{"id":31051,"date":"2025-06-17T04:55:26","date_gmt":"2025-06-17T04:55:26","guid":{"rendered":"https:\/\/financialrush.com\/?p=31051"},"modified":"2025-06-17T04:55:26","modified_gmt":"2025-06-17T04:55:26","slug":"the-economic-scourge-of-small-print","status":"publish","type":"post","link":"https:\/\/financialrush.com\/?p=31051","title":{"rendered":"The economic scourge of small print"},"content":{"rendered":"<p> \n<\/p>\n<div>\n<p>Unlock the Editor\u2019s Digest for free<\/p>\n<p class=\"article__content-sign-up-topic-description o3-type-body-base\"><span>Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.<\/span><\/p>\n<p><iframe class=\"article__content-sign-up-iframe close\" scrolling=\"no\" id=\"signUpIframe\" data-prev-url=\"\/register\/in-article-sign-up?ft-content-uuid=0c9e4ac6-03e5-4ed1-aae3-2ece50e3ed03\"><\/iframe><\/div>\n<div id=\"article-body\">\n<p>To what extent should your employer be able to dictate where you can work after you quit? In recent years, policymakers in a range of countries have come up with the same answer: not as much as they do now. <\/p>\n<p>Their interest in this question has been prompted by academic research into what I call \u201cthe economics of small print\u201d. The prevalence of non-compete clauses in employment contracts, for example, is now \u201csurprisingly high\u201d, according to a <a href=\"https:\/\/www.oecd.org\/en\/publications\/five-facts-on-non-compete-and-related-clauses-in-oecd-countries_727da13e-en.html\" data-trackable=\"link\">recent overview<\/a> by the OECD. These clauses typically ban an employee from going to work for, or starting, a competing business within a certain period of time after leaving their job. And they appear to have spread quietly from well-paid jobs such as senior executives to badly paid ones such as fast-food workers and hairdressers. Interestingly, such patterns seem to hold in very different types of labour markets, from flexible ones such as the UK and Australia to more regulated ones like Austria and Italy.<\/p>\n<p>Policymakers are paying attention. There have been moves in Australia, Canada, Finland, the Netherlands, the UK and some US states to prevent or restrict the use of non-competes, often on the grounds that they suppress mobility and wage growth for workers.<\/p>\n<p>But one place is zigging while everyone else zags. In Florida, the state legislature has <a href=\"https:\/\/www.flsenate.gov\/Committees\/billsummaries\/2025\/html\/3554\" data-trackable=\"link\">passed a bill<\/a> that, if approved by the governor, would permit non-compete agreements that last a full four years. It would also make it easier for employers to get them enforced. Even in the US, the move would make Florida a real outlier. \u201cPrior to this law, if any employer in any state in the US would have asked me, \u2018Hey, is a four-year non-compete enforceable?\u2019 I would have simply said, \u2018No,\u2019\u201d Mark Konkel, a partner at Kelley Drye &amp; Warren who specialises in employment law, told me.<\/p>\n<p>What does Florida hope to achieve? The bill\u2019s title offers a clue: it is called the Contracts Honoring Opportunity, Investment, Confidentiality, and Economic Growth (Choice) Act. Much of the legal analysis has described it as an \u201cemployer friendly\u201d move to make Florida even more \u201cwide open for business\u201d. But to see stringent non-competes as straightforwardly pro-employer would be a mistake. It would be better to say that they are pro-incumbent employers. And what that means for economic growth is not straightforward.<\/p>\n<p>The case for non-competes is that they protect workforce investments, client relationships and trade secrets. But they have long been unenforceable in California, which didn\u2019t stop Silicon Valley becoming the innovation capital of the world. And, if you have a new company and you want to expand and hire good people, the clauses can allow incumbent competitors to hoard talent. The OECD report\u2019s authors concluded that \u201cthe balance of evidence suggests that non-compete clauses suppress job mobility, firm entry, innovation, wages and productivity, which more than offset any gains from enhanced incentives for firm-specific investment\u201d. <\/p>\n<p>Indeed, there are signs that the forces of \u201ccreative destruction\u201d have been <a href=\"https:\/\/www.ft.com\/content\/4c1abb2a-f710-4aa3-80ac-d8811abad84f\" data-trackable=\"link\">waning<\/a> in recent decades: business entry and exit rates have declined in the US and elsewhere, as have job-to-job moves. It is possible that non-competes have contributed to this trend, by preventing competition and fluidity.<\/p>\n<p>John Lettieri, chief executive of the Economic Innovation Group, a think-tank that opposes non-competes, said he thought Florida was committing economic self-harm, even though the law would only apply to people who earned more than twice the annual mean wage. \u201cImagine taking some of the best human capital you have in your state, and putting it on the sidelines for four years,\u201d he said. \u201cThe biggest economic harm in the long run is restricting the highest-paid talent.\u201d<\/p>\n<p>Konkel, the employment lawyer, said it remained to be seen how much employers would use the new law. \u201cIf you are about to join an employer and you know that in accepting that employment, you\u2019re going to be compelled to sign a four-year non-compete, it is very hard to imagine very marketable people will just sign such an agreement without negotiation,\u201d he said. While some firms like hedge funds might be able to pay enough to compensate, many other employers would probably wait and see, or \u201ccontinue to take a more tailored approach\u201d, he predicted. <\/p>\n<p>Florida\u2019s move on non-competes could be seen in the same way as its proposal to ease <a href=\"https:\/\/www.ft.com\/content\/e341fdac-80a6-4a19-ba46-741bd0e4efaa\" data-trackable=\"link\">restrictions on child labour<\/a>: interventions that might benefit incumbent employers in the short run, but with costs to human capital and growth in the long run. At least the economists who like to study the economics of small print have a new place to get their microscopes out.<\/p>\n<p><a href=\"https:\/\/www.ft.com\/content\/mailto:sarah.oconnor@ft.com\" data-trackable=\"link\"><em>sarah.oconnor@ft.com<\/em><\/a><\/p>\n<\/div>\n\n<br \/><a href=\"https:\/\/www.ft.com\/content\/0c9e4ac6-03e5-4ed1-aae3-2ece50e3ed03\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Unlock the Editor\u2019s Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this&hellip;\n","protected":false},"author":5,"featured_media":31052,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[23],"tags":[],"class_list":["post-31051","post","type-post","status-publish","format-standard","has-post-thumbnail","category-us","cs-entry","cs-video-wrap"],"_links":{"self":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/posts\/31051","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=31051"}],"version-history":[{"count":0,"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/posts\/31051\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/media\/31052"}],"wp:attachment":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=31051"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=31051"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=31051"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}