Idaho’s non-compete laws have attracted national attention, for unfortunate reasons: they are a regressive form of neo-feudalism and need a rewrite.
A non-compete is a contract between an employee and employer to restrict what the employee may do after leaving her job, typically by preventing her from working for a competitor, within a geographic area, for a time period, or some combination of each. Idaho is among the states permitting non-compete contracts — in fact, thanks to recent changes, Idaho law now blesses restrictions and burden-shifting rules that would be illegal elsewhere in the country.
Here is why that matters. In the early 1990s Silicon Valley and Boston were neck-and-neck as growing technology centers. How did one become a global tech powerhouse while, in the other, tech’s prominence is dwarfed by an annual marathon and Sam Adams beer? Economists generally agree: California’s ban on non-competes drove Silicon Valley’s rise to dominance, whereas Massachusetts laws permitting them kneecapped Boston’s ability to keep up.
Boston illustrates something important: non-competes are economically toxic. Research shows they reduce job mobility, discourage entrepreneurship and even cause “brain drain” in the communities that enforce them. Apart from poisoning the broader economy, they also hurt workers individually. Non-competes tend to reduce wages (by denying workers higher-paying opportunities) and, according to some scholars, dampen workers’ sense of job ownership and desire to develop skills.
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As if the economic damage were not enough, non-competes are also contrary to basic Idaho values. They restrain freedom by locking people out of better opportunities. They create monopolies on labor in the same way. They prevent innovation by siloing talent, rather than permitting it to flow where the free market dictates. In other words, by stifling autonomy, freedom, personal choice and reward for hard work, non-competes undermine the values that make Idaho great.
Non-compete proponents argue that, without them, departing employees might steal confidential information or share it with the competition. But trade secret theft is already a stand-alone basis for a lawsuit. Similarly, non-disclosure agreements already restrict how confidential information may be shared. Rather than target the actual threat (that former employees may share secrets), non-competes overreach by preventing people from going to work at all.
A closing example drives the point home. I recently advised a young woman whose non-compete, upon departure from a three-person company, barred her from working in her employer’s field for three years. As a result, she could not support herself without changing careers or leaving Idaho. The employer apparently felt these heavy restrictions were necessary to keep its top-secret business ideas from leaking to competitors. But the field in question? Cutting hair. There is nothing balanced, or even rational, in allowing employers that degree of leverage.
If Idaho wants to languish while other states grow, its current non-compete laws certainly further that goal. But if we want a growing economy and a thriving job market — if we want to be part of the future — we must re-write our non-compete statutes. They are obstacles to progress.
Patrick Bageant is an attorney in Boise who represents an equal number of plaintiffs and defendants in civil litigation.