrowly as possible. See Every1's Guide to Electronic Contracts, Part A, Chapter 7 d) II) at http://
amzn.to/1vLbmcj.
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A hairstylist in Massachusetts lost a lawsuit filed by his former employer after taking a job at another salon, even though he was
fired by the former employer. His noncompete required him to wait 12 months before working at any salon in nearby towns. A
judge issued an injunction ordering him to stop working at his new employer. See "Noncompete Clauses Increasingly Pop Up in
Array of Jobs", June 8, 2014 at http://nyti.ms/1rOfV07.
A different Massachusetts salon sued a former hairstylist for violating a non-solicitation agreement by posting her new salon
employment on Facebook. The judge refused to order her to stop working at the new salon, because he said the Facebook post
was not a solicitation of her old salon customers. See Invidia, LLC v. DiFonzo, at http://1.usa.gov/1w6jeF2.
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10. 5 Things to Do Before You Start A New Job
When a court judges the reasonableness of a noncompete, it balances the public interest, as well as the former employee's
interest, against the employer's. A former employer should not be able to stop a former employee from working where it has no
existing competition.
If there is a strong public interest in having the employee's services (like medical care) available, a court is likely to view less
favorably a geographic scope that prohibits those services by a former employee. A geographic scope that only temporarily
inconveniences an employee who provides widely available services is more likely to be approved.
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California will not enforce employee noncompete agreements made in California or elsewhere. An employee bound by a
noncompete made in another state can move to California, and it will not be enforced against him by a California court. See
Application Group Inc. v. Hunter Group Inc. (1998) at http://bit.ly/12Z4flG.
Even if an employee never moves to California, a noncompete should not prohibit competition anywhere in the U. S. It will
probably be found to be unreasonable, because it could force the worker to leave the country.
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The arguments for noncompetes are that they: 1) give employers an incentive to invest in training their workers, and 2) create
incentives to invest in existing companies, because they are easier to enforce than patent and trade secret protections.
The arguments against noncompetes are that they: 1) discourage high-growth "spin out" companies formed by former
employees, 2) reduce the pool of skilled, high-wage workers in enforcing states, 3) reduce the sharing of industry knowledge,
and 4) discourage employees from investing in their own skill development. See "Business Booms Where Employee
Noncompete Agreements are Banned, Fed Study Infers, But Use in U.S. Grows" Dec. 4, 2014 at http://bit.ly/1AW0MPQ.
The longer the duration of a noncompete period, the more an employer must show that it is necessary to protect its legitimate
interests.
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