The Future of Work and U.S. Public Opinion on Noncompete Law: Evidence from a Conjoint Experiment

• Published date: 01 December 2023
• Author: Christopher P. Dinkel
• Date: 01 December 2023
• DOI: http://doi.org/10.1111/ablj.12234

American Business Law Journal

Volume 60, Issue 4, 749–792, Winter 2023

The Future of Work and U.S. Public

Opinion on Noncompete Law:

Evidence from a Conjoint

Experiment

Christopher P. Dinkel*

Although policymakers h ave recently shown a keen interest i n noncompete reform,

a gap exists in the literature concerning what the U.S. public’s preferences are

regarding noncompetes. Therefore, this article presents the empirical findings of a

nationally-representat ive survey of the American public on the noncompete law

governing employees. Bas ed on the results of a conjoint exp eriment within the

survey, this article finds that t he U.S public prefers that non competes be used to

protect any types of confiden tial information, rathe r than simply customer list s or

employee training investments. Additionally, the findi ngs do not show clear sup-

port either for or against noncom pete exemptions based on an empl oyee’s earnings

level. However, this article finds that the U.S. public prefers a noncompete exemp-

tion for physicians, a short er maximum duration for the no ncompete period, and

a legal mandate that depa rting employees subje ct to noncompetes receive so me

compensation from the employ er during the noncompete period. Consequently, this

article argues that employ ers should engage in greater s elf-regulation if they

*Assistant Professor of Legal Studies, Department of Management, Spears School of

Business, Oklahoma State University. This article is based on part of my Ph.D. dissertation

written at Northwestern University. I would like to extend my deep gratitude to Professors

Stephen C. Nelson, Karen J. Alter, Rochelle C. Dreyfuss, and Jide O. Nzelibe, who super-

vised my doctoral research. I would also like to express my sincere appreciation for the

valuable feedback on this article from the ABLJ Editorial Board members, including Susan

Park and Rob Landry, the Oklahoma State University Department of Management faculty,

including Laurie Lucas and Griffin Pivateau, the participants of the 2023 Business Ethics

and the Future of Work Symposium, including Jeff Lingwall, Norman Bishara, Debbie

Kaminer, Robert Bird, and Robert Sprague, and the audience participants of the Employ-

ment Law Finalist Session of the Academy of Legal Studies in Business 2023 Annual Con-

ference. I also gratefully acknowledge citation-editing assistance for this article from

Maddison Craig. Lastly, I would like to thank the Northwestern University Department of

Political Science for providing financial support to carry out the survey in this article.

©2023 The Authors.

American Business Law Journal ©2023 Academy of Legal Studies in Business.

749

would like to mitigate the risk not only that legislators will respo nd to public

sentiment favoring more employee-friendly policies by enacting a total or near-

total ban on noncompetes, b ut also that judges will find t he noncompetes to be

unreasonable.

INTRODUCTION

The ability of employers to shape the future of their workforce by uti-

lizing post-employment restrictions on competition under the law is

under significant threat from policymakers. For the past several years,

state legislatures have enacted reforms aimed at curtailing firms’ use

of covenants not to compete, also known as noncompetes,whichare

agreements that prohibit a person from working for a specific amount

of time in a certain geographic location for a company that competes

with the other party to the agreement.

1

Members of Congress have

also recently introduced federal legislation to prohibit nearly all non-

competes.

2

And perhaps most imminently for firms, the Federal Trade

Commission (FTC) proposed a sweeping rule in January 2023 to ban

noncompete clauses.

3

In announcing this rulemaking, the FTC stated that it “is asking for the

public’s opinion on its proposal to declare that non-compete clauses are an

1

See infra text accompanying notes 19–25; Covenant Not to Compete,BLACK’SLAW DICTIONARY

(11

th

ed. 2019) (defining a “covenant not to compete”as “[a] promise, usu. in a sale-of-busi-

ness, partnership, or employment contract, not to engage in the same type of business for a

stated time in the same market as the buyer,partner, or employer”).

2

See infra text accompanying notes 34–36.

