Non-compete clauses, huh?

John Cousins
March 4, 2023
3 min read

Non-compete clauses, huh? They’re like a leash on a dog, but for grown-ass adults. ’Cause that’s what we are, right? Grown-ass adults. Except we’re not allowed to go out and play with the other dogs in the park.

No, we gotta stay in the yard. ’Cause the boss man don’t want us sniffing around the neighbors’ bushes. He’s afraid we’ll find a better bone. But let’s be real, the only bone we’re getting is the one we’re chewing on now.

And it ain’t exactly T-bone steak. More like an old, gnawed-on chicken bone. But hey, at least we’re not allowed to compete, right? That’s the American way. Keep the little guy down. Keep him in his place. Keep him on his leash.

Cause heaven forbid, he might just take a bite out of the big dog’s bone. The big dog don’t like that. He wants to keep the bone all to himself. But the little dog’s gotta eat too, you know? That’s why they call it ‘competition’ — cause it’s a fight for survival. And the little dog’s gotta fight to survive. But not if the big dog’s got anything to say about it.

Non-compete contracts and clauses, also known as restrictive covenants, are agreements that prohibit an individual from competing with their current or former employer for a certain period of time after leaving the company.

These agreements are commonly used in the business world to protect a company’s confidential information, trade secrets, and customer relationships.

Non-compete clauses can be found in employment contracts, severance agreements, and other contracts. They typically prohibit the individual from working for a competitor, starting their own competing business, or soliciting the company’s customers or employees for a certain period after leaving the company. The duration and scope of the restriction vary depending on the company and the individual’s role.

Non-compete clauses are designed to protect a company’s legitimate business interests, such as confidential information, trade secrets, and customer relationships. However, they can also be used to restrict an individual’s ability to work and earn a living. As a result, courts have been known to enforce non-compete clauses only to the extent that they are reasonable and necessary to protect the employer’s legitimate business interests.

It is important to note that non-compete clauses are not enforceable in every state. Some states, such as California, have laws that prohibit non-compete agreements.

Noncompetes serve to dampen economic growth. Job-hopping and seeding startups has been part of Silicon Valley since the beginning.

The FTC is proposing a rule to ban noncompete clauses on the grounds that they hurt workers and harm competition.

FTC Chair Lina Khan wrote a congent op-ed detailing why. The FTC is seeking comments (you can comment here).

Agency estimates new rule could increase workers’ earnings by nearly $300 billion per year.

Other states have laws that limit their enforceability. Therefore, employers and entrepreneurs should be aware of the laws in their state and consult with legal counsel before including non-compete clauses in contracts.

Additionally, it is crucial to fully understand the terms and implications of any non-compete clauses before signing a contract. Consider the duration and scope of the restriction and the potential impact on your ability to work and earn a living. You may also want to negotiate the terms of the clause or seek legal advice.

In conclusion, non-compete contracts and clauses prohibit individuals from competing with their current or former employer for a specific time after leaving the company. These agreements are designed to protect a company’s legitimate business interests but can also restrict an individual’s ability to work and earn a living. They also conspire to reduce competition among firms and hence lower economic growth. The enforceability of non-compete clauses varies by state, and both employers and employees need to be aware of the laws and implications of these clauses.

What are your experiences with non-competes?

Share this post
John Cousins
Author, Entrepreneur, & Teacher

Receive my 7 day email course

Take your finance skills to the next level with my 7-day corporate finance email course. You'll learn all the essential topics from financial analysis to risk management in a fun, engaging format. Each day, you'll receive an email with practical examples, exercises and resources. Perfect for aspiring finance pros or anyone looking to expand their knowledge. Get ready to transform your finance game!

By clicking Sign Up you're confirming that you agree with our Terms and Conditions.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

If you like this article. Here are some more articles I think you might like.


The Road to Becoming a Unicorn: A Quick Guide to Startup Funding Rounds

The whole process of funding and developing startups has become more widespread because the cost of getting a product to market has dropped so precipitously in the past couple of decades from millions of dollars to typically anywhere from under $20,000 to $500,000.
John Cousins
December 18, 2023
7 min read

Oh Behave! Behavioral Economics: Why we do what we do.

Behavioral Economics is a method of economic analysis that applies psychological insights into human behavior to explain economic decision making.
John Cousins
December 18, 2023
4 min read
Personal Growth

Professional Development: 3 Types of Skill Sets

To perform effectively in a job and advance to greater responsibilities requires developing a well rounded set of skills. Every job and every industry has its specifics but these skill sets are general and apply across all jobs. Skills are fundamental for turning a job into a career trajectory and this trajectory is part of our personal fulfillment in life.
John Cousins
December 18, 2023
5 min read