'Send Noncompete Agreements Back To the Middle Ages'

Stephen Mihm, Bloomberg contributor and associate professor of history at the University of Georgia, argues against the use of noncompete agreements (NCAs) because they limit the free flow of employees and discourage innovation. An anonymous Slashdot reader shares an excerpt from his report: The agreements, known as NCAs, forbid workers from taking valuable skills acquired from one employer to a competing firm. They first appeared in the Middle Ages, when master artisans required them of apprentices because they didn't want to face direct competition once their proteges set up shop on their own. Courts eventually sanctioned these restraints, provided they didn't harm the public interest, establish a monopoly or unduly restrain an employee's right to work. But this trend toward wider use of the contracts, which gathered steam from the late 18th century onward, conveniently omitted that they originally applied to skilled laborers operating in a pre-capitalist society. Yet employers increasingly used noncompete clauses to limit the mobility of unskilled wage laborers along with skilled workers.

Have NCAs helped or hindered economic growth? The most famous study looked at California, one of only a handful of states that do not permit NCAs. The de facto prohibition of the agreements affected skilled and non-skilled workers alike, and employees high and low could jump from job to job without any fear of legal reprisal. The mobility seems to have disseminated innovation very swiftly from company to company, creating the kind of dynamism and technological spillover that helps foster long-term success. The prohibition of NCAs clearly benefited Silicon Valley. Further proof was provided by the comparison to another claimant to high-tech supremacy: Route 128 in Massachusetts. The conclusion was that California's ban -- and the embrace of the agreements in Massachusetts -- helped tilt the balance of power to California.

Read more of this story at Slashdot.