3

Non-Compete Clause Rulemaking,FED.TRADE COMM. (Jan. 5, 2023), https://www.ftc.gov/legal-

library/browse/federal-register-notices/non-compete-clause-rulemaking (“The Federal Trade

Commission proposes preventing employers from entering into non-compete clauses with

workers and requiring employers to rescindexisting non-compete clauses.”) [hereinafter FTC

NCCR]; FED.TRADE COMM., NON-COMPETE CLAUSE RULE,NOTICE OF PROPOSED RULEMAKING

(NPRM) 213 (2023), https://www.ftc.gov/system/files/ftc_gov/pdf/p201000noncompetenprm.

pdf (proposing under 16 C.F.R § 910.2 that “it is an unfair method of competition for an

employer to enter into or attempt to enter intoa non-compete clause with a worker; maintain

with a worker a non-compete clause; or represent to a worker that the worker is subject to a

non-compete clause where the employer has no good faith basis to believe that the worker is

subject to an enforceable non-compete clause”). While the proposed rule broadly prohibits

noncompetes, it provides an exception in relation to the sale of a business where “the party

restricted by the non-compete clause is an owner, member, or partner holding at least a 25%

ownership interest in [the] business entity.”Id.at5.

750 Vol. 60 / American Business Law Journal

unfair method of competition.”

4

By the time the public comment period

closed in April 2023,

5

the proposed rule had received over 26,000 com-

ments.

6

Although groups such as industry associations were active partici-

pants in the rulemaking process,

7

a key question that has significant

implications for the future ability of employers to lawfully use non-

competes in the United States arises: what are the broader American pub-

lic’s views on noncompetes? In other words, although one might expect

firms that utilize noncompetes to oppose further legal restrictions on

them, what does the U.S. public actually think about noncompetes?

This article presents the results of a nationally-representative survey in

which the American public was asked what its preferences are regarding

various types of noncompete laws. While the FTC’s proposed rule ban-

ning noncompetes may not survive intact in the coming years—due to

court challenges or the FTC’s own immediate or future actions to issue a

less sweeping rule or eventually rescind any promulgated rule banning

noncompetes—this article’s findings suggest that employers should engage

in greater self-regulation and limit the scope of their use of noncompetes

to align more closely with public opinion if they would like to retain the

ability to utilize noncompetes as a legal strategy to shape the future of

their workforce.

8

Taking such action could help to diminish the risk not

4

FTC NCCR, supra note 3.

5

Non-Compete Clause Rule; Extension of Comment Period, 88 Fed. Reg. 20,441 (April 6, 2023)

(to be codified at 16 C.F.R. pt. 910) (extending the comment period to April 19, 2023).

6

See Non-Compete Clause Rule (NPRM),Rulemaking Docket,FED.TRADE COMM., https://www.

regulations.gov/docket/FTC-2023-0007 (last visited July 13, 2023) (showing that 26,813

comments were received).

7

See, e.g., Coalition Letter Requesting Extension on FTC Non-Compete Clause Rule,U.S.CHAMBER

COM. (Jan. 31, 2023), https://www.uschamber.com/finance/antitrust/coalition-letter-requesting-

extension-on-ftc-non-compete-clause-rule (providing a letter signed by o ne hundred industry

organizations requesting that the FTC extend the comment period to the NPRMfor an addi-

tional sixty days because “[t]he regulated community should be given sufficient time to assess

the potential consequences of the rulemaking and develop insightful comments for the Com-

mission to consi der”); Comment from U.S. Chamber of Commerce,F

ED.TRADE COMM.(April

17, 2023), https://www.regulations.gov/comment/FTC-2023-0007-19345 (showing submitted

comment from the U.S. Chamber of Commerce that states “[t]he Chamber and its member-

ship are stronglyopposed to the Proposed Rule”).

8

On potential court challenges, see, e.g., Joseph Lavigne, Thomas Hubert & PJ Kee, Legal

Challenges the FTC Faces in Light of Proposed Ban on Non-Compete Agreements,T

RADE SECRET

INSIDER (Jan. 26, 2023), https://www.tradesecretsinsider.com/legal-challenges-the-ftc-faces-in-

light-of-proposed-ban-on-non-compete-agreements/ (questioning the legal validity of the

2023 / The Future of Work 751