This article has been reviewed according to Science X's editorial process and policies. Editors have highlighted the following attributes while ensuring the content's credibility: Findings recently published in The Quarterly Journal of Economics provide, according to the study's authors, the clearest cause-and-effect evidence to date that noncompete agreements reduce worker mobility and earnings—while offering no measurable benefits in protecting sensitive business information. The work, by Evan Starr, a professor of management and organization at the University of Maryland's Robert H.
Smith School of Business, with Bo Cowgill (University of Toronto) and Brandon Freiberg (INSEAD), evaluates more than 14,000 job offers across two finance firms and represents one of the largest randomized studies ever conducted on restrictive employment contracts. For years, employers have argued that noncompetes are needed to guard trade secrets—and that workers would not agree to give up future job options unless they were compensated for it. Yet Starr and his colleagues uncover five findings that directly challenge those assumptions: "At least in our setting, noncompetes reduced mobility and earnings without reducing the spread of firm secrets," the authors write—summarizing a core tension revealed by the experiment.
The researchers partnered with two firms hiring thousands of freelance recruiters on short-term contracts. Workers were randomly assigned to receive a contract with no noncompete, a contract with a highly salient noncompete placed on the first page or a contract with a hidden noncompete embedded mid-document. All contracts included a nondisclosure agreement (NDA), allowing the researchers to isolate the effect of adding a noncompete on top of other confidentiality protections.
The experiment tracked contract review behavior, acceptance decisions and subsequent responses to job opportunities that could violate either the noncompete or the NDA. Many workers skimmed past the noncompete in seconds, and a substantial share remained unaware of the restriction until firms contacted them after employment—evidence consistent with a behavioral model of inattention. Workers did not negotiate noncompete terms, and they were not more likely to accept higher wages when randomly offered a noncompete.
Even unenforceable noncompetes—such as those used in states like California—reduced mobility just as much as enforceable ones. "In other words, the law doesn't matter," Starr notes. "The presence of the clause alone changes behavior." The experiment also examined secret sharing between two employers.
"It's difficult to test how noncompetes affect secret sharing outside of an experiment like this because secrets are, generally, secret and thus hard to observe," Starr says. "This research design lets us see firsthand what secrets workers share between competitors and the effects of noncompetes on that sharing behavior." The findings come amid an ongoing national debate over noncompete agreements. Although the Federal Trade Commission's proposed nationwide ban was recently halted in court, states continue to advance restrictions, and federal agencies have signaled increased scrutiny of labor-market contracting practices.
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