White House urges ban on non-compete agreements for many workers
reuters.com
reuters.com
Trade secrets, IP, secret sauce: covered by NDA and IP assignment agreements
Client lists, contract terms, sales strategies, reported metrics, financials: covered by NDA and in some cases SEC regulations about insider trading.
Etc.
The only thing a non-compete does is say that Employee A cannot work in their chosen field for some period of time after they are fired or quit. In doing so it offers no consideration or compensation typically in the contract.
So your employer underpays you by 40% and treats you badly? You want to leave for greener pastures at that hip new startup that offered you a Senior Engineer gig? Well, sorry to say you have a mortgage, a wife, and 2 kids and that non-compete says you are only legally allowed to be a burger flipper for two years after quitting, that software engineering is verboten.
Totally fair right?
If you don't sit on the board of a Fortune 500 company, you have literally no incentive to support non-competes. There is no rational basis to argue in their favor. Please learn the difference between NDAs, IP assignment agreements, and non-competes before lending non-competes some mystical powers they don't have.
There are many "temporarily embarrassed" entrepreneurs that read HN who can't stomach the thought of their future tech lead stealing their idea.
I personally worked for one such person, whose startup was so new that employees were being paid only with shares, but still had about 10 pages of legal documentation for new employees to sign.
And yet we are still confronted with NDAs just to listen to "Facebook for Farmers" pitches.
Perhaps it's better to say those entrepreneurs are afraid of their implementers leaving with all of the domain specific knowledge; believing that it would allow them re-create the product and outmaneuver the entrepreneur.
Of course it's never really that easy, but so few fears are rational.
Half the reason I want increased computer science education is because I'd like this madness distributed across more people.
We once had a guy whose first slide was just an NDA in tiny font that he actually read aloud to 50 people. I was in the back of the room with some of the other staff and I had to step out because I was laughing too much.
In practice though, most of the time your idea is too small or too risky to be on the radar of those organizations.
A bit like how when you wake up a dream you had makes perfect sense until you try to describe it to someone else.
The statement that ideas don't matter, only execution matters, can only apply among sets of trivial ideas that don't change the landscape. Yes, if you want to make Facebook for Farmers, that's an idea that is completely interchangeable with hundreds of other equally trivial ideas, and it doesn't matter which one you choose so much as how well you execute on it. But if you have a genuinely significant idea, something that can fundamentally alter the landscape or advance humanity, then execution is secondary, and, in fact, lots of different people or organizations could implement it. That isn't to say that you can't screw up the execution and fail thereby, but the limiting factor to success is different for trivial ideas vs significant ideas: there are thousands of trivials and the major factor of success is how well you execute the one you choose; there are few significants, and the major factor in success is having them first/getting to market first. If you think you have one of the latter, NDAs might make sense.
Ideas + experimentation to validate them + implementation is where its at. An idea by itself without execution is a fantasy.
Startup law in a nutshell: Management completely disregards labor law but is very concerned about intellectual property.
I feel it's an adequate explanation of why people who are currently employees who support such employee-hostile policies.
https://consumerist.com/2016/06/22/jimmy-johns-to-stop-using...
"Employee covenants and agrees that, during his or her employment with the Employer and for a period of two (2) years after … he or she will not have any direct or indirect interest in or perform services for … any business which derives more than ten percent (10%) of its revenue from selling submarine, hero-type, deli-style, pita and/or wrapped or rolled sandwiches and which is located with three (3) miles of either [the Jimmy John’s location in question] or any such other Jimmy John’s Sandwich Shop."
Fortunately, PAs are in enough demand that she was able to get it modified to a 20 mile radius and scoped to a particular aspect of the practice.
Many (if not most) EU countries require compensation for non-competes to be valid (usually at least 30% gross), and the non-compete can still be challenged in court if e.g. it applies to too large a geographical area (e.g. the entire state/country) or if it's broad enough to prevent the employee from finding work in the field.
As a consequence, almost no one ever does, except for very high level executives.
There's potentially plenty of point if you don't expect your employees to understand that (or be able to count on it)
(I live in France)
To go meta for a moment: I think that this sort of statement exposes a flaw that many of us have in debates. It's related to the "argument from ignorance" fallacy, but is not exactly the same thing.
I take it as one of my priors that people at news.yc are intelligence.
When lots of intelligent people argue for X, and X makes no sense at all for you, you should ponder with some real seriousness that perhaps N intelligent people are not insane, but, instead, you are missing something.
In this case, you say "They have literally no value to society".
This is not an argument. This is a conclusion, or an axiom.
Let me explain why I think non-competes are a good thing:
1) deontological: freedom to contract is always a good thing. It is a human right, and government has no legitimate moral power to remove that right from people.
2) Hayekian / information theoretic: I have local knowledge regarding both my costs and my benefits from signing a non-compete contract. Government legislators and bureaucrats, at some great remove, has almost no knowledge of either my costs or benefits.
3) pragmatic (overlaps #2): perhaps I am desperate to break into career field X and would pay almost anything to get in. Or perhaps my skills are much lower than other competitors. What can I offer employers that my peers can not? My willingness to sign a non-compete. Or perhaps I know that I will be moving in three years, and thus a geographic non-compete has no downside to me. Etc.
> you have literally no incentive to support non-competes...There is no rational basis...mystic powers
Your entire approach here is quite arrogant.
Consider, for a moment, that the other people on news.yc are not idiots.
That's not a strong argument either. You could substitute "contract" with anything. I say this as a staunch libertarian. Government restrictions aren't bad because "government", but because restrictions.
The free market works best when government restricts the freedom to restrict freedom. That's why cartels being illegal is good (they restrict competition), bans on insider trading are good (they restrict fair competition), etc. Non-compete restricts the freedom on the labor markets.
If you let people do anything they want because freedom, you don't actually get freedom.
Just because thousands of HN readers are intelligent engineers, founders, scientists, marketers, etc. doesn't make them legal experts, or political experts.
You assume that "freedom to contract" means that both parties enter with equal knowledge and equal bargaining power. In an environment with high unemployment (like we were not to long ago) it could mean that employees would jump at any job they were offered, out of necessity, even if it came with a nasty non-compete.
Government regulators can look at an overall picture and see that, statistically, in great numbers, there are overarching problems with the non-competes, like their being used with employees who don't have trade secrets.
2) maybe I have better information than the government, but my potential employer has better information than either of us. I won't have a better picture of the local employment market than a business so I will easily get swindled.
3) allowing the desperate to sign a contract no wants to sign leads to a race to the bottom where everyone has to sign a non-compete. How can I refuse to sign if 99% of applicants will sign even if I am the best applicant? They will just say no to me and take the #2 applicant. The only way to fight non-competes here would be a union to form collective bargaining at which point we have lost the ability to make our own contracts as individuals entirely.
Here your #2 conflicts with your #3. If a person is so desperate to find entry-level minimum-wage work that she would pay any price to do so, then she doesn't actually have the freedom to negotiate contracts.
You may not be an idiot, but you do seem to be ignorant of the empirical evidence. Non-competes choke off innovation. It's that simple, and that well established.
I think history shows that this kind of thinking leads to bad outcomes. The main reason is that there is power unbalance between employers and would be workers. In natural state of the world the workers would just take resources by force and share. As we are guaranteeing that this won't happen (by enforcing property laws) we need to give something back as well to people in worse negotiating position (worker rights, minimum wage, some contracts being illegal are all example of it).
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A good thing for whom? It is good for lawyers and others who benefit from writing contracts.
Imagine for a moment a world in which you sign a non-compete before ordering a burger. It sounds silly, but sillier clauses are signed in order to purchase far cheaper consumer goods every day.
Is the world really a better place because two parties are hypothetically able to achieve their longtime dream of finally combining a legal instrument and a sandwich? Are you excited that you "have local knowledge" and are ready to exploit this knowledge to review legal terms with counsel before ordering your burger OR is this hypothetical benefit dwarfed by a very real huge volume of people who aren't going to hire a lawyer to negotiate a contract of adhesion for a $10 purchase when under social pressure while they're dining with someone else?
Freedom to contract is not always a social good. It introduces complexity, and complexity creates friction which prevents people from participating optimally in a market and prevents the market from clearing. Contract innovation is not optimal for the burger market.
