Management Professor’s Research Spurs U.S. Proposal to Ban Noncompete Agreements

A University of Maryland researcher's influential work on noncompete agreements was cited more than 60 times in a new Federal Trade Commission (FTC) proposal that would block companies from preventing employees from working for rivals or starting their own competitor.

The extensive research by management and organization Assistant Professor Evan Starr has revealed how prevalent and crippling noncompete agreements can be, not just for high-tech workers, but even for low-wage workers like hairdressers and restaurant staff. Those findings have been the impetus behind the Biden Administration’s work to curb these agreements.

The FTC estimates that such a rule could increase wages across the U.S. economy by almost $300 billion a year. In a recent New York Times article on the proposal, Starr said that noncompetes suppress wages for both workers bound by them and even those who don’t have to sign them, based on his research with management Professor Rajshree Agarwal and Robert H. Smith School of Business doctoral student Justin Frake. That’s because the agreements make the hiring process more complicated and costly for employers, who must navigate which potential hires are restricted by them.

Starr has found that noncompetes encourage businesses to invest in more training. But in one study, he showed that only 10% of workers who signed a noncompete sought concessions, and about one-third of workers covered by one found out about it only after they accepted the job.

Some states have banned noncompetes or rendered them unenforceable, but workers don’t always know that and are often scared by the threat of lawsuit, Starr has found in his research and recently told Marketplace Radio.

“Low-wage workers generally don’t have the wherewithal to finance litigation even for a frivolous noncompete agreement,” he told Marketplace. He said the FTC ban would give workers a lot more leverage.

The FTC proposal isn’t the first time Starr’s research on labor practices has been used to bolster federal legislation. His paper on nondisclosure agreements helped push through the bipartisan Speak Out Act, passed by Congress and signed into law in December, to limit employers’ use of the tactics to keep sexual harassment victims quiet.

The Biden administration has been relying on Starr’s research to underscore arguments on how noncompete clauses hurt workers. In a roundtable discussion in March 2022, officials outlined steps and rationale for reforms in response to a U.S. Treasury report, “The State of Labor Market Competition.” The work cites and draws from 10 of Starr’s research papers.

In November 2019, Starr gave compelling testimony before the U.S. Senate Small Business Committee on his research findings in a hearing, “Noncompete Agreements and American Workers.” He also testified at a U.S. House of Representatives subcommittee hearing, “Antitrust and Economic Opportunity: Competition in Labor Markets,” in October 2019.