Covenants Not To Compete in a Knowledge Economy: Balancing Innovation from Employee Mobility Against Legal Protection for Human Capital Investment

Abstract

This Article examines a specific policy issue that goes to the heart of the larger debate surrounding the changing employment relationship: How should the law of covenants not to compete adapt to the changing landscape of the U.S. labor market and to the increasing importance of a knowledge-based economy? The author first argues that noncompete policy is of great importance to fostering economic growth and labor markets, and then discusses various theoretical approaches to noncompete enforcement in a knowledge economy. The preferred approach, the author contends, is a hybrid model of selective enforcement that differentiates among workers as “creative” or “service” employees, thereby enhancing the positive spillovers gained from policies at the extremes of the enforcement spectrum.