What is optimal is common law, which is mostly the same everywhere so that an entire society understands how it works. It's how the police know what to do when facing a diner who didn't pay their bill, it's how you know what to do when the order is wrong, it's how a business can hire employees who know all this stuff without training them on custom procedure. Standardization is optimal for the vast, vast majority of transactions, so that people can get on with whatever they do when they're not negotiating legal instruments. The benefit of designing something bespoke for some marginal case is dwarfed by the cost of increased complexity of the transaction and the deviation from the established standard.
If you believe that job contracts are so positive and innovative, insist on reviewing one as a condition of doing an interview. If it is really about local knowledge, surely it will be positive for all involved to develop that knowledge early and comparison shop. In reality people will look at you funny and probably decline, because the real function of that contract is to appear after you've decided to take the job and exploit social pressure in order to get a stronger deal for the company.
He could prove they're detrimental in some way, but that's different than proving that they have no positive aspect for those groups.
It sounds to me like he has already stopped and pondered it, and came away with nothing. Then he posted here, offering people a chance to correct his ignorance.
So far as I can tell, he's done everything correctly.
Seriously? There's nothing arrogant about the OP's post which expresses dismay that others as employees (not founders or CEO's) would support having such restrictions put on their careers.
> Consider, for a moment, that the other people on news.yc are not idiots
Parent didn't accuse anyone of being idiots, nor did they frame their concern in terms of intelligence or likewise..
Your post is thought provoking, but you ruin it in those last two sentences.
Fundamentally, you should have the freedom to work in your profession without fear. If a Jimmy John sandwich makers skills are precious things, there's an easy way to retain those skills -- pay the worker what they deserve.
If you think that's unfair to the business person, that's fine, but don't call yourself a capitalist or a good person.
Hardly. Freedom to contract would be a good thing if we could assume that the sides stand on more or less equal footing, which is almost unheard of in the case of corporations and people.
>I have local knowledge regarding both my costs and my benefits from signing a non-compete contract.
No, you don't. The non-competes don't cost you anything until an uncertain time in the future. Unless you can predict the labor market that will exist when/if you leave the company (and you can't) you can't actually know what the cost will be.
Limited government has limited power to enforce contracts. Take, as an example, an assassination contract. You can write one up and sign it. If you or your hit man later breach the contract, you cannot sue each other in any civilized government's civil courts. You may, however, be able to engage a black-market arbiter to resolve your dispute, and that arbiter may allow terms of the contract that are otherwise illegal to be considered in rendering their judgment.
This is, in effect, saying that no government court will honor any non-compete clause in a contract. It is not saying that you cannot put such clauses into your contracts. But you won't be able to convince the government's justice services to enforce it for you (at lesser cost) if you do.
As government is widely considered a social contract for mutual benefit, a democratic form can certainly alter it such that government power is less readily wielded by those who might use it to harm or exploit the people. Businesses that use non-compete clauses can either assent to the change or start shopping for new jurisdictions.
With respect to your #3, having to pay an arbitrary and unnecessary barrier to entry in order to work profitably using a particular skill set is, in my opinion, unconscionable. It is indicative of an environment where the worker has little bargaining power. Any sane group would band together and use their collective power and mutual self-interest to halt that extraction of rents from their members. Since certain types of worker seem to be knee-jerk opposed to collective bargaining organizations, that leaves government edict.
Your #2 cannot be generalized. It can only be fairly judged on a contract by contract basis. But when enough unconscionable non-compete agreements cross a legislator's desk, the practice is judged by the worst examples. And the worst examples are when big companies collude to depress worker wages, using agreements that are non-negotiable and provide no tangible benefit to the employee. Some people were abusing it, and the only cost-effective way to stop the abuse also stops many of the legitimate uses.
You're right, it was unintentional but I can see how what I wrote could be perceived this way. My apologies. I am clearly acknowledging the intelligence of other posters by attempting to make a clear case for my position. If I did not believe that other posters were intelligent I would not engage in the discussion at all.
> 1) deontological: freedom to contract is always a good thing. It is a human right, and government has no legitimate moral power to remove that right from people.
Freedom to contract implies that both parties to the contract have bargaining power. In an employee/employer relationship this is mostly untrue. The only bargaining power that the employee has is simply to walk away. Legally any term of a contract is supposed to be met with "due consideration". In an employment contract, typically the offer of employment is treated as "consideration". I argue that a non-compete is so onerous as to require additional consideration beyond a mere offer of employment, however this is rarely if ever given. As an employee you may only choose to accept it or walk away, unless you individually have some unique position which grants you bargaining power.
While I am generally opposed to government regulation, if we had an absence of all regulation it leads to less freedom for individuals, not more. Or rather, it leads to less freedom for the majority of individuals in favor of more freedoms for a small number of individuals. This is not beneficial to society, and thus this argument does not refute my statement "They have literally no value to society."
> 2) Hayekian / information theoretic: I have local knowledge regarding both my costs and my benefits from signing a non-compete contract. Government legislators and bureaucrats, at some great remove, has almost no knowledge of either my costs or benefits.
This is possible, but isn't a societal argument. This is an argument that says there may be value to you as an individual employee due to local knowledge, but it doesn't mean there's a larger value to society. I accept that it's possible to have local knowledge that gains you a benefit from the non-compete. Such as: You have some special skill that is required by the employer. You are one of the few people with that skill. The employer both /must/ hire you and /must/ keep the non-compete in the contract. This provides you local knowledge which could allow you to bargain for an outsized salary or bonus compared to others in your field, or to get special severance arrangements to counter-balance the non-compete.
In this case, it might be possible that the insistence of the employer on the non-compete provides you individual value. Although, I'd also argue that the terms of the non-compete are not valuable to you, it's the fact your opponent in the negotiation won't let it go and your knowledge of what that is worth that lends it value. In either case, it doesn't give it value for society as a whole, so this does not refute my statement "They have literally no value to society."
> 3) pragmatic (overlaps #2): perhaps I am desperate to break into career field X and would pay almost anything to get in. Or perhaps my skills are much lower than other competitors. What can I offer employers that my peers can not? My willingness to sign a non-compete. Or perhaps I know that I will be moving in three years, and thus a geographic non-compete has no downside to me. Etc.
In this case, your desperation as an individual implies you don't have the bargaining power necessary to negotiate a contract fairly. Your willingness to agree to a coercive term is a sign of desperation, not value. This argument establishes neither a societal value or an individual value to the terms of the non-compete.
If your skills are lower than your peers, then other employers are less likely to hire you away. If the company hiring you is trying to get you to agree to a non-compete because they intend to train you to increase your skills, then a fairer method would be to increase your compensation as your skills increase with the understanding that your increased skills increase your value as an employee. The non-compete is unnecessary and exists again only to provide coercive action against you. This argument neither establishes a societal value or an individual value for the non-compete.
If you know you're moving in three years and the terms of the non-compete are strictly geographic, then you have local knowledge which means the non-compete cannot harm you. It doesn't provide any additional value you for you, but you've managed to nullify its downsides for you individually. I'll concede this one neutrally on an individual level that this provides some level of local knowledge (in the vein of your 2nd argument) that assists you in contract negotiation. This argument though fails to establish a societal value.
Again, this argument fails to refute "They have literally no value to society."
I cannot prove a negative, but I spent quite a bit of time thinking about why they exist before I wrote my original post. I could not come up with any reason why non-competes are valuable to society. I could not come up with any reason why they are valuable to employees. I could only come up with reasons why they might be valuable to an employer and narrow cases where an employee might use them as a bargaining chip but only in a way which nullifies their downsides. There is no upside to an employee for a non-compete. None. They restrict freedom of movement in the labor market and arguably lower the overall innovative output of a society.
I reiterate my original statement. "They have literally no value to society."
Intelligence is just the ability to precisely handle complex intellectual structures. It doesn't make those structures meaningful or accurate.
What's that quote again? Ah, googling found it.
“I make mistakes like the next man. In fact, being--forgive me--rather cleverer than most men, my mistakes tend to be correspondingly huger.”
I disagree. In an unbalanced relationship, the more powerful can take advantage of their power and impose contracts that leave the less powerful significantly worse off. If your choice is, for example, to contract to surrender your statutory rights or be unemployed, the freedom people have is the freedom to be worse off or much worse off. I wouldn't say this is a good thing. We rely on government and (if we're lucky) unions to prevent this freedom.
