Via Infectious Greed, a paper by economists at the Federal Reserve that suggests that California law rendering non-competes unenforceable has supported innovation in Silicon Valley:
Job-Hopping in Silicon Valley: Some Evidence Concerning the Micro-Foundation of a High Technology Cluster
Bruce Fallick, Charles Fleischman, and James B. Rebitzer
2005-11Abstract: In Silicon Valley’s computer cluster, skilled employees are reported to move rapidly between competing firms. If true, this job-hopping facilitates the reallocation of resources towards firms with superior innovations, but it also creates human capital externalities that reduce incentives to invest in new knowledge. Outside of California, employers can use non-compete agreements to reduce mobility costs, but these agreements are unenforceable under California law. Until now, the claim of "hyper-mobility" of workers in Silicon has not been rigorously investigated.
Using new data on labor mobility we find higher rates of job-hopping for college-educated men in Silicon Valley’s computer industry than in computer clusters located out of the state. Mobility rates in other California computer clusters are similar to Silicon Valley’s, suggesting some role for state laws restricting non-compete agreements. Outside of the computer industry, California’s mobility rates are no higher than elsewhere.
In Canada, the general rule is that non-compete agreements are viewed critically by the Courts. But it’s also fair to say that in recent years that point of view has if anything become more pronounced, particularly if a customer non-solicit that will protect the employer is in place. It’s interesting to see that the Courts’ attitudes may well have a solid grounding in economic theory.