The Ethics of Noncompete Clauses

Harrison Frye

Business Ethics Quarterly, 2020, vol. 30, issue 2, 229-249

Abstract: Noncompete clauses (NCCs), or agreements by employees to not work for a competitor or start a competing business, have recently faced increased public scrutiny and criticism. This article provides a qualified defense of NCCs. I focus on the argument that NCCs should be banned because they unfairly restrict the options of employees. I argue that this argument fails because it neglects the economist Thomas Schelling’s insight that limiting exit options can be beneficial for a person. This employee-based defense of NCCs does not absolve all their uses, but it does give us a rough test for evaluating the permissibility of NCCs. With this test in hand, I turn to some of the more controversial uses of NCCs. For those who weigh heavily the interests of employees, the question is not whether NCCs, but when.

Date: 2020
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