That's a strawman, since it assumes that only insanity or ignorance makes people favor a position that's bad for the general public. There are much more probable causes for such a view, such as personal interests.
>1) deontological: freedom to contract is always a good thing. It is a human right, and government has no legitimate moral power to remove that right from people.
This is not an argument. This is a conclusion, or an axiom. ("Because human rights" are not an argument either. See where how deep this rabbit hole goes?).
Second, it can be argued that freedom to contract is NOT "always a good thing". It's a good thing only when one side is not far more powerful than the other to the point of forcing the contract. When one side is coerced to sign (because e.g. else they cannot find employment in SV because all employers require non-competes), then it's not a freely chosen contract clause anymore, nor a free job market.
Third, even if freedom of contract was "always good", still what's good thing for an individual, is not necessarily a good thing for society.
Stealing and cheating, for example, can be good for the person doing it, but it's not good for society (and even less so in many people start doing it).
>2) Hayekian / information theoretic: I have local knowledge regarding both my costs and my benefits from signing a non-compete contract. Government legislators and bureaucrats, at some great remove, has almost no knowledge of either my costs or benefits.
That's a naive view that assumes government as some removed from society enemy entity. In a democracy a government is the representation (imperfect as most human creations are) of the will of the people, and laws are based on historical experience and reasoned arguments, with input from people "in the field" in drafting them.
Also, government has much more complete information and view of the overall societal cost of non-competes, whereas you as individual mostly have your local knowledge to go by and personal gain as your guide (assuming of course you're freely entering the contract out of calculation, and not because employers have created a trust on the issue, and you are left with no other option).
>3) pragmatic (overlaps #2): perhaps I am desperate to break into career field X and would pay almost anything to get in. Or perhaps my skills are much lower than other competitors. What can I offer employers that my peers can not? My willingness to sign a non-compete.
Or offer to have sex with them. This rabbit hole also goes very far...
Now let's get down to the real business of your arguments.
> Freedom to contract is always a good thing
This is only true if the people signing the contract are not coerced, whether by force or by poverty into signing that contract.
> Freedom to contract is a human right
So then you agree that it's a human right when it's not coerced yes?
> Government has no legitimate moral power to remove that right from people
It does if you follow the social contract. It does not remove the right but it does impose restrictions that follow from other human rights. It definitely has a legitimate moral power to impose restrictions. Whether you consider governments in general to be legitimate or moral is up to you but in this case? We have loads of precedent showing that in certain cases it has been absolutely necessary for governments to impose restrictions on contracts. Not to mention that we have courts, which you do not address. Are courts the only place where the judge or jury of your peers has a legitimate moral power to remove or impose restrictions on contracts?
> I have local knowledge regarding both my costs and my benefits from signing a non-compete contract.
Quite an assumption to make.
> Government legislators and bureaucrats, at some great remove, has almost no knowledge of either my costs or benefits.
I can agree with this though it would have to be supported; they do collect all sorts of data so they may have some knowledge, greater than "almost no knowledge".
The argument against non-competes is that they place limits on freedom of speech and freedom of expression. They put a limit on employment options as well and are harming my future earnings which are very much real in contrast to the imaginary losses. Willingness to sign a non-compete is not a competitive advantage for employees, it's the equivalent of saying "I am willing to be treated like a slave" or "I will work for free". It's degrading and violates fundamental human rights. You cannot be in support of less restricted commerce and still support non-competes. You cannot be in favour of fundamental human rights and still support non-competes which take away or immensely restrict those rights.
Your arguments, in the end, contradict one another. I will not comment on the arrogance of your approach here.
Often called "Panglossianism" as per Voltaire's character in Candide:
> Dr. Pangloss was the pedantic old tutor in Voltaire's satirical novel Candide. Pangloss was an incurable, albeit misguided, optimist who claimed that "all is for the best in this best of all possible worlds." So persistent was he in his optimism that he kept it even after witnessing and experiencing great cruelty and suffering. The name "Pangloss" comes from Greek pan, meaning "all," and glossa, meaning "tongue," suggesting glibness and talkativeness.
The idea that there's always a good reason for every societal practice that we currently observe is arrogant too, just in a different way.
Whoah! Way too close to home. Only 1 kid and 70% underpaid.
Non-competes ask employees to give up something extremely significant: freedom to work there they choose. Which I have no problem with if they get something significant in exchange.
Let's an employer wants some insurance that I won't go work elsewhere because there is going to be a long training period or what not. I expect significant compensation for that, ideally in the form of a large signing bonus, maybe 50k per year of non compete.
Don't want to pay 50k in cash up front per year of non compete? Take out the non compete. Simple negotiation.
I guess the problem in practice is that employees just sign their employment contract no matter what it says, which is unfortunate.
Apart from that please shove your non-compete there
In other words, the problem is that they are coercive. Employees usually sign because the company has more legal power and can be intimidating or because they could be homeless.
I agree that contracts can be intimidating, but they shouldn't be. Non competes, like most things, can be spelled out in totally ordinary English that anyone can comprehend. Rather than having to create 1 law against every possible employee-adverse thing an employer might put in a contract, I would much prefer a law that mandates employee contracts be easily understood by an average employee.
Yes, we would! And they try really hard to do that.
> I've seen non-competes in contracts with 150k+ compensation. Getting 150k to do something is not coercion, it's an exchange.
When you're generating value in excess of double that amount? It's coercion, you aren't get paid your worth. We've actually seen this with the big tech companies like Intel, Google and Adobe. They kept salaries down for over 4 years so that 150k and a non-compete actually is a huge hindrance and it is coercion.
They already have a mechanism for that. It's called a contract - you promise to work for the company for 2 years.
Your argument could easily be twisted to support cartels.
"The doctrine of at-will employment can be overridden by an express contract or civil service statutes (in the case of government employees)."
Every time I've challenged someone on this point, their objection turns out not to be about plea bargains per se, but the (unrelated) fact that the law permits such severe punishments in the first place, defendants have insufficient resources to fight them, and prosecutors have therefore enough leverage to secure them at all.
But that's not an argument against "plea bargains"; its disgust at the whole system and misattribution to one part.
I agree the extreme and severe punishments exacerbate the problems with plea bargains but plea bargains are bad by themselves, in isolation, even if other punishments are fair.
The government should NEVER be in the business of giving people special treatment and rewards for waiving their fundamental rights because it's more convenient for the government. Everyone has the right to a trial, but people who exercise it are punished. Which means people don't REALLY have a right to a trial. Imagine if the government promised it would tax people less if they chose to avoid engaging in political speech critical of the government. This case is identical to a plea bargain. Except it's less serious, since it's about money, not about jailing somebody.
I'm okay with someone pleading guilty and throwing themselves at the mercy of the court and asking forgiveness. Then it's up to the human beings in the trial to decide how to handle it. Creating a formal system where you do this in exchange for something tangible? Before a trial? No. Innocence or guilt is too important to be bartered like that.
- someone pleading guilty in return for an indefinite punishment, but not a definite one, and
- someone getting a more time in the horrible, horrible cage because the trial found them guilty but not less because they realized they would lose
- someone getting mercy from the court for pleading guilty, but not "getting special treatment and rewards for waiving right to trial" (which a guilty plea is)
- someone leaving their fate in the hands of a capricious, unpredictable jury, but not leaving their fate in the hands of a capricious, unpredictable sentencing judge for the guilty plea
I just don't see a consistent preference ordering that spits out "plea bargains should be banned".
-If the CJ system gives out indefinite punishments for trivial things, that's a problem unrelated to plea bargains. The solution isn't to make things even worse by allowing prosecutors to abuse the extreme sentences to force people into (sometimes false) confessions.
-Why should someone get years of freedom over someone else because they were law-savvy enough (or paid someone law-savvy enough) to realize they were going to lose and gave the prosecutor a sweet deal to make his job easier? Why create an even more uneven distribution of sentences based on who understands the system or can pay a lawyer to understand it?
