Employment Restrictions on Resource Transferability and Value Appropriation from Employees

Abstract

We examine the joint adoption of four employment restrictions that limit firm resource outflows—non-disclosure, non-solicitation, non-recruitment, and non-compete agreements—and their associations with value appropriation from employees. Using novel individual- and firm-level survey data, we find that when firms adopt restrictions, they tend to adopt either all four restrictions or only a non-disclosure agreement. Adoption of all restrictions is more likely when workers have access to valuable resources, non-competes are more enforceable, and states adopt the inevitable disclosure doctrine. Employees with all restrictions earn 5.4% less than employees with only non-disclosures, with this effect being driven by workers with low bargaining power. Analyses of earnings and a single restriction (e.g., only non-competes) yield opposite results from those considering joint adoption, likely because of selection.

Keywords: Employment Restrictions, Value Appropriation, Bargaining Power, Bundling

JEL Classification: J31, J41, J42, K31