Non-compete clauses drag down productivity, OECD study finds

Where U.S. non-compete regulation stands now

Andrea Garnero, an OECD senior economist based in Paris, France, told the Financial Times it was striking that non-competes turned up just as often in states like California, where they’ve been effectively banned for more than a century, as anywhere else in the country. For employers, Garnero said, there’s “no cost to putting a clause in,” and the threat of legal action can chill a worker’s decision to leave even when a court would likely strike the clause down. That dynamic is playing out directly in the U.S., where federal rulemaking has stalled and enforcement now runs almost entirely through the courts.

U.S. regulators have already abandoned one attempt at a nationwide fix. The Federal Trade Commission’s 2024 rule banning most non-competes was struck down by a federal court in Texas, and the commission voted 3-1 in September 2025 to drop its appeal. The rule was formally removed from the Code of Federal Regulations on February 12, 2026, leaving enforcement to state law and case-by-case federal antitrust action.

That case-by-case approach is already producing results. The FTC secured a consent order requiring pest-control company Rollins to rescind existing non-competes and notify affected staff, detailed in HRD America‘s coverage of the FTC’s order against Rollins. State courts are moving independently too. A North Carolina judge dismissed a wealth management firm’s non-compete and non-solicitation claims against a former financial planner this June, a decision explored in HRD America‘s report on the North Carolina non-compete ruling, after the court found the restrictions were written too broadly to survive.

Some employers are leaning on non-disclosure agreements as an alternative, though legal experts have warned that broadly written NDAs can function as de facto non-competes, a tension covered in HRD America‘s look at whether restrictive covenants are legally enforceable. Employment lawyers say the safest path is a narrowly scoped clause tied to the specific role, duties, and confidential information an employee actually held, not a blanket restriction applied across the workforce.

No-poaching agreements are also under scrutiny

The OECD also flagged a related concern. Half of employers surveyed said they were aware of no-poaching or wage-fixing arrangements in their industry, arrangements that are typically illegal but, the report said, more widespread than previously assumed. The OECD recommended that governments look at ways to enforce existing restrictions, pointing to Spain’s ability to fine employers that misuse non-compete clauses, and do more to help workers understand their rights.