-The court is set up to be run by humans; they can take mercy on whoever they like. We've chosen to set up our laws that way and I'm pretty ambivalent about whether or not that's a good thing. But even so, that's after the court has found that they are guilty. Mercy can only be applied after guilt is accurately and appropriately assigned -- something plea bargains make impossible. They induce false confessions (it's often the case that an innocent person would spend more time in jail waiting on their trial than they will if they plea bargain -- many decide they don't particularly like jail and take the plea. Not to mention the threat of a bigger sentence). They distort the findings of the court as prosecutors do not try to jail the person for what they can prove they did, rather they use the potential threat of what they might be able to suggest a person did in the future to provide the punishment.
-The law is always capricious and unreasonable. It is a human institution and it's adversarial. If someone is given an unreasonable and capricious sentence it's the fault of the prosecutor who pushed for an inappropriate charge (and happened to win anyway), or the judge who abuses his power to punish the person, or the lawmaker to design laws with appropriate punishments.
Plea bargains can make punishments more consistent and predictable -- everyone is guilty whenever they are accused. Their sentences are milder than technically could be possible but guilty nonetheless. For the unlucky few who have the audacity to maintain their innocence in the face of a prosecutor on the attack, well, capricious and unreasonable is exactly the name of the game. The phrase "throwing the book at you" exists for a reason.
The real point which I don't think you touched on is the simple principle of the government giving citizens special rewards and treatment for waiving their fundamental rights. It shouldn't happen if rights are to remain rights. Why shouldn't congress pass a law saying no taxes for people who sign a pledge to give the government permanent permission to search through all of their documents, computers, affairs, so they waive all protection against search and seizure? It's purely voluntary. Why should citizens subject themselves to the capricious and unpredictable execution of search warrants when they can just come home one evening to a police officer politely saying hello as he rifles through their closet? It's much better than a ridiculous unpredictable SWAT raid at 4am. And they get rewarded for it!
A non-compete allows a company to make an investment in you (in the form of training) with some assurance that you will not immediately turn around post-training and go work for a direct competitor. NDAs/IP assignment agreements do not address this need. If it weren't for non-competes, that investment would be infeasible and we would all be paying our employers for the training we get – either directly, in the form of course fees, or indirectly, in the form of depressed wages during the course of the training.
Edit: For a deeper dive on this, see Paul H. Rubin and Peter Shedd, "Human Capital and Covenants Not to Compete," available at https://www.jstor.org/stable/724227?seq=1#page_scan_tab_cont....
As an employer, after investing in training an employee you only need to ensure that you get an acceptable return on investment before the employee leaves. You want to prevent the employee leaving, so your agreement should specifically target that.
Non-competes are overly broad here and this has the consequence of making them coercive and punitive, both completely unnecessary. The non-compete doesn't guarantee your ROI except as a knock-on effect of its coercive nature. It only prevents your (former) employee from working at all. A net negative for society and arguable for you as an employer.
NDA + non-solicitation: You can't start your own HVAC company by handing your sales person a copy of my client list and calling everyone who currently works with me.
Non-Compete: You can't start your own HVAC company. Full-stop.
Do you see the difference? Do you understand why one is reasonable and fair and the other is not?
I'm in a right to work state though and that means that noncompetes don't hold up at all unless they have a reasonable and non excessive scope. In a right to work state nobody can prevent you from earning a living so in order for a noncompete to hold it has to ensure that you have plenty of other options in your field in the area outside of the scope of that agreement.
I think we are talking about the same thing just using different terms.
What you just described is a textbook non-solicitation agreement.
A non-compete would read something like: "You covenant and agree that, during the term of your employment with the Company and for twelve (12) months after the termination thereof, regardless of the reason for the employment termination, you will not, directly or indirectly, anywhere in the Territory, on behalf of any Competitive Business perform the same or substantially the same Job Duties."
In a contract, terms like "Competitive Business", "Job Duties", "Territory", and "Company" would be previously defined. What this says in essence though is that for 1 year after your termination (either you quit or are let go) you cannot do the same job anywhere within the "Territory" which could be the city, state, country, region, or world-wide depending on how its defined in the contract.
So, let's say in your HVAC example. A non-compete says you cannot work in HVAC at all for the term. A non-solicitation, like you says prevents contacting clients of the "Company".
"Right to work" means you have the right to work without being required to join a union, i.e. it bans union shops where one must pay union dues or lose their job [2]. It is a response by 26 states to federal collective-bargaining laws.
[1] http://www.nolo.com/legal-encyclopedia/understanding-noncomp...
Generally speaking, so-called right-to-work laws are about preventing an employer from requiring that all employees join a union. Maybe some of those laws are worded broadly enough to also cover non-compete contracts, but I've never seen any real indication of that being the case.
I do not think this proposal makes the distinction that you make. Both are in the crosshairs.
> Client lists, contract terms, sales strategies, reported metrics, financials: covered by NDA and in some cases SEC regulations about insider trading.
This is largely unenforceable as I'm sure you're aware. The fact is that legally preventing someone from working at a competitor is simply the only effective way of deterring IP getting to a competitor.
From a macro level, non-competes are awful. The economy as a whole does much better (is more productive) when the best labor is free to chase the most productive uses of capital. (And vice versa) Successful companies are constrained by the existence of non-competes, because they have a reduced pool of employees to hire. They may still do them for their own employees, but they can't take the step without everyone else taking it too. (A variation of prisoner's dilemma)
I'm generally a small-government low-regulation person, but this may be an instance where companies need to be nudged as a group to accept something that will help them in aggregate.
I know you probably know this, but it doesn't have to be laid out explicitly to be compensated. The compensation would be present silently through higher wages, better perks, higher vacation etc. Workers evaluate the sum total of the costs and benefits of a job when deciding to work somewhere. It can be argued that workers don't always make the best decisions for themselves, so we should restrict their options, although to do that you have to show that the government makes better decisions for them which is sort of difficult.
An ordinary person would rightly believe that 100% of their job compensation is in exchange for doing their job, and that any additional bonus compensation for doing something else must be explicitly laid out in a separate contract.
In order for what you say to be true, jobs with non-compete agreements should in aggregate pay more than jobs without them. I do not have that data, but I believe that they actually pay less, due to the tautological competition-suppressing effect of non-competes.
It sounds like it would be beneficial to list out each of the non-monetary advantages and disadvantages of a job and how much money they're each worth, but in reality there's too many [1] to make that practical. Not only are there a ton of these unseen effects but their value is different for each individual.
One person may value their ability to take another job at a competitor quite highly while another may not. And that's the case for all these unseen effects.
[1] Examples of unseen effects that make the implicit wage different from the explicit one:
* having to sign a noncompete
* do you like the sorts of people you'll be working with?
* do you like the tasks you'll be working on?
* do you have flexible hours?
* do you like the place where you work?
* do you like the length of the commute to work?
* do you like the smell of the rhododendron's outside your office window?
etc.
In practice that probably isn't necessary because the employer doesn't see much benefit from having a non-compete. Workers are no more qualified to work for their competitors after having worked for subway for a year than they were when they were first hired.
As a developer pretty much none of these matter or protects anything.
Imagine this scenario; - John has no idea about video encoding but a good developer.
- John joins to a video encoding startup
- This startup encodes videos 3 times faster than the competitor
- After working on the core product for 2 years, John knows a lot about video encoding, because he's been trained. He also knows why they can do faster than anyone else. It's not one thing, bunch of things.
- Then John receives an offer from the competitor with 50% more salary (obviously this is smart thing to do for competing company). He obviously leaves, because 50% more! All the know-how, experience etc. will be just automatically transferred to this competitor. NDA, copyright etc. nothing can prevent it.
So how is this good for anyone but John? If you think this kind of stuff doesn't happen and all this kind of advancements are public domain anyway, you are wrong. There are many niche fields where competing advantage comes from technical excellence and understanding couple of key things better than your competition.
Not to mention John will have inner knowledge of so many other non-technical but important details that can give obvious unfair competitive advantage.
When non-competes are removed companies do need to treat their employees differently. "If I don't trust this employee enough I shouldn't give them the important bit of the source code, shouldn't train them on X know-how that we internally produced" etc. which is pretty bad for everyone.
Since the secrets aren't yours to share at will, they belong to the company, there's nothing that restricts your freedoms in an NDA. It's more of a covenant than a restriction. You're making a legally enforceable promise to not spread about things you know full well are supposed to be confidential. A non-compete however restricts your freedom of movement in the labor market and directly provides a tool for the employer to coerce your actions in and outside of work. There's a huge difference in consequences and incentives, while the NDA provides sufficient protection for the things that matter in your scenario.
