The problem is not just that the employees have less options where to find a job. The real problem is that the employees don't know about the agreement!

If I work at Pixar and prospect Intel for a job, they will tell my boss and my carreer at Pixar will be messed for ever.

I had a boss that liked to fire employees who he knew were searching for jobs elsewhere. He would announce in job sites good offers asking for candidates with the skills used in his company, and didn't disclosed the company name. When he got answers from his own employees, he would fire them in the best opportunity. A great way to create a culture of fear.