Libertarian Answer Man: Noncompete Agreements

by Stephan Kinsella on May 3, 2026

From some tweets on Twitter. My original tweet below, and reprinted with a few modifications followed by a few followup tweets.

Here’s the right (libertarian) way to view the FTC’s ban on noncompetes.

First, the ban is unconstitutional since the federal government simply has no jurisdiction over state contract law.

But let’s ignore that and ask about the legality of noncompete agreements. Under current…

— Stephan Kinsella (@NSKinsella) April 28, 2024

Re Jeanne Sahadi, “FTC is sued by business groups over its ban on noncompete agreements, which may delay enforcement,” CNN (April 26, 2024):

Here’s the right (libertarian) way to view the FTC’s ban on noncompetes.

First, the ban is unconstitutional since the federal government simply has no jurisdiction over state contract law.

But let’s ignore that and ask about the legality of noncompete agreements. Under current positive law, states treat it differently. Some states are more skeptical of the enforceability of noncompetes, while others are more permissive.

The libertarian approach is to recognize that contracts simply are transfers of title to alienable resources. They are not “binding obligations.” There should never be specific performance, just as voluntary slavery contracts should not be enforceable. A contract preventing someone from working for someone else is just a minor version of a slavery contract. As Evers writes in his classic article on contract theory, Williamson Evers, “Toward a Reformulation of the Law of Contracts.” J. Libertarian Stud. 1, no. 1 (1977): 3–13, p. :

The involuntary servitude involved here is more starkly apparent in another example. Suppose an opera singer or a comedian promises to show up for a performance, but doesn’t. Should it be lawful to capture him and force him to perform?

Some courts have attempted to get around being in the position of enforcing obvious slavery by instead issuing an injunction that while it doesn’t compel specific performance of personal labor, does prohibit the enjoined party from engaging in any alternative remunerative work. While this is more discreet then kidnapping or forced labor, it is still the enforcement of a slave contract.

So, noncompetes should not be enforceable.

That said: an employer and employee may have an agreement whereby the employee agrees to pay money (“damages”) to the employer if the employee quits and goes to work for a competitor. Presumably the second employer can come up with the monetary payment if it’s worth it (this goes along with the “efficient breach” theory of contract). Now I personally despise non-competes even of this type, and think they would be increasingly unpopular and infeasible in a real free market, but technically speaking, if someone is stupid enough to sign such an agreement, hey, so be it. But the point is: it’s not a limit on the employee’s actions; it’s only an obligation to pay money damages. It might have a similar effect as today’s noncompetes, but I doubt it, because of economic effects.

I understand companies wanting to keep trade secrets, but these can be protected against with NDAs [nondisclosure agreements]. You don’t need to prevent your workers from quitting or working for competitors to protect trade secrets. I am in favor of maximum employee mobility so I am mildly in favor of the FTC directive, while admitting that it’s clearly unconstitutional and the FTC should be abolished. These are the same assholes that prevent the importation of “patent infringing” products; patent law and its enforcement is clearly anti-competition. ¹

***

I include here only some of the followup tweets, but I especially liked some of them. One guy admits I even changed his mind. Some people actually have integrity and humility and care more about truth than their pride.

That’s well said

— Chris Pacia (@ChrisPacia) April 28, 2024

Thank you. This is one of the best examples of good clear multifaceted thinking-out-loud I’ve ever seen on TwiX. Multiple strands of argument that don’t all poi t the same way. Someone should use this as a textbook example of good thinking.

— Kyle Aretae (@aretae) April 28, 2024

This changed my mind.

— Michael Yockey (@myockey) April 28, 2024

shockingly good take.

— Pierre Chang (@PiereChangstein) April 29, 2024

Bit tangential, but read here and in comments that voluntary slavery contracts should *not be enforceable in free market. Is that not the opposite of Walter Block’s view?

Curious if any interesting links/debates there.

— Matthew Mežinskis (@1basemoney) April 28, 2024

Nobody agrees with Walter. He’s a contrarian outlier on this. He’s flat-out wrong. I discuss this all in detail in my book. https://t.co/kL3ONj15TY

— Stephan Kinsella (@NSKinsella) April 28, 2024

Not cost-effective to sue win & collect $ judgment against low wage worker from whom garnishment will yield just a few bucks a month. So if you prohibit injunction remedy, you reduce employers’ willingness to contract with such folks in the first place.

— Stephen Ware (@ProfStephenWare) April 28, 2024

First, so what. So be it, if so. This is not how we figure out what law is just and unjust. Second, I disagree. There should be no injunction of course since people own their bodies. I think in a vigorous free market employers will have to compete for workers, and imposing costs…

— Stephan Kinsella (@NSKinsella) April 28, 2024

Are non-competes fundamentally different than a non disclosure agreement?

Both cases you are voluntarily restricting your own freedom. A violation of NDA and noncompete are both enforced through monetary damage. Both are necessary in a free market without IP.

— Tom Bombadil (@sirtobiaswade) April 28, 2024

yes they are different. In a free market, with no IP and no voluntary slavery agreements being enforceable, then contracts would simply be transfers of title to owned things, including money or other resources. So an NDA says “if you reveal this secret information to someone…

— Stephan Kinsella (@NSKinsella) April 28, 2024