If you are a developer and worked on a code for 2 years. NDA cannot cover what you know what you don't. Your know-how that you captured on that company can simply be replicated in another company. You'll write the code from scratch, and NDA or copyright, or even patent in majority of the cases will not be enough to enforce or stop such a think. In rare cases patent can solve it but do we want all companies to patent everything?
While employed, a person necessarily learns skills in order to perform their duties; as an employer, it would be impossible to derive value from the worker without training and knowledge transfer. Your argument is that it should be a two-way street until employment is terminated, then it becomes a one-way restriction against the employee. That's not fair to workers and is extremely biased toward the employer.
How about the consumer/society as a whole who now widely benefits from advanced technology being proliferated through the industry instead of being hoarded by one company?
Secondly when you do that, aren't you actually killing commercial research? Why would I spend $10M to research something if one of my employees can just take that know-how and move to my competitor?
It's not going to happen because your logic is off a little.
Patents are there to promote growth to society, not to promote growth of the patent holder. It works because it's set up to be a win-win for both.
If at any point the patent system hurts growth to society, it should be revamped or eliminated.
Patents are not fundamental human rights. Nor are copyrights. They exist to serve the society, not the holder. Once they cease to do so, they should be removed.
So the question is: Do non-competes serve society's interests?
How about no-poaching agreements? They're almost like non-competes.
b) that company's value is based on a mix of value which they created and where they benefited from prior art. In the former case, copyright law would prevent John from taking source code and patents would prevent him from taking novel work. In the latter, passing on a trained employee is no more unreasonable than it was for them to benefit from the long history of work which they also benefited from without having to pay for it.
So how long should John be banned from working for a competitor for exactly? 5 years? 10 years? Until his current employer says he can?
What if John leaves and starts an open source project doing the thing he's learned how to do really well? Should he be stopped from writing code in a particular domain as a hobby?
What if John leaves because he's had a brilliant idea that his current employer refuses to listen to? Should John be banned from starting his own competing company? Should an employer be able to restrict an idea from getting to market when they're not using it themselves?
This is good for society, because society gets more competitive labor markets and more competitive video-encoding markets. This encourages the spread of high-quality products and technical knowledge at low prices.
Remember: companies exist to supply a product efficiently. You are not entitled to get rich by rentiering on ideas.
If you want to keep John from working for a competitor, just agree to pay him his salary for two years after he stops working for you, while he goes on vacation around the world. The amount of competition and poaching you want to avoid should be priced in terms of years of salary you're willing to pay in exchange for non-labor.
Say you ran the marketing campaign at X and through extensive testing you discovered what works in the space X is in, now you go to competitor Y. Are you going to cleanse your brain of everything you learnt at X or are you going to apply the learnings at Y ?
The reality is the reason Y hired you is to get the learnings that you got from X, what you learnt could save them years of work and reduce the competitive edge that X has.
The exact same thing applies to developers. Say you built a ML model for driving cars at Google and now you're working for Apple on a similar project. You're not going to copy and paste the code you built at Google but you're 100% not going to go down the dead-ends that Google went down because you know they don't work.
Of course there's overlap. But the issue that people have with non-competes (especially broad ones) is that they effectively try to limit all knowledge transfer that may benefit a competitor directly or indirectly. Especially when this gets to a point of prohibiting people from working in a given profession or role for anyone else without any compensation, this seems wrong.
Somewhat related, where folks usually get into trouble is reuse of intellectual property or derivative works. IP laws actually have teeth and are enforced in numerous countries.
It doesn't matter if they'll eventually lose. Just as long as they can play legal chicken with you and get you to give up because you don't want to waste all your money on lawyers defending yourself.
...well, now imagine an industry where sales oriented companies have essentially no stable book value. They cannot get loans securitized by the value of their book, and therefor cannot invest in growth or innovation. In the end it is a race to the bottom.
A reasonable balance exists whereby employees are bound by a 2-3 year non-compete clause that prevents them from stealing clients. Markets are still competitive within 2-3 years, and since everyone has these clauses, employee value is retained.
This is why they are a valuable part of an agreement. Including a non-compete means that your contract is lower risk for the employer, which can mean higher salary or better retention. Early termination terms exist for the same reason.
That said, a non-compete which prevents you entirely from practicing your craft would be a hard one to enforce, I've certainly never seen a contract like that.
If there are non-compete clauses in entry-level food service jobs, I hardly think they would bother to enforce them. The loss of a burger flipper from a McDonalds to a Burger King is less than the cost of lawyering them into a pit of despair.
Well at least one fast food company forced employees to sign non-competes up until earlier this year: Jimmy John's sandwiches: http://fortune.com/2016/06/22/jimmy-johns-non-compete-agreem...
They are the large number of libertarians who believe all regulation is bad under all circumstances. Mental contortions follow to justify it in this case.
[1] https://www.contractstandards.com/clauses/non-solicitation
A list of clients that you have an established relationship with is to sales what experience with a set of technologies is to software engineering.
The sales industry relies on account executives being able to take their address books with them. If that stops happening, everybody loses.
California employment law prohibits non-compete agreements for employees, and has since 1872. California also prohibits any employee agreement which claims employer ownership of intellectual property developed on the employee's own time.[1] This is one reason Silicon Valley is so successful.
[1] http://www.leginfo.ca.gov/cgi-bin/displaycode?section=lab&gr...
> "shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information except for those inventions that either [...]"
I wouldn't expect everyone to visit the source link. I would hate to see incomplete advice (for the sake of brevity, I understand) mislead someone into thinking they can use a company device in any way for something they wish to assert ownership of.
I have always wondered how could such a claim on ownership could exist in the first place. This reduces the employee to a mere company slave.
Law is solidified by precedence and the rulings have been more and more against employers, rightly so. It's OK to trust in the system on this matter, as no one is ruling for employers on the matter.
I get paid the same no matter how many hours a week I work.
On rare occasion, I've connected to our VPN or sent some emails outside of normal hours because something came up, with no effect on my salary. I'm lucky in that these occasions are rare, but some people are not so lucky. In the other direction, we have a policy that PTO has to be billed in 4-hour increments, and anything that consumes less than that doesn't have to be reported, such as an early-morning doctor's appointment that takes one hour. Is that doctor's appointment "on company time" because it was too short to bill PTO for?
Does it count as being "on company time" if I'm looking at my phone when an email notification comes up because one of my co-workers CC'd me on something? Is it "on my own time" when I'm sharing memes back and forth with a coworker on our Slack?
If legislation at the federal level were to apply a weaker standard for who can not be covered by a non-compete clause, a state can still expand coverage to all jobs.
California has stricter auto emissions because Federal law allows it. Other states are allowed to follow the California standard, because Federal law allows that.
Almost all executive orders direct federal agencies, which are part of the executive branch, to take a given action. An executive order that attempts to compel a state to enact a certain policy is unheard of.
As a freelancer, contractor and self-employed business owner/worker, please make these illegal, tired of these.
The worst part about non-competes is they are blanket protectionism usually and up to 2+ years of non-compete, this sometimes happens on a job that is only 1-3 months. You have to laugh at those types of situations. Usually the client will push them aside or lower the time to the job plus some time, but both non-competes and arbitration agreements are horrible for workers in today's economy where people change jobs frequently and many are self-employed/freelancing/contracting.
The non-compete should not exist, at the core removing competition from skilled workers in our economy is bad all around, unless you are one of the current big fish.
A non-compete allows a company to make an investment in you (in the form of training) with some assurance that you will not immediately turn around post-training and go work for a direct competitor. NDAs/IP assignment agreements do not address this need. If it weren't for non-competes, that investment would be infeasible and we would all be paying our employers for the training we get – either directly, in the form of course fees, or indirectly, in the form of depressed wages during the course of the training.
For a deeper dive on this, see Paul H. Rubin and Peter Shedd, "Human Capital and Covenants Not to Compete," available at https://www.jstor.org/stable/724227?seq=1#page_scan_tab_cont....
Yeah, because employers refuse to train employees unless they sign a non-compete. It's not that they are unable to provide training, it is that they are unwilling. If Non-competes are banned, then they can start providing better training to more workers because there's no more needless red tape...
