Non-Compete Agreements
Non-compete agreements are contracts that companies often require their employees to sign when they are hired. They usually prohibit those employees from taking what they have learned while working at the company and using it to benefit their next employer. You can see that a non-compete agreement only takes effect after the employee leaves the first company.
An example: Albert Einstein is hired by Intel and assigned to develop a new kind of computer chip. Before he begins work, he is required to sign a noncompete agreement. If Einstein were to leave Intel (for any reason – it doesn’t matter whether he quits or is fired), this agreement prohibits him from working for a competitor for 2 years after he leaves. Einstein tries to go to work for AMD (a competitor). Intel sues him (and probably AMD also), to prevent him from working there.
Non-competes have economic impacts – for the employee, the company that hires him and the company he leaves to go work for – and are sometimes controversial.
I would like you:
? to briefly summarize the arguments for and against them, from the point of view of the employee, the hiring company and the next company; ? explain the economic impacts of non-compete agreements, both for the hiring company, the employee and the economy as a whole; ? discuss what limits should apply to them – which types of jobs and industries do they make sense for (if any), and which do they not make sense for (if any)? Why do you make this distinction – in other words, what is different about these jobs and industries that allow for different rules? ? try to craft a model non-compete agreement that addresses the criticisms and limitations of agreements and the differences you described above.
I have uploaded to the “assignment 3” folder a number of readings, including an explanation of how non-competes work, as well as some articles on how they are used in real life. You may find it useful to do your own research to supplement this material.
Your memo should:
o be no longer than 2 pages, double spaced (that’s about 500 words)1. It can be shorter, if you think you can do a good job in less space; o be typed using Times New Roman 12-point font, 1” inch margins; o look good.
? there is a lot to do in two pages, so don’t waste precious space explaining how non-competes work – I know that already. You should instead jump right into your analysis; ? even so, you should feel squeezed for space – this just means you need to be very careful with your writing – think: “do I need that word? Does that word ‘do any work’ “? If not, cut it! We can discuss writing tips in class, or if you like, I’d be happy to meet outside class. ? I will grade you on: o how well you apply what we have learned in class, as well as general economic principles that you may have picked up outside of class; o the power of your argument – can you convince me? o the quality of your writing – organization, grammar, spelling, etc. I pay a lot of attention to this!

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