Connecticut moves to help low-paid workers hurt by noncompete rules
ctpost.com
ctpost.com
And they should be paid for 8-10 hours a day, 7 days a week - the non compete clause prevents them from working for a “competitor” every day of the week.
That will quickly get rid of non competes that aren’t actually necessary for anything other than wage suppression.
Other fun things are enforcing the noncompete at the employer's discretion. You never know if you're out for a month or a year and they can change their mind mid way through.
The median in the sibling comment wouldn't work because unless bonuses are paid monthly the median will just be the base salary, so you'd have to do mean.
Requiring payment for the duration of the non-compete is perfect. You can tweak the specific requirements up/down as problems arise.
In most practical situations, requiring payment (of almost any amount) will eliminate non-competes, because employers generally don't like paying for labor they can't use.
What negative unintended consequences?
In practice, non-competes that pay out 200k+/yr are quite common in finance (think firms like 2 sigma, Jane Street). They will pay to keep people from going to competitors, mainly to keep their strategies and implementation details reasonably protected.
I also don't mean in response to a company enforcing it. A company would be required to pay that amount for the period covered. The employee could choose to offer them an out if the found a much better paying job, but that would necessarily not be at the discretion of the company.
It's a blatant violation of freedom and it hurts the economy.
It's wrong regardless of skill level. If the worker is skilled, then it is their right to choose what they do with it. If investors have the right to invest their capital in two competing companies at the same time (or hundreds of competitors; as it happens when they invest in stock indexes like S&P500), then definitely a worker should be allowed to work for two competitors at the same time.
Workers should be allowed to put themselves in positions of leverage using their skills as a bargaining tool.
I have had noncompete clauses in my employment contracts in CA, where they are not enforceable. I know that they're not, but I work in tech where must people are aware of bullshit like this being attempted.
I don't see how these positions are reconcilable.
So instead, make non-compete clauses really unattractive for your average employee. This would include things like paying the average wage over the last year, including any bonuses (or paying the average bonuses or prorating them another way), continuing to pay benefits such as health insurance contributions so the employee doesn't pay more, and things like that. I'd even be willing to put a penalty so the company would have to pay a bit more if their pay rate doesn't meet the industry standard in the area.
You could require them to mention it, but that's just a more complicated version of banning it outright.
The difference is the matter of liability. In the regulation case, a business found to be in arrears could be hit with a very large judgement. On the other hand, if non-competes were simply banned and employees were unaware of the law, they could still suffer under the chilling effect of an unenforceable clause in their contract. To then discover the problem later and show damages in court would be much more difficult.
Otherwise you get something like $4k/mo in the middle of Alabama, or $1k/mo in SF one of which is gratuitous, the latter is not enough to pay rent.
If you made it $10k/mo it would be more reasonable.
Just having a minimum and so a forced cost to NCs isn't enough, because you have to compare it to the cost savings it implies.
Take my $1k/mo in SF concept (noting that noncompetes are already not enforceable in CA). That isn't enough to pay rent, so it doesn't matter if you're guaranteed that income when you leave, because its not enough to live on. That means despite 1k obviously being more than 0, from a NC victim's PoV there isn't one - they cannot afford to quit, so their wages can still be easily suppressed.
A good start would be: the GREATER of the 75th percentile of wages for a given job category, and if multiple possible categories, the highest paying one that COULD apply OR the average take home pay over the last [3 years or during the time worked if shorter].
How does the rest of your comment follow on from that?
This framing makes it easier to maintain the image of hating unions/perks/whatever, but is also simpler to implement: there are legitimate reasons that you may not want high level/executive members to not work for your competitors. Whether or not you agree with that is moot: there are enough lawyers in the legislative branches to believe that it's necessary. A law like this would not be an outright ban, but rather would result in companies reducing their use of NCs to just those employees where the information that had was actually valuable.
Currently NCs have no downside for a company, so there is no reason you would ever not use one: They allow suppression of fair market wages, and literally have no associated cost. This would mean that there is: You want to put a 12 month NC on your janitors? Well you now have to pay for a 12 month vacation. Immediately - NC clauses don't say you have to work for X months for the NC to come into effect. If you work for a company for a week, you are bound to an N month NC, and so a law like this would require a company pay for that time - again, making a company actually think about whether an NC is actually necessary.
Thank you for your swift and thorough response.
Some say eliminating noncompetes would hurt businesses, but consider that California banned noncompetes back in the late 1800s (yes, really) and has the largest economy of any state.
When low-wage workers are involved, noncompetes are a form of coercion pure and simple.
Trust me, no company does things so uniquely that one employee's knowledge escaping into the wild would bring it down. And if it would, they've got other problems.
https://en.wikipedia.org/wiki/DuPont_v._Kolon_Industries
If a junior employee on low wages has access to trade secrets then you're doing something terribly wrong, but it is entirely normal for e.g. industrial chemists, food technologists and manufacturing engineers to know extremely valuable secrets about the companies they work for. It is similarly normal for them to be offered extremely generous severance packages tied to a strict NDA.
The software industry is far from unique in the use of (largely legitimate) NDAs and non-competes for senior employees with extensive access to proprietary knowledge. Conneticut's concerns are about non-compete clauses being used illegitimately as a means of reducing churn for junior employees, which is a very different matter.
Can you imagine if a doctor was prevented from practicing medicine for 2 years after leaving a hospital? or an Architect? No. This is just bullying.