>A non-compete allows a company to make an investment in you (in the form of training) with some assurance that you will not immediately turn around post-training and go work for a direct competitor.
Then why to most non-competes extend 2 years after you leave a company, and why do they get applied to workers who have been with a company for years? You, like many others in this thread, seem to be confusing "experience", a thing the employee owns, with "training" and "know-how", things the employer owns.
Even if it weren't, employers aren't hiring machines, they're hiring human beings. If they've become so greedy that they have forgotten that, I see no reason our laws shouldn't compel them to treat their employees (and past employees) properly.
Were Soft Engs simply to do 'work' then you would be absolutely right.
But in a world of IP ... it's a different story.
Company ABC brings you in, trains you on their know-how and core IP, which took a lot of struggle, $, and R&D to create - then you leave, go to a competitor, and effectively communicate and give away ABC Corps. most valuable asset.
Non-competes can certainly applied far too aggressively, esp. in situations where there is not merit ... but there are definitely cases wherein I think it does make sense.
I'm thinking companies like DWAVE in Vancouver that built the 'first' qubit/quantum computer. The guy spent his whole life developing that tech. It's feasible that Google just grabs up some of the team and internalizes all that work and effort for the price of a few headcount.
It's a real problem in some cases, but worse - very difficult to parameterize.
If the employee violates the IP then sue him for that. No need for non-compete agreements. If you're worried the employee will steal your clients then you're not giving your clients a good deal at first place, and the employee shouldn't be prevented from working with your clients. This is a free market. Non compete agreements are completely anti-freedom of both enterprise and work.
> Company ABC brings you in, trains you on their know-how and core IP, which took a lot of struggle, $, and R&D to create - then you leave, go to a competitor, and effectively communicate and give away ABC Corps. most valuable asset.
Then the burden of proof should lie with the previous company, there shouldn't be any possibility of preemptive clause within the former contract. If it's clear corporate secrets were leaked then sue. If you don't want your employee go work somewhere else then compensate him, that's the problem here , most of the time there is no compensation.
It doesn't matter how much R&D was created. That's the role of patents to deal with that thing.
Maybe ABC corp was mistaken, and their most valuable asset was that employee and not just the model parameters he struggled for years to optimize?
I'm beginning to think none of you have ever worked in companies that actually produce IP.
First off - that's not what patents are for. Patents protect publicly known information - not trade secrets. And they don't do it very well. There are very few things you can defend with a patent.
What companies are concerned with is 'trade secrets' and 'know how' - and it's a serious thing.
"Then the burden of proof should lie with the previous company, there shouldn't be any possibility of preemptive clause within the former contract."
If you work at DWAVE for 5 years and learn everything you know about Quantum Computing there - and go to Google to work on Quantum Computing - then there is basically a 100% chance that you are passing on 'know how' and 'trade secrets' - otherwise - Google would not hire you.
Your comments about customers etc. are irrelevant with respect to IP issues.
If you work for ABC corp and they make a 'sales automation tool' - and you go off and build your own 'sales automation tool' - then fine. It's not about IP or trade secrets. You can do as you like.
But for other types of things, no way. You work at Nuance on Speech recognition - then you leave and build a nearly identical speech recognition system? That's probably IP theft.
There would not be any technology if IP could not be protected in some reasonable way.
I'm not suggesting that many of these contracts are crazy - and that there can be absurd limitations and weird corner cases - of course it's very tricky - but companies deserve the right to protect their IP in some manner.
That isn't trade secrets, it's experience.
Unless you have a noncompete clause. That's exactly why they're a problem. You can't develop your professional skills. When you leave, you have to start from scratch in a different industry.
Sure. What I have in my head isn't the companies IP though, it's my experience.
"IP" is often confused with "the collective experience of your employees". IP is physical artifacts such as code, drawings, patents etc. The memory of having written that code is not part of the IP, nor is the capability of doing it again in a fraction of the time.
And yes, I have a lot of patents and trade-secrets to my name.
I've seen people talk with a straight face how they think their company invented the use of IFNDEF/DEFINE for C .h files
And parent comment only goes to show how there are cattle that supports barbecues
All software companies produce intellectual property.
If the person from your quantum computer example gets fired with non-compete, it would mean being forced out of he field with 100% certainty. Quite a leverage for a company.
In my opinion, there is still enough stuff out there benefiting corps over employees even if non-competes go away.
Not being able to work work in the same field for up to 2 years (non-compete) and not disclosing internal ip, processes, etc when you go work at another company (NDA) in the field are much different.
Preventing someone from working in a field and not disclosing or sharing secrets/ip are two different animals.
NDAs are useful and I use them myself when contractors work with us, but non-competes create a very master/slave type of relationship, ownership of someone's skill that they need to work.
Paid non-competes are something that isn't as bad but non paid non-competes are horrible for the little guy and really a form of ownership that really goes against 'pro-business' ideals for smaller companies trying to compete while seemingly being 'pro-business' for the company doling out non-competes (big fish).
Contractors can't be told where to work, how to work or times to work, why are we allowing companies to tell skilled workers what they can and can't work on after the contract is up aside from what is under NDA?
Um, that's covered by an NDA--Non-Disclosure Agreement.
Those are generally QUITE enforceable, even in California and often last for 3 to 5 years.
Non-compete is quite different.
Pragmatically speaking, it's nary impossible to work in some fields, and then move to a competing firm without passing on know how or trade secrets.
Even the 'manner of approach' to a problem, while it may not be a trade secret, is basically a core part of the 'true IP' that is developed by a company.
Using DWAVE as an example - there are thousands of 'little things' that they will have had to figure out along the way - from which parts to use, which vendors work well, material types, tooling, physical test units, support gear (like cooling etc.) - all of this is IP.
Any number of small issues can be the 'key ingredients' that make or break a project. When DWAVE spends a year trying to figure out how to keep some material at a steady temperature in order to bind it to another ... then that's IP.
It's a paradox when nearly one's entire skill set is tantamount to 'trade secrets' but it's feasible.
An NDA - in the broadest sense - in this case would be a de-facto 'non compete' - because there's hardly a thing this Eng could do for Google that wouldn't involve giving away important information.
In case you guys are not aware: hiring people to steal away trade secrets and know-how is very common in the Valley, often by major players and firms.
If you haven't noticed - the biggest and most successful tech companies all have either natural monopolies (i.e. Facebook/Twitter with network externalities), or insurmountable massive barriers to entry keeping others out (i.e. Apple having MacOS/iOS, a retail distribution chain, massive leverage over supply chain, and market share).
In business scenarios it happens as well, in less 'protectable' scenarios. Apple snared away tons of BlackBerry sales/BD execs - not because they were necessarily skilled or talented - but because of their established relationships within carrier channels. Apple was buying access to Verizon and AT&T - not random sales guys abilities.
Don't forget that not only do companies lose their "IP" with outgoing workers, but they also get more free with incoming ones. Perhaps it balances out but with a net positive effect since effective skills get spread around the industry instead of being locked up whereever they were discovered.
I think this is part of a bigger argument about how much IP protection is enough to encourage innovation but not so much that it stifles the market. You seem to be advocating protecting every last little bit of knowledge but perhaps that's stifling for the economy overall even if it is more fair for individual members.
Intellectual property is a bit of a misnomer it has very little in common with property of the standard sort and the burden falls upon you to explain why we ought to create greater artificial scarcity for imaginary property.
I am not particularly in favor of or against non-competes as a whole, (though I would be reluctant to sign one,) but they strike me as less invasive than other marketplace restrictions (such as government regulations).
On the last point, see generally J. Doyne Farmer and John C. Holland who've done significant work on innovation and the processes by which it occurs. You'll find presentations from both on YouTube, as well as publications. Both are/were associated with the Santa Fe Institute (Holland died in 2015).
1) No non-compete, long hours, and low salary
2) Non-compete agreement, short and flexible hours, and high salary
If this is a possible scenario, would the ban on non-competes be anti-worker?
I agree that I am ignoring many things, as this is a limited discussion, and I am only addressing the impact of a law on a single employee, and its ethical ramifications.
It is like a reverse market regulation against workers that are bringing the productivity and skills to the company.
