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Sunday, April 14, 2019

Human Capital Accumulation, Mobility & Equality (plus talk tomorrow at Yale)

I am working on a new  paper titled, Gentlemen Prefer Bonds: How Employers Fix the Talent Market very soon on ssrn. here is an abstract:

The labor market is precisely as the name indicates: a market. The currency of this market is talent. Competition principles apply in equal force to the labor market as to the product market, with the added effect that human capital is a living resource—its quality is endogenous to the competition for it. Competition among firms in the product markets spurs innovation, competitive pricing, and higher quality products and services. Competition among firms over talent ensures higher wages, better work conditions, and higher quality human capital. The strength of competition in the labor market depends on a range of factors, but a key measure of competition is the number of alternatives available for employees to consider. A powerful armor employed by companies to reduce alternative job opportunities is the restrictive covenant. The purpose of this article, written for a symposium on frontier in antitrust law is threefold. First, it explains the broader landscape of anti-competitive restrictions that are routinely placed on employees including horizontal collusion between employers agreeing to fix wages or refraining from poaching each other's employees and vertical arrangements between employers and employees, which may include employees agreeing not to solicit customers or former co-workers post-employment; to incur penalty for competition; and to avoid building on their professional knowledge, reaching beyond trade secrecy protections and into information that should remain in the competitive markets public domain, such as customer lists, compensation information, and general know-how. Second, while many of the harms potentially caused by non-competes are well-documented, the article presents a neglected aspect of labor market concentration: the perpetuation of wage gaps and inequalities. The article argues that mobility restrictions have a disproportionate effect on certain protected identities—primarily women, minorities, and older workers. In particular, I provide an original analysis of the effects of restrictive covenants on the gender wage gap and presents supporting empirical evidence. Third, the article presents a pervasive problem in the landscape of restrictive covenants: the prevalence of unenforceable contractual terms. I argue that the problem of unenforceable anti-competitive restrictions in employment contracts calls for a proactive approach, including notice requirements in employment contracts; regulatory action and penalties that target the contracts before litigation has been pursued; and a private right of action, including class actions by employees who have been harmed by unenforceable contracts.

I will be presenting it tomorrow at Yale Law School, if you happen to be in New Haven would love for you to join!

Posted by Orly Lobel on April 14, 2019 at 07:18 PM | Permalink

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