For a nation supposedly focused on entrepreneurship and individualism, we allow corporations to get away with a lot of behavior designed to stifle innovation. If a developer makes an application entirely on their free time and using their own systems, it is absurd for a company to expect the rights to that IP.
This isn't a philosophical debate. This is an empirical debate. Non-competes have both pros and cons, and empirical studies suggest the pros are exaggerated and cons under appreciated. They're also not the only tool in the toolbox. For example, there are NDAs, trade secrets, and tortious interference, among others. Compensation and other incentives can be restructured.
Finally, your scenario only begs the question: so what? For the sake of argument, let's assume that it's somehow unfair to the original employer. What about the customers? Why is it fair that they've lost the option of working with a guy they like, probably for less money? There are two sides to the coin. That's why I said it's an empirical question: we can work out which option produces the better outcome overall, and the facts strongly suggest the best outcome is the world where non-competes are generally unenforceable.
One of the biggest and last remaining areas of productivity growth in modern service economies is putting people to their most productive task. There are huge structural inefficiencies that result in person doing task A when they'd be much more productive doing task B. This is much more of a problem in a service economy than a manufacturing economy. And one source of this inefficiency, and an increasingly common source at that, is non-compete agreements.
That doesn't seem to happen in California where noncompetes are banned. This is one of those things that seems like it might be a problem but doesn't actually happen very often.
Hell, there's case law that a myspace friend list can be a trade secret under the right circumstances.
https://en.wikipedia.org/wiki/Ross_Perot
> After he left the Navy in 1957, Perot became a salesman for IBM. He quickly became a top employee (one year, he fulfilled his annual sales quota in a mere two weeks)[10] and tried to pitch his ideas to supervisors, who largely ignored him.[11] He left IBM in 1962 to found Electronic Data Systems (EDS) in Dallas, Texas, and courted large corporations for his data processing services. Perot was refused 77 times before he was given his first contract. EDS received lucrative contracts from the U.S. government in the 1960s, computerizing Medicare records. EDS went public in 1968 and the stock price rose from $16 a share to $160 within days. Fortune called Perot the "fastest, richest Texan" in a 1968 cover story.[12] In 1984 General Motors bought controlling interest in EDS for $2.4 billion.
I don't see a reason why we should be okay with removing such powerful leverage from the workers hands.
Just require a business to keep paying an employee his salary and benefits during the non-compete. A business has a secrets to guard. An employee has a family to feed. All is fair.
It depends on how you frame the issue. Banning non-competes only prohibits courts from enforcing those terms of the contract. In other words, it removes an element of state coercion.
The rationale for state enforcement of contracts is to promote the operation of free trade. It's become quite clear that in the vast majority of situations, even as between savvy economic agents, non-competes substantially restrain the operation of free markets. They're a net loss. Why use state coercion to such an end?
Given the known facts, rather than add a bunch of exceptions limiting enforcement it's better to reverse the default rule--that is, switch from default enforceable to default unenforceable--and add affirmative exceptions for the particular situations where we know they work well. California has non-competes, they're just limited to a very small set of circumstances.
Or you could frame the enforcement of the non-compete as the government prohibiting people from freely using their labor.
I think it's not so bad that when Hal asks the government to give him the money that he says he was promised, the government just tells Hal he was a fool to expect anything from that promise. Or course that isn't a universal, there are things in contracts that absolutely should be honored, the point is that you figure out which ones as a society rather than blindly enforcing anything and everything.
Ultimately, this is not 'prohibiting' anything; this is just stepping out of the free market, which is a good thing.
For example, saying the government 'prohibits' non-competes in this arrangement is like saying the government 'prohibits' conversion to Christianity. However, there is no law stating that a person cannot sign a contract with his pastor saying he is now Christian and will remain so until he dies. That is perfectly within both of their rights. What they cannot do is ask the government to enforce that contract, but that doesn't mean it's prohibited... it just means it's legally useless, the way non-competes should be.
All that keeps these unenforceable contracts 'viable' is shame or large cultural organizations (like a church). For example, some professions start professional organizations that establish rules for members, and then the organization markets itself so that people know only to trust professionals belonging to that org (like realtors). If that org decided that there ought to be restrictions around how members conduct themselves with regards to competition and kicked out members who broke this taboo, then fine... have at it! But, the government is unnecessary ere.
I agree. Let's get rid of this prohibition of an employees ability to break these agreements for any reason at all.
Plus, there are real downsides to your approach. It puts the onus on the employee to collect from the employer, which is best-case arduous and worst-case more expensive than it's worth with most of the money going to a billboard lawfirm anyways.
Your approach might make sense in the mid six figures and up, but for low-wage or even low to mid middle class workers, outright nullification would be way more effective.
I don't think it will involve collections or anything like that. You just keep receiving your monthly paycheck.
No paycheck - no non-compete.
Anyway, isn't that just prohibiting a non compete without compensation for potentially lost income? I mean any law is arguably a prohibition from the right perspective.
You mean like prohibiting an employee from switching jobs?
Either way, an incoming CxO has a lot more negotiating leverage (and usually experience) to ask for such things than fresh graduate looking for his first job. Low wage employees usually have no negotiating leverage at all and must accept the contract as-is or remain jobless.
Edit: I'm definitely not against banning non-competes for everyone. But a candidate for a C-level executive position is much more likely to have the resources and the knowledge to negotiate fair concessions or compensation for accepting a non-compete.