I just read an interesting story about Amazon trying to enforce a Non-Compete clause for a former employee who went to work for Google. State rather than federal laws regulate Non-compete contracts and enforcement varies widely from state to state.

Libertarian Ideology

The reason I find this interesting is because the very nature of a non-compete contract goes against my Libertarian ideology. It undermines the capitalistic system by preventing people from selling their services to the higher bidder. The courts largely agree with me and generally refuse to enforce non-competes unless they involve the movement of trade-secrets or the poaching of clients. When a person simply moves from one job to another, and doesn’t approach clients from the first job, the courts have shown great reluctance to enforce the non-compete.

Purpose of a Non-Compete

The entire purpose of a non-compete in anyone’s contract is to prevent other companies from coming in and paying that employee more money. I ask you, why shouldn’t anyone be able to sell his or her services to the highest bidder?  Would any employee sign such a document if they didn’t think their hiring depended upon such a concession? I don’t think so. No one would willingly sign away the right to go somewhere else if offered a better salary or a better situation. It’s essentially extortion. If you don’t sign this non-compete, we’ll hire someone else.

Right now, California is the only state to explicitly forbid such contracts although, as I mentioned earlier, judges have proven extremely reluctant to enforce the contracts except in specific situations.

When I read stories about enterprise corporations trying to enforce 18 month non-compete contracts it infuriates me and reminds me of why unions came into existence in the first place. If companies let individuals seek those who will compensate them properly for their skills it is better for corporations and it is better for employees. Capitalism in its unfettered state is an excellent system but those who would chain it come in many different uniforms.

There are unions who forget their original purpose and spend more time counting their dues then trying to help their members. There are corporate leaders who believe accumulating more money is of greater importance than treating employees as partners. There are employees who forget that they owe it to their employers to always do their best job. There are politicians who pass laws so that unscrupulous business owners can bankrupt their rivals. There is no single enemy to capitalism and those who seek to pervert it will likely always be with us.

What works best for people is the freedom to sell their services to whoever is willing to pay the most or offers the most rewarding work environment. What works best for companies is providing an excellent place to work for their highly skilled workers. What works best for society is businesses with hard-working employees and owners who treat them as family. This produces innovation, advancement, wealth, friendships, and success. This is objectively good. This is what we should strive to achieve.

Conclusion

Non-competes work against this idea. They should be illegal and happily the courts largely agree. It’s a shame states like California have to pass such laws, it should be completely unnecessary.

What do you think?

Tom Liberman