Clause and Effect: Theory and Field Experimental Evidence on Noncompete Clauses

The authors study worker noncompete clauses in a large field experiment with two finance firms. Across ~14,000 job offers to freelance recruiters on short-term contracts, they randomize wages and the presence, salience, and duration of noncompetes (all contracts also included a nondisclosure agreement). Removing a noncompete increases mobility between competing employers by 36–52% and raises workers’ total earnings from the two firms by 12–17%. They find no evidence—rejecting even small effects—that removing noncompetes generates secret leakage. They also find no evidence that workers choose noncompete jobs for higher pay. Many workers appear unaware of noncompetes before firms’ post-employment communication. The results align with a model of inattention and uncertainty about enforcement.