Company: "Hey come here and build us this thing that makes us capable in this area, and when you are done you can't go on building things for other people". It almost seems like a fatal attraction or overly obsessed/attached owner/girlfriend.
Non-competes are a kick in the nuts really to put it bluntly. You'll know the feeling when you get one. It is closer to a company trying to own a skilled worker rather than a partnership.
>"makes me not want"
I do not want to agree to many terms, so I do not agree to them; this does not make me want to ban those terms.
>"It is like a reverse market regulation"
Non-competes are 'like' any other business agreement to me. In any case, I am not sure what a 'reverse market regulation' is.
>"seems like a fatal attraction or overly obsessed/attached owner/girlfriend"
If you were analogizing an employer/employee relationship to a sexual one, they would seem most similar to a pimp or john; I do not think this is a useful analogy.
>"are a kick in the nuts... You'll know the feeling"
Many agreements feel unpleasant; I dislike any deal which obligates me to pay a large sum of money. This is interesting, but not very important to anyone else.
1. Money.
2. Skills and Knowledge.
3. Career Contacts.
With non-competes a company is trying to screw you out of #2 and 3.
The argument whether to ban non-competes should be rooted in the practical applications of the clause. Highly skilled, in-demand workers have the power and financial safety to negotiate a non-compete clause.
The question is when the power dynamic between employer and employee is heavily skewed yowards the employer, can they abuse this imbalance to force non-competes as a market equilibrium.
For example, for a person struggling financially, the slightly higher salary may be a short-term requirement, while the non-compete ruins their long-term prospects.
Depending on the phrasing of the non-compete, I tend to cross that section out, initial them, and then include a note when I submit them to my employer. Most are fine with that change.
https://techcrunch.com/2016/02/18/silicon-valley-keeps-winni...
http://news.wgbh.org/2016/06/29/politics-government/deleo-pl...
"If I can't have you, nobody can" is the long and short of a non-compete IMO, I don't feel that's an acceptable condition in any relationship.
Maybe I misunderstand what a non-compete is, but it seems relatively straightforward. I don't think an employer is entitled to that kind of benefit, especially considering loyalty to an employer is usually rewarded with indifference at best.
No. I'm mid-career. I have skills you want. You're not training me. Your company is not an engineering school. I'll leave because I might not like working for you, or living where your company's office is. It's my life, not yours.
Decided to stay in California where this wouldn't ever even be a question that would come up.
When I refused to sign it she said that it might be hard to offer me a job in the case I don't sign it. Which very much sounded like a threat to me. If they insist I would most probably sign it, as without the salary I wouldn't be able to afford rent next month. According to her all the other employees have signed it and none questioned her on it.
Notably non-competes are mostly illegal in India, still almost all agreements I have come across have the clause mentioned in them. I don't understand the point in having a clause like this, when its non-enforceable.
Many other points of the agreement were as egregious as the non-compete clause. Also the whole agreement was extremely one sided. It also said all the IP/Products/patents I develop, even in my own time, during my tenure would belong by the employer.
These clauses are getting worse too, claiming what you develop up to a year after you leave the company. I had to sign one of these or not take the job, non-negotiable. Not taking the job wasn't a choice at that time, sadly.
Shame on me for not asking up-front what I would have to sign, but also, how is it legal to start throwing new contracts at someone, when they weren't part of the original agreement in the first place.
Is it legal to have a extremely one sided agreement? Also if it is signed under threat(no job/no livelihood) isn't it void, as its signed under duress?
It's too easy for companies to claim losses from competing employees. They need to put their $$$ where their mouth is
I don't agree compensation would be any useful. In France non-compete agreements must be compensated proportionnaly.
Example: My company prohibited me from working with the customers on the whole territory of France for a duration of 3 months, paid at 1/3 of the salary per month. The real mean clause is that they can decide whether to apply it or not, and they can tell you on the day you leave. Therefore: They save, except when the employee gets hired by the customer, in which case they only have to spend 33% of the salary for 3 months to prevent you from working.
Last point, in France, Company-to-Employee non-competes are restricted, but Company-to-Company are not. Which makes things hard for consultants.
So don't fall in that trap: Asking for a compensation will only seem fair on the surface. Require your government to drop non-competes altogether, and both for employees and B2B contracts.
Congress might, say, prohibit noncompetes across state lines, but would have a harder time making the case for a noncompete prohibition within a given state. Perhaps not impossible.
OTOH, there are Federal standards for labour in the US under the NLRA -- National Labor Relations Act.
Lay understanding of law.
Not that I support this reading, but it's been used to shake off commerce clause challenges for the better part of a century now.
They are paying you. You join the company on those terms. If you don't want to join, then don't join.
What they don't want you dong is taking all their IP, walking off and passing it onto a competitor.
It would be extremely naive to not understand that this happens all the time.
It's a tricky and nuanced problem, but it's real.
Bullshit, that's what NDAs are for.
Totally false and completely naive.
Most knowledge and know-how is not explicit - they are often learned.
For example - suppose you worked at Nuance, and helped develop their new AI/Neural Network speech recognition system. Everything you know about Speech + AI you learned from them, in that language specific setting.
If you went to work on Google's new Speech Recognition, which is AI-based - it would basically be impossible not to pass on know how and relevant knowledge. The application-specific skills are basically IP.
And the knowledge and experience you got from your previous job before Nuance ? where does it come from ? why would the buck stop at Nuance ? or the former company ? or the company before it ? your point is ridiculous. The knowledge I acquire, if it doesn't involve a company's secret is my own and no company owns it. There is no such thing as intellectual slavery which you basically promote. If you don't pay me I owe nothing more than the respect of your patents and other corporate secrets and those are covered by NDA.
Of course, the counter-argument there is that they paid you for your work, and that's why it's their property. It may follow that if the work is theirs and you can't use it, then surely your student loan in its entirety would also be their responsibility for just that reason.
Shame I have more important problems to solve in the meantime, that idea could be quite fascinating to work through.
If Nuance wants to pay me to not work for google for a long time - fine. As long as the non compete is fully paid that's fine.
Without pay from my former competitor, it must of course be completely within my rights to go to Google and develop in 1 year what took me 10 years at Nuance. That's what my experience does - helps me do the same thing quicker. That experience, and nuances "Trade Secrets" are more or less the same thing. Nuance paid me for years of failed attempts and dead ends. Google pays me (more) to not repeat them.
No. Those application-specific skills are called experience.
If you can't own them forever as slaves then preventing them from freely applying their learned skills for a period of time isn't coherent and logical.
+ Absolutely false. Whenever you work for a company, you will gain knowledge that is their property - almost always. It doesn't matter who/what/when/how you work for - that knowledge is theirs. Even McDonald's workers are subject to private info such as operating details.
+ "For you to somehow by dint of experience BECOME employer property in whole or in total is a truly bizarre perspective."
Nobody is anybodies property. If nearly everything you know about a subject is a trade secret, then you obviously cannot use that elsewhere.
+ "If you can't own them forever as slaves then preventing them from freely applying their learned skills for a period of time isn't coherent and logical."
Would you children stop talking about slavery?
If your skills and experience are tantamount to trade secrets than you cannot use them elsewhere.
The idea that some company is going to let you in on their $1 Billion dollars and research, so you can walk across the street and hand it over to another company 'because you think it's your right' - is not coherent or logical. Put yourself in the perspective of the manager of that IP.
What is protected is defined in terms of patents, trade secrets, and non disclosure. It looks like the long term prospects of software patents is extremely grim and neither of the later items can be so broadly construed.
Your skills and experience can't be owned by your employer. It looks as if you actually understand that none of the above are so broad and want to use non competes to protect some sort of moral right.
The problem is that such employers are 0.0001% of the population the freedom of everyone else and in fact the efficiency of the labor market as a whole is vastly more important than some sort of moral right for Bob the employer to keep Jim the employee from learning the trade and using that experience down the road.
Your perspective is antiquited and based on a belief in an entire social framework of mutual employee employer loyalty that was always mostly imaginary and now practically fictional.
It's highly likely that you have personal issues heretofore unexpressed wherein you feel badly treated.
Maybe you should elaborate on THAT.
I have actually refused a job offer because the terms of the non-compete were so one-sided for the employer. The contract had things like one-way attorney fees, applied everywhere in the US for a year, wasn't limited to what the company actually worked on, and other employer favored terms. This was for at-will employment, and apparently I was the first person to refuse the job offer due to the contract. I wish more people would refuse to sign such biased contracts, as it stands companies can get away with the practice because too many workers allow them to do so.
