Resistance to Noncompete Agreements Is a Win for Workers | Hacker News Reader

Resistance to Noncompete Agreements Is a Win for Workers

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I'm surprised more states and provinces don't take the example of California as a guide for non-competes. Places are always trying to create their own Silicon whatever which is obviously easier said than done, but getting rid of non-competes is one thing that can be done.

I don't think getting rid of non-competes would necessarily attract companies to your silicon-whatever.

Silicon Valley isn’t what it is because it attracted companies, it’s a hot bed because it empowers people to start their own.

It's talent, not employers, in short supply.

Not really true. The whole existence of a “brain drain” indicates that the places the workers are coming from have insufficient opportunities.

Which results in talent being in short supply.

The talent is both better rewarded and considered and treated elsewhere.

It's quite possible for talent to depart locations based on nonfinancial considerations, or considerations with indirect financial effects, as with noncompetes. The Great Migration and Jewish refugee migration (1920s-50s, and later, Europe) are cases in point.

On multiple grounds, California ~1960 - 2000 offerred both better compensation and better considerations for technical talent. The pendulum is swinging based on a few factors, notably housing costs an conditions.

Or sufficient opportunities, but less compensation.

I am bound by a non-compete agreement, but until a few months ago, I didn’t remember that I had signed it. At that time, I received an offer for much more money and more responsibility from a competitor. However, a close friend and co-worker reminded me about the agreement when I told him I was mulling the offer.

Ultimately, I decided I didn’t want to risk asking my manager for a release, and I certainly didn’t want to violate an enforceable non-compete without the blessing of my employer. So I scuttled the move.

I was disappointed, but I hold nothing against my employer or against the laws of NY. They hid nothing from me when I accepted the offer, and the noncompete was very limited in scope (geography, industry, and duration). If I had left for the competitor, I would have brought a lot of knowledge that I gained as a result of my position in the company. Not legally protected IP, mind you, but still valuable technical know-how and information about our customers’ biggest problems and the trade offs of various solutions. I don’t think it’s unreasonable to allow organizations to protect that kind of information.

Edit to add that I don’t believe all non-compete agreements are reasonable. Just that I think it’s misguided to ban them wholesale.

I disagree.

Non-compete agreements severely disadvantage highly specialized professionals where there are only 2-3 employers in a specific area who can hire you for your skills. This reduces their leverage and allows companies to underpay their employees. This becomes a huge problem when you become experienced in your field and built up a network. One cannot simply restart their career in a different industry in many cases. With jobs becoming more specialized, this gives employers excessive leverage over employees.

As an alternative, I would prefer something like a fixed-term contract renewed every x years (typically 2-3 yrs) where you're free to move to a competitor at the end of your contract term. This protects the employers investment and also the employees leverage to negotiate higher wages or a promotion.

I would recommend looking at CA for the positive effects of banning non compete agreements.

If you're really working on proprietary material there are NDAs to protect the employer.

I'm sorry you feel this way. You lost out on a good opportunity because of an asymmetrically unfair legal agreement that you had to sign. I'm glad I live in California where it's not enforceable. If you came to California, you would see that your supposedly valuable knowledge isn't as valuable as you think. Certainly it has some value because you learned how to be good at your position, but it wouldn't tank the company, no one is that important.

> I don’t think it’s unreasonable to allow organizations to protect that kind of information.

Why though? As you pointed out, it isn't protected IP, but rather knowledge and skills that YOU have developed and hold in your head. Does the company legally or morally have any license over or?

I didn’t learn this information in a vacuum nor on my own time. I worked on systems where I saw abstractions that worked well and others that could be improved. I spoke and tested ideas with users. I attended meetings where people presented findings that were the product of hundreds of hours of work and read countless reports with similar information.

If I left for a competitor, I would be working on a lot of similar problems. Of course, I wouldn’t immediately tell my new employer everything valuable I learned in my old job, but in the normal course of doing my new job, I inevitably would reveal information that my old employer spent time and money to learn.

> Of course, I wouldn’t immediately tell my new employer everything valuable I learned in my old job, but in the normal course of doing my new job, I inevitably would reveal information that my old employer spent time and money to learn.

This is ridiculous. Modern employers don't even invest much in employee training anymore and expect you to come with all the skills you need. And non-competes are like -ve training where anything you learn you're expected not to use for a period (and you forget some of it in the meantime).

In the big-picture view this seems like a huge waste of a country's human resources. When people are switching jobs the match between employee <-> position is forced to be sub-optimal by non-competes, reducing overall productivity.

Edit: It's giving employers an awful lot of credit to say that they "spent time and money" to learn something. An employer is already short-changing their employees by paying them less than their productivity (see: profit). It's more accurate to say that you're spending time and money (in the form of profit you give up to the employer) to learn something for their benefit. And now the employer is expecting to have a monopoly on that as well. Terrible deal for a worker.

Contracts of all sorts increase switching costs, but they also potentially create value. Sure, in some cases, one or more parties could become better off by taking some action that is prohibited by the contract, but that doesn't mean that we would be better off as a society if we outlawed all contracts that have the potential to encumber somebody in the future.

The reason to ban non-competes wholesale is that they diminish the economic vitality of a region by inhibiting the formation of new ventures. This doesn't make them immoral; it just makes allowing them bad policy.

If non-competes are allowed, it's in every existing employer's interest to use them. This means that the constituency for keeping them is concentrated and well-funded, while the constituency for banning them is diffuse, consisting of the entire pool of employees as well as all the startups that don't exist yet. People who haven't lived and worked in California, such as yourself, may just not know what they are missing. So once they are entrenched, banning them comes to be very difficult politically.

