Noncompetes

Employee covenants not to compete, which bar workers who leave their jobs from working for a competing employer for a period of time, should be subject to heightened antitrust enforcement. While noncompetes may serve legitimate purposes, they also create entry barriers and reduce labor market competition. The threat to competition has been highlighted by new research, which suggests that employers overuse noncompetes and that noncompetes reduce labor market competition. A likely explanation is the inadequacy of the existing legal regime. Antitrust law nominally applies to noncompetes, but courts have eviscerated it by imposing an excessive burden of proof on plaintiffs who challenge noncompetes. An appropriate doctrinal framework for evaluating noncompetes under antitrust law would shift the burden of proof to employers. Employers would be permitted to rebut challenges to their noncompetes only by showing that the noncompetes raise wages for their own workers and workers in the broader labor market.