An empirical analysis of noncompetition clauses and other restrictive postemployment covenants

Employment contracts for most employees are not publicly available, leaving researchers to speculate about whether they contain postemployment restrictions on employee mobility, and if so, what those provisions look like. Using a large sample of publicly available CEO employment contracts, the autho...

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Bibliographic Details
Published in:Vanderbilt law review 2015-01, Vol.68 (1), p.1
Main Authors: Bishara, Norman D, Martin, Kenneth J, Thomas, Randall S
Format: Article
Language:English
Subjects:
Agreements
Bargaining
Chief executive officers
Competition
Contract negotiations
Data collection
Employees
Employers
Employment at will
Employment contracts
Evaluation
Noncompete agreements
Noncompetition agreements
Random number sampling
Restrictive covenants
Studies
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Summary:Employment contracts for most employees are not publicly available, leaving researchers to speculate about whether they contain postemployment restrictions on employee mobility, and if so, what those provisions look like. Using a large sample of publicly available CEO employment contracts, the authors are able to examine these noncompetition covenants, including postemployment covenants not to compete ("CNCs" or "noncompetes"), nonsolicitation agreements, and nondisclosure agreements. What they found confirms some long-held assumptions about restrictive covenants but also uncovers some surprises. They begin by discussing why employers use restrictive covenants and examining how the courts have treated them. They then analyze an extensive sample of CEO employment contracts drawn from a large random sample of 500 S&P 1500 companies. They find that 80% of these employment contracts contain CNCs, often with a broad geographic scope, and that these generally last only one to two years.
ISSN:0042-2533
1942-9886