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In contract law, a non-compete clause (often NCC), restrictive covenant, or covenant not to compete (CNC), is a clause under which one party (usually an employee) agrees not to enter into or start a similar profession or trade in competition against another party (usually the employer). In the labor market, these agreements prevent workers from freely moving across employers, and weaken the bargaining leverage of workers. Non-compete agreements are rooted in the medieval system of apprenticeship whereby an older master craftsman took on a younger apprentice, trained the apprentice, and in some cases entered into an agreement whereby the apprentice could not compete with the master after the apprenticeship. Modern uses of non-compete agreements are generally premised on preventing high-skilled workers from transferring trade secrets or a customer list from one firm to a competing firm, thus giving the competing firm a competitive advantage. However, many non-compete clauses apply to low-wage workers or individuals who do not possess transferable trade secrets. The extent to which non-compete clauses are legally allowed and enforced varies under different jurisdictions. Some localities and states ban non-compete clauses or highly restrict their applicability. In jurisdictions where non-compete agreements are legal, courts tend to evaluate whether a non-compete agreement covers a worker's move to a relevant industry and reasonable geographic area, as well as whether the former is still bound by the agreement over a reasonable time period. An employer bringing a lawsuit may also be asked to identify a protectable business interest that was harmed by the employee's move to a different firm. Research shows that non-compete agreements make labor markets less competitive, reduce wages and reduce labor mobility. While non-compete agreements may incentivize company investment into their workers and research, they may also reduce innovation and productivity by employees who may be forced to leave a sector when they leave a firm. The labor movement tends to advocate for restrictions on non-compete agreements while support for non-compete agreements is common among some employers and business associations. History As far back as Dyer's Case in 1414, English common law chose not to enforce non-compete agreements because of their nature as restraints on trade. That ban remained unchanged until 1621, when a restriction that was limited to a specific geographic location was found to be an enforceable exception to the previously absolute rule. Almost a hundred years later, the exception became the rule with the 1711 watershed case of Mitchel v Reynolds which established the modern framework for the analysis of the enforceability of non-compete agreements. Traditionally, non-competes were used to prevent high-skilled workers from transferring trade secrets or a customer list from one firm to a competing firm. However, such clauses can frequently be found in the contracts of low-wage workers and other workers who are unlikely to be in a position to share trade secrets. When courts consider the enforceability of non-compete agreements, they usually ask the employer to identify a protectable business interest that was harmed by the employee's move to a different firm. Courts consider whether the non-compete covers a relevant industry (does the worker do work for a firm in the same industry?), reasonable geographic area, and reasonable time period. University of Chicago Law School Professor Eric A. Posner has argued that since non-competes have an adverse impact on competition, they should be covered under a strong anti-trust regime, and the "law should treat noncompetes as presumptively illegal, allowing employers to rebut the presumption if they can prove that the noncompetes they use will benefit rather than harm their workers." In April, 2024, the Federal Trade Commission (FTC) banned all non compete agreements in the United States. Within a few days, business groups including the U.S. Chamber of Commerce sued to block the new rule. Impact Studies show that non-compete agreements make labor markets less competitive, reduce wages and reduce labor mobility. Existing evidence suggests that the wage suppressing effects of non-competes are disproportionately concentrated on lower-income workers. Non-compete agreements can incentivize firms to increase investment into worker training and research, as those workers are less likely to leave the firm. Non-competes may reduce overall hiring costs and employee turnover for companies, which may result in savings that could in theory be passed on to customers in the form of lower prices and to investors as higher returns. Non-competes are more common for technical, high-wage workers and more likely to be enforced for those workers. However, even when non-compete agreements are unlikely to be enforced (such as for individual low-wage workers or in states that do not enforce these agreements), the agreements may still have an intimidating impact on those workers. A 2021 study of the U.S. health care sector from 1996–2007 found that noncompete agreements in this sector led to higher prices for physicians, smaller medical practices and greater medical firm concentration. A 2021 study found that noncompete agreements for low-wage workers have been shown to lower wages; a study determined that the 2008 Oregon ban on noncompete agreements for workers paid by the hour "increased hourly wages by 2%–3% on average." The study also showed that the Oregon ban on noncompete agreements for low-wage workers "improved average occupational status in Oregon, raised job-to-job mobility, and increased the proportion of salaried workers without affecting hours worked." Studies have found that non-compete agreements can prompt technical workers to involuntarily leave their technical field to avoid a potential lawsuit from their former employer. For this reason, non-compete agreements have been linked to less innovation and lower productivity as inventors switch fields in order to avoid violating non-competes. By country Belgium In Belgium, CNCs are restricted to new employments within Belgium and for no more than one year. The employer must pay financial compensation for the duration of the CNC, amounting at least half of the gross salary for the corresponding period. Canada Canadian courts will enforce non-competition and non-solicitation agreements; however, the agreement must be limited in time frame, business scope, and geographic scope to what is reasonably required to protect the company's proprietary rights, such as confidential marketing information or client relations and the scope of the agreement must be unambiguously defined. The 2009 Supreme Court of Canada case Shafron v. KRG Insurance Brokers (Western) Inc. 2009 SCC 6 held a non-compete agreement to be invalid due to the term "Metropolitan City of Vancouver" not being legally defined. In 2021, emplo.... Discover the Supreme Court Of Texas No C 2080 popular books. Find the top 100 most popular Supreme Court Of Texas No C 2080 books.