A constant critique of Communist governments (that employ state-centered economic policies) is that these governments completely destroy any incentive for innovation: Why should I try to reach higher and innovate when everyone is rewarded with equal pay? According to a new NY Times article (link here), however, restrictive employment agreements have gone the extra mile to make Americans ask similar questions in their own corporate workplaces.
In Silicon Valley, a class-action lawsuit has been filed to protest the alleged company policies of major tech companies that prevent their employees from seeking better pay at a different firm (even if former employees wished to start their own firms). For example, under these alleged company policies, former employees of Google would have their application rejected at Apple for no other reason than the fact that the prospective employees were formerly employed by Google. How are these major tech companies able to justify these policies? Through the restrictive employment agreement that you may have only skimmed in the excitement of realizing you were able to secure a job at Google.
As the article continues, the do-not-hire agreements between major tech companies are only the beginnings of a far more complicated story. In fact, the article continues that companies are claiming more than their employee's inventions and artistic works, going as far as to claim the skills, ideas, and professional ties of their employees. The employment agreements that major tech firms use to secure these assets from their employees often require them to sign away all of their innovations and the knowledge they acquired during the course of their employment. However, it doesn't stop there. The do-not-hire agreements are often derived from parts of employment agreements that force employees to "refrain from competing with their employer post-employment, whether that means taking a new job with a competitor or starting their own company." Not only that, unlike other high-patenting countries such as Germany, Finland, Japan, and China, American intellectual property laws completely disregard the notion that employers should compensate employees who innovate with something beyond their regular salaries. You may be wondering, however, if all of this is legal. Are there any laws that protect workers from the restrictive employment agreements that seem to allow corporate America to own its workers?
By and large, the answer is no. While some states do have laws that limit the power of employment agreement, most employers can claim ownership over almost all aspects of their employees' cognitive ability. However, at the end of the day, does any of this have any real impact? Does this actually hinder our society, or just simply sound unfair?
The answer, according to a recent study published in the Harvard Business Review (link here), is that these practices do have a measurable impact on the productivity of American workers. The study found that employees who had to sign noncompete clauses in their employment agreements were less likely to remain focused, less likely to spend time on their actual tasks, and more likely to make errors.
When considering solutions to address this problem, it is clear that more power must be given back to the employees of corporate America. First, intellectual property rights laws must be adjusted so employees are justly compensated for innovating within their companies. Second, laws must be made to limit the power of employment agreements (which can currently allow an employer to claim nearly all of the cognitive abilities of their employees). Finally, individual innovation should be encouraged through the patenting process in a way that places individuals and corporations on equal footing.
Although it is clear that action must be taken, it is also equally important to remember why we fight. It would be convenient to argue that these policies must be changed because they are unfair. However, as the definition of "unfair" varies from person to person, facts must be used to determine whether a policy is truly detrimental. We must remember we must change these policies not because they are "unfair," but because they are having a tangible harm on the innovation and productivity of the American labor force.