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October 7th, 2011

MIT study: Engineers highly constrained by noncompete agreements

Published on October 7th, 2011 | By: pwray@ceramics.org

Credit: Wikipedia.

According to Matt Marx, an assistant professor at the MIT Sloan School of Management, many engineers say noncompete agreements cause major disruptions in their careers and often force them to abandon their original vocation altogether.

In a study of 1,029 randomly selected engineers from the membership rolls of the IEEE, Marx found that nearly one-third who sign noncompete agreements shifted to jobs and industries that had little or nothing to do with their advanced degrees and skills. In an MIT news release, Marx says, “When people take a career detour, they sometimes earn less money, lose touch with their colleagues, and their skills atrophy.”

Although many consider such agreements to be a standard practice in their field, Marx says his research shows that many engineers aren’t confronted with such agreements until after they are on the job. “Seventy percent of people said they were informed only after they accepted the offer. Half the time it was after they showed up for work. On the first day, they enroll in a 401(k), set up direct deposit, and, oh yeah, are given this noncompete thing to sign. People get savvy as they get older, but a lot of people are blindsided by it,” he comments in the same release.

According to Marx, this blindsiding is not accidental. He says, “[F]irms strategically manage the process of getting workers to sign such contracts, waiting for workers’ bargaining position to weaken.”

One of Marx’s colleagues argues that noncompete agreements also create inefficiencies in the labor marketplace. “It’s not a zero-sum game if you’re getting a good match between employees and firms,” says Olave Sorenson, who teaches at the Yale School of Management. “And, one of the difficulties with the noncompete agreements is that it makes it more difficult for employees to find the right firm for them.” Conversely, he notes, engineers and other high-skilled employees “are locked up in firms where they’re not creating as much value as they could elsewhere.”

Another problem Marx identifies is the patchwork quilt of state regulations and varying levels of legal enforcement and protections, which encourages out-of-state career changes.

Marx has authored a paper, “The Firm Strikes Back,” on this topic in the American Sociological Review (doi:10.1177/0003122411414822).


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