Understanding the Impacts of the Non-Compete Clause in Employment Contracts From the Perspective of the Sustainable Development Goals

Introduction

In today's economy, employment has become crucial for an individual to provide support for themselves and their families. Today’s workforce is impatient to achieve their goal of being successful people, thus they grab the opportunities that exist in front of them. Besides, the advancement of technology and growth in living standards as well as in the education sector, enable individuals to be kept updated and attentive in the present environment. Under Sustainable Development Goal 8 (SDG 8), the world calls for inclusive and sustainable economic growth, full and productive employment, and decent work for all that include measures to promote policies to support job creation, improve resource efficiency in consumption and production, to provide full employment and decent work with equal pay and to promote youth employment, education, and training. Sustainability is known as durability or the ability to maintain at a certain level. In employment, sustainability means meeting the needs of the employee in the long term as well as the short-term advantages in economic, environmental, and social development factors (Novitz, T., 2021). Moreover, sustainability aims to protect the present and future generations' needs without compromising the ability and ensure the balance between economic growth, environmental care, and social well-being (Novitz, T., 2021). Businesses are important for economic growth which is known as good opportunities for society in assessing decent work that can provide employment security. In current practice, it has become a social norm to leave a job and pursue a better opportunity and career progression because employees are concerned about their long-term career paths. On the contrary, employers are eager to protect the relationship built with their employees during the employment period. Employers spend their time, money, and effort in providing career development to their employees. Still, employees opt to switch their jobs for career growth. In this situation, there is no breach of employment on the part of employees if they leave the company, according to law.

According to Marx (2011), some employers practice non-compete agreements to retain their employees or to limit technical professionals' mobility, leading to involuntary career detours. Nevertheless, Lestari et al. (2017) contended that the implementation of the non-competition clause in employment agreements must be conducted based on the Indonesia’s Trade Secret Law. Hieu et al. (2020) further explained the enforcement of such a clause must be transparent and reasonable in order to balance the interests of both employers and employees. Kuzminac (2022) revealed that employees decided to accept the non-compete agreement as they needed the position although there is no justified basis for such a clause. Posner (2019) discovered that the disclosure of the non-compete agreement caused public turmoil as it did not protect trade secrets or customer benevolence but prevented low-income employees from in the hunt for better compensation. However, Starr and Robert (2019) believed that the employees are aware of the effects of non-compete agreements and they would not agree to such restrictions unless they obtained a justified return from the employers. Through the enforcement of this clause, employers can invest in their employees and share confidential information with less fear of information leakage. While employees are obligated not to use the training and information to assist competitors (Kang & Fleming, 2020).

This non-compete clause restricts employees’ ability to participate in competitive work. Such a clause causes economic harm to the employees as well as harm the society as it is a restraint of trade (Arnow-Richman, 2019). Marx et al. (2014) exhibited that non-compete agreements are responsible for a “brain drain” of skilled employees who enforce such contracts in states where they are not enforceable. A study by Wilkergren (2017) analyzes the use of non-compete clauses to prevent an employee from utilizing the knowledge that he gained to start a new business. He also suggested legal restrictions on the length of the non-compete clause can increase the joint welfare of the employee and the employer (Wilkergren, 2017). Arnow-Richman (2019) stressed the law to protect employers’ investments in information and human capital, and simultaneously promote fair competition.