I suggest looking at the issue from the perspective of competition between regions. It's ironic to me how much effort states and localities will go to to attract employers, when they hardly even consider trying to attract better workers. Companies come and go; workers tend to put down roots. When you get a concentration of highly skilled workers, as we have here in Silicon Valley, it naturally attracts businesses; the startup I work for now, for instance, could hardly have been formed anywhere else. And if it had been formed elsewhere, and tried to hire people away from the Valley, it would have great difficulty getting the best people, in no small part because they wouldn't want to sign a non-compete. I know I will never sign one!

I agree that companies should be able to enforce these contracts. But there should also be more realistic limitations. For one, there needs to be good compensation for the employee. Too often an employee signs a non-compete and gets locked in to a job that isn't paying market rates.

If the company fired you tomorrow, would you still be bound by the non compete?

Many people are and they receive no additional compensation. I think there need to be provisions requiring an additional non-compete accompanied with comeserate severance pay upon termination.

The problem with this line of reasoning is that it is not solely your decision to make. We as a society, as taxpayers and potential jury members, are being placed on the hook for the costs of enforcement and the negative consequences on the local economy that these agreements produce. If you and your employer want to engage in a non-enforceable personal agreement to avoid competition, that’s (mostly) your business. But if you ask us to use the court system we taxpayers pay for to enforce it, things are very different.

Can you point to empirical studies that demonstrate "the negative consequences on the local economy that these agreements produce"? This is an honest question. I think theoretical analyses point in a bunch of different directions, and I reckon data would help inform our arguments.

We have the natural experiment of California, which as I recall, if it were a country, would have the world's sixth or seventh largest economy.

Compare what's happened to the Boston metro area with Silicon Valley. Boston matches the Bay Area in top universities, and if you go back to the 1980s, had even more of the computer industry. But the Valley has outpaced it ever since, and by now has much greater economic vitality.

As a Bostonian I agree. There was some recent Massachusetts legislation to limit non-competes but I wish they'd done away with them entirely like in California.

Did you receive extra compensation for the non-compete?

Yes, my signing bonus was contingent on signing a non-compete, non-disclosure, and other agreements. It wasn’t much money, and in retrospect, I don’t think it was worth it. Still, I agreed to the terms, so I should be bound to them.

In Washington State, there was an almost full-ban on non-compete that was proposed a few years ago. Google came to the public hearings with full support for the law as it is (which make sense given the status for non compete in California - and how it got sued by Microsoft over one employee). The law would have made it that non-compete are void if laid-off, and void if over 1 year max or if you're not an executive employee.

But Microsoft, Amazon, and the hospitals fought it hard. (Hospitals are using it on both nurses and doctors apparently)

So the bill got rewritten where it only applies to people with a total comp less than 185k, and where student debt could be subtracted to that 185k. This got fought more by opponents.

Now the ban on non compete only applies to people whose yearly salary (total comp as listed on W-2) is less than 100k, So doctors and tech workers at those companies get nothing out of it, except the clarification that non compete:

- cannot be for longer than 18 months

- if employee is laid off and non compete is enforced, the company must pay base salary for the duration of non-compete.

Geekwire had a good coverage of it over the years:

https://www.geekwire.com/2016/non-compete-bill-stalls-washin...

https://www.geekwire.com/2018/effort-kill-non-competes-washi...

https://www.geekwire.com/2019/tech-leaders-sound-off-washing...

EDIT:

original bills: http://lawfilesext.leg.wa.gov/biennium/2015-16/Pdf/Bills/Hou... ; http://lawfilesext.leg.wa.gov/biennium/2017-18/Pdf/Bills/Hou...

final bill: https://app.leg.wa.gov/billsummary?BillNumber=1450&Initiativ...

> - if employee is laid off and non compete is enforced, the company must pay base salary for the duration of non-compete.

That sounds like a pretty big "nothing" to get out of it?

The trick is not to enforce the non-compete but to deter other companies from hiring because it's too much trouble.

Should be a single time decision made at the end of employment

It’d be interesting to see data on what happened to the number of non competes enforced before and after the new law. That sounds like a pretty big disincentive to enforce them.

Non competes should be enforced symmetrically. If a company won't let you work for another company they can't hire another employee.

That's the net effect, and it hurts employees far more than employers.

There are trade-offs here even if looked at purely from the worker's point of view. While it is probably strictly superior from that POV to have the exact same job with the exact same terms except without a non-compete, the inability to commit to a non-compete means that the equilibrium is shifted and the exact same job with the exact same terms likely wouldn't have existed in the first place.

Perhaps on the balance laws against non-competes are a good idea, but we should always be wary of claims of a free lunch.

Noncompetes are a free lunch, for employers. They get to suppress wages at no cost to them.

As for them being necessary for certain jobs to exist, I’ll believe it when I see it. Different states are governed by different laws, so if it does happen examples shouldn’t be hard to find.

This is a great point. Non-compete agreements reduce risk of losing otherwise unprotected information to a competitor and probably increase retention of valuable employees. So preventing employers from using these agreements would increase risk and turnover, and employers might (read: probably would) decrease offered compensation in response.

Now, this effect might be dwarfed by the upward pressure on compensation caused by greater availability of alternative jobs for employees, but it’s not obvious to me that would be the case. I’d be interested to see some empirical studies on the subject.

I disagree with the assumption here that employers are offering increased compensation. When it's standard practice to have non competes _and_ they take years to be out of effect then you don't get competition that would require increased compensation for employees.

At this point even if a competitor jumped in and offered no non competes for the same wage, it wouldn't matter as no one can work for them. The mechanisms of capitalism require little to no barriers to entry and industry wide practices like non competes add large barriers which prevent the normal supply and demand mechanisms

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