Non-compete contracts hurt worker productivity, study suggests

Non-compete clauses, which limit workers’ ability to move from one firm to another, are a contentious issues in tech circles. The state of Massachusetts, for instance, plans to ban them in the hopes of preventing future Mark Zuckerbergs from leaving Boston for California.

Now, a new study published in Harvard Business Review offers fresh ammunition to critics: it suggests that workers are less motivated and perform worse when subjected to terms that limit their job mobility.

The study paid online participants to search matrices for numbers that add up to ten. In a sub-group of people subjected to a mock non-compete clause, 61 percent decided to drop out and forgo the money compared to 41 percent in a control group. The non-compete group also performed significantly worse at the task, making mistakes at twice the rate as the others.

So what’s the upshot? According to the authors of the study:

We believe that limits on future employment not only dim workers’ external prospects but also decrease their perceived ownership of their jobs, sapping their desire to exert themselves and develop their skills. The resulting drop in performance may be more damaging to companies than the actual loss of the employees would be.

If the authors’ findings are correct, the conclusion could carry big implications for the American work force, where more than half of engineers and 70 percent of executives are reportedly subject to non-complete clauses.  The authors also say that existing research shows higher levels of innovation and productivity in regions that outlaw limits on worker mobility.

Silicon Valley and California stand out in this area. Courts there have explicitly banned non-compete clauses on public policy grounds, a situation that makes it easy for companies to poach each others’ employees.

(Image by Jaromir Chalabala via Shutterstock)