Non-compete clause

The earliest non-compete disputes emerged from the medieval guild system. Master craftsmen trained apprentices, and upon completion of the apprenticeship, some masters attempted to restrict where journeymen could practice. English courts consistently rejected these restrictions for centuries, viewing them as restraints on trade. The labor shortages caused by the Black Death in the mid-fourteenth century reinforced the legal hostility, since restricting workers' freedom to move between employers would have deepened an already catastrophic shortage.

The legal framework shifted in 1711, when the English court's decision in Mitchel v. Reynolds established that partial restraints on trade, limited in geographic scope and duration, could be enforceable under certain circumstances. This decision created the modern framework of "reasonableness" that still governs non-compete law. California has banned non-competes since 1872, a fact widely cited as one factor in Silicon Valley's culture of job-hopping and rapid innovation.

By the twenty-first century, non-compete agreements had spread far beyond their original purpose of protecting trade secrets. The Federal Trade Commission estimated that approximately thirty million American workers, including sandwich makers, yoga instructors, and warehouse workers, were subject to non-competes. In 2024, the FTC issued a final rule to ban most non-compete clauses nationwide, though the rule faced immediate legal challenges. Research consistently shows that non-competes reduce wages, lower labor mobility, and suppress innovation.