I commend you for looking out for your long-term self interests, and agree that more people should carefully scrutinize their employment agreements. This does not bring me to conclude that non-compete terms should be banned, as they are simply one of many terms of the contract which should be priced appropriately.
P.S. Non-competes should have nothing to do with trade secrets; those should be covered by an NDA.
I'm not sure why nickff is mentioning trade secrets, when that's a separate issue, covered by NDA.
NDAs are nice, but there is no way to know whether a trade secret has been transferred to a competitor (if the competitor keeps their secrets secret).
The other problem with allowing NDAs but disallowing non-competes is that it provides a huge loophole, where businesses can classify all non-public information as trade secrets, thereby preventing the former employee from implementing any competing system (which will inevitably contain some non-public process from the previous employer).
Do you agree that NDAs are flawed in the ways I described?
<<"NDAs are nice, but there is no way to know whether a trade secret has been transferred to a competitor (if the competitor keeps their secrets secret)."
<<"The other problem with allowing NDAs but disallowing non-competes is that it provides a huge loophole, where businesses can classify all non-public information as trade secrets, thereby preventing the former employee from implementing any competing system (which will inevitably contain some non-public process from the previous employer)."
I am unsure what you mean by the following quote:
>"it's not like you can't"
You think the information in my head is so valuable that you don't want me working for a competitor for three years after I leave? OK, pay me for three years.
It's not worth that much to you? Well, how much is it worth?
If you're assuming that all you're going to do after you leave a company is become a wage slave at another one, then getting paid the same wage for a few years might be enough to compensate you. However, if you really aspire to start your own company that might become hugely successful (e.g. the next Facebook or Google), how would you be compensated for that?
The point is that even if you're paid for the time when the NDA is in force, you are still being harmed, because your freedom to invest your time is restricted.
If you're a programmer and are prevented from getting a new job right now, when it's a seller's market for talent, then you might be in a much worse situation in a year if the market changes.
Even getting 100% of your wage for that year could be a terrible deal.
[1] http://www.cnbc.com/2016/06/22/jimmy-johns-drops-non-compete...
Law needs to catch up on this one and fast. I like the idea of making non-compete enforceable only if you can prove malicious intent. Similar to how tax works. If onus is on the tax payer to prove that if you buy something and sell it at profit you must prove that the _intention_ was not to turn a profit if you want to pay capital gains tax and not income tax on the profit.
Except the burden on proof must be skewed in favor of the employee and the proof of intent needs to sit with the employer if they want to enforce. E.g. If I go to market and get an offer (say at some competitor), you have first right of refusal to give me a counter. If you refuse to counter you cannot enforce your non-compete. This is fair imho. Lots of problems regarding "trade secrets" etc. but the law should be highly weighted towards the idea of "innocent by until proven guilty" for the employee.
A $12 / hr. part time Walmart worker can not work at another retailer or online company or Amazon warehouse. The scope is defined by the company.
It is used as a threat.
Besides, if someone wants to steal company secrets they will regardless of a signed paper.
In the '80s worked with a Chinese C/unix contractor that ported all code to China. It was comm type work. No NDA would prevent a criminal.
See http://nl.workpocket.be/2/3/het-concurrentiebeding/
Netherlands also has various limitations on anti compete clauses. Generally, they're not valid: http://www.lbv.nl/actueel/wet-en-regelgeving/146-het-concurr.... Since 2015 they only apply to full time employees and there should be a very good business reason. Meaning: it should not apply to everyone, at most a limited amount of people.
Has anybody around here been sued after leaving a company due to a non-compete clause?
I worked for a company based in New Mexico while I lived in California. When we both got sick of each other, at the exit interview the HR personnel on the phone from New Mexico told me I could not work in IT for the next 2 years as I signed a non-compete agreement. I just started laughing at them and told them I lived in California and good luck with enforcing that contract. End of conversation and I was out in the parking lot 5 minutes later, still laughing.
https://www.google.com/amp/s/www.washingtonpost.com/amphtml/...
b) Even if we assume Trump somehow managed to implement his plan, how is it not going to be struck down immediately as a violation of the first amendment? Campaign finance and lobbying are incredibly broken right now, but they currently exist because of a legal framework that can only be changed by a constitutional amendment that (partially) exempts political speech from the promises of the first amendment.
> The Obama administration on Tuesday also urged states to ban non-compete agreements that are not proposed before a job offer or promotion is accepted and said employers should not be able to enforce the agreements when workers are laid off.
It's unclear to me if the empathized part was meant to be a general statement, so that could affect tech workers.
The general gist is that, yes, they are enforceable. The legislature keeps pushing for them, and the courts have, at various times, pushed back against them. There are limitations on them, but you'd have to talk to an attorney to figure out what they are -- I don't remember exactly what my attorney said. I do know that my attorney said my fairly typical non-compete probably would hold up in court.
While I signed this one, I've just flat out refused to sign them in the past. People seem to have the idea that the employment agreement is set in stone. For some companies it might be, but I've had some success pushing back against clauses I didn't like.
I don't know if this is a common experience, but my employer recently began putting NDAs in place and, in retrospect, I feel they took advantage of the ignorance of most of the employees (including me). They insisted that the NDA was "standard," managers told us that there was no room for negotiation and pushed to have us sign immediately (eventually relented to having it signed by end of the following day).
It actually seems borderline malicious and evil to me. Modern day slavery.
I think that's a good thing.
I'm not sure the White House would agree.
Unfortunately, people would rather welcome big brother govt into their lives than work on fixing the real problem.
Won't this just move the non-compete to be included in the job offer instead of the formal employment contract? That's a slight improvement at best.
On one hand everyone is free to trade freedoms for gains (usually monetary - every contract restricts both parties freedom), but on the other hand you can't trade certain freedoms away that we view as fundamental.
Even though I am certainly no proponent of non-compete agreements I cautiously tend towards viewing such contracts as acceptable and valid.
You usually do limit selling your services already the moment you accept a position as an employee, at least for the time you stay employed there. Contractually expanding it for a mutually agreed upon period doesn't strike me as that much different, at least as long as there was no coercion involved and both sides fully understood the consequences.
I've had a company try and add a non-compete to a contract. They're generally not valid where I live, but it is always a hassle between having rights and getting that right. So I crossed it out of the contract (legal thing to do). That was a first for that HR, but it was accepted.
Note: talking in general. There might be exceptions in certain situations. E.g. CEO/strategic level functions or in case the salary is continued for the length of the non-compete period in case of not being able to find work (Belgium law ensures half of the salary).
>Contractually expanding it for a mutually agreed upon period doesn't strike me as that much different
As long as I'm compensated for that period (a normal wage) then I think it's fair.
Okay this is really bad, in the EU country where I live you usually first negotiate and sign the contract, then start working.
But the drawback is that it is really just done this way because the government requires that the business notifies it about your employment before you start working, which is a privacy issue.
I think I'd still prefer it the US way. I'd ask about this before starting to work. (if this isn't a no go)
You have to bring it up in the interview if you don't want to be bound by one. But even just asking could spook out the interviewees and get them to pass on you "Is this guy a Snowden? Is he going to steal and leak all our preeeeecious 'secrets'?"
Husband wife owns a florist. Has for decades in a county fourth highes per capita income in us.
Built a nice life but it was time to retire and sell the business.
They did not own their building.
New landlord buys building ( shop in nice main street area.) raises rent to outrageous amount. Too much to run the business.
Husband wife team can't sell florist before New lease starts and they do not sign lease.
The very Next week !!!! Next week - building owner puts up new sign for a new florist.
The owners lost everything. They owned some things like coolers - and got $$ for those.
On the one hand, it's a bit sleazy to attempt to cash in on the previous shop's customer relationships. But I have trouble calling this "stolen." Presumably, if it were a Starbucks that were opened instead, it wouldn't be so objectionable even though the net effect on the previous store owners is largely the same.
I call it sleazy. But wonder why someone didn't let them see that outcome could happen.
Ultimate loss is the loss of the business.
Thus my example.
No, not really an NDA issue but I shared because I was interested and also signed many a NDA in my lifetime.