Jeff John Roberts at GigaOM writes about research published in Harvard Business Review that says non-compete clauses, which limit workers’ ability to move from one firm to another, may do more harm than good. The research suggests that workers are less motivated and perform worse when subjected to terms that limit their job mobility.
The study paid online participants to search matrices for numbers that add up to ten. The article explains that a sub-group of people subjected to a mock non-compete clause, 61 percent decided to drop out and forgo the money compared to 41 percent in a control group. The non-compete group also performed much worse at the task, making mistakes at twice the rate as the others. According to the authors of the study:
We believe that limits on future employment not only dim workers’ external prospects but also decrease their perceived ownership of their jobs, sapping their desire to exert themselves and develop their skills. The resulting drop in performance may be more damaging to companies than the actual loss of the employees would be.
Mr. Roberts concludes that the findings could carry big implications for the American workforce, where more than half of engineers and 70 percent of executives are reportedly subject to non-compete clauses.
The study authors also say that existing research shows higher levels of innovation and productivity in regions that outlaw limits on worker mobility.
Silicon Valley and California stand out in this area. Courts there have explicitly banned non-compete clauses on public policy grounds, a situation that makes it easy for companies to poach each others’ employees.
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I’m not a lawyer, so get your own legal counsel, but I can google and it seems that enforcing or challenging the enforceability of a non-compete agreement under Michigan law invariably boils down to four issues:
- Do the non-compete clauses protect a legitimate business interest?
- Is the duration reasonable?
- Is the geographical restriction reasonable?
- Is the type of employment or line of work restriction reasonable?
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Ralph Bach has been in IT long enough to know better and has blogged from his Bach Seat about IT, careers, and anything else that catches his attention since 2005. You can follow him on LinkedIn, Facebook, and Twitter. Email the Bach Seat here.