Employers who violate Colorado’s non-compete laws face stiff new penalties
gunder.com
gunder.com
This applies to pretty much any valuable information that fits in one person's head.
That doesn't make sense. If that were true, there would be one trading firm in California that only existed to hire traders from other firms and copy results.
There are also very few plantations, victorian workhouses and open pit coal mines. Some kind of businesses aren't worth having.
On a more positive note: I wish wealthy countries would pass laws to ban ship breaking in countries with weaker environmental laws. It seems like a terrible loop hole today that would not be very expensive to patch. When you look at how chemical plants operate in wealthy (mostly environmentally clean) places, pollution controls are front and center for the whole staff. They well know the fines easily exceed profits, and they don't want to wreck their own communities with pollution.
If a trading firm is going to use human traders they would not do it in Cali, because they will have to force their traders to work at uncomfortable hours. If a trading firm is going to use solely computers, they would not do it in California because the time a network signal takes to reach California from New York actually matters in computer based trading.
Nah dude, grandparent is talking about smart Robinhood traders
The real issue is when firms won't pay workers for this privilege. This should be outlawed. It is harmful to workers and competition ("free movement of labour").
Some states are more friendly to labor exploitation than others.
https://en.m.wikipedia.org/wiki/High-Tech_Employee_Antitrust...
The defendants were high-technology companies Adobe, Apple Inc., Google, Intel, Intuit, Pixar, Lucasfilm and eBay, each of which was headquartered in Silicon Valley, in the southern San Francisco Bay Area of California.
The civil suit was filed by five plaintiffs. It accused the tech companies of collusion between 2005 and 2009 to refrain from recruiting each other's employees.
They stole billions of dollars from their staff. Eric Schmidt, one of the main conspirators, is still in a leadership role at Google.
https://home.treasury.gov/system/files/226/Non_Compete_Contr...
First I had no idea how prolific non-competes are.
> Non-competes are a central labor market institution, with nearly one fifth of all American workers currently bound by such a contract.
After the policy recommendations, here is the conclusion from that paper.
> Though non-compete contracts can have important social benefits, principally related to the protection of trade secrets, a growing body of evidence suggests that they are frequently used in ways that are inimical to the interests of workers and the broader economy. Enhancing the transparency of non-competes, better aligning them with legitimate social purposes like protection of trade secrets, and instituting minimal worker protections can all help to ensure that non-compete contracts contribute to economic growth without unduly burdening workers.
Any non-compete clause must come with a requirement to pay that employee to not compete. That will quickly get rid of non-competes that aren't actually their for the purpose of protecting trade secrets.
Companies will sit on new medications until right before/after the similar, but older, medications they own/license are off patent, that way they always have another patented medication waiting in the wings for when they're done squeezing every cent they can out of their old ones.
Plus, there is nothing stopping another company from making a similar drug and beating you to market - there were over 6 -statin drugs in the market at one point.
4. Contracts with executive and management personnel and employees who constitute professional staff to executive and management personnel.
There is an actual clause covering secretaries! So you can be sure your secretary will not go working for a competitor. You do not have to think hard to guess who had this law written for themselves.
Even when one of these exceptions applies, Colorado courts insist that the non-compete provisions be reasonable in duration and scope.
For example, a state that has a law which says non-competes much be “reasonable”, may be enforced by the courts as “1 year in duration and within 50 miles”.
Let's say you work for a consultancy in a large metropolitan area covering 5MM+ people and this area has 100+ consultancies. There are many groups of these consultancies and they all service different verticals. There are no other major areas with concentrations of business within hundreds of miles (see middle America).
A person may have been working exclusively within the healthcare vertical at one consultancy and would move to another to work in a completely different vertical (e.g., retail). Would 'reasonable' cover this nuance? Probably not, particularly not in the favor of the worker.
In practice, you can call up a lawyer in any state that requires non-competes to be "reasonable" and they can tell you more specifically what the court will enforce.
- The almost conspiracy-esque malice of bending ‘to the rich’ that the grandparent poster was talking about is much more easily explained by ‘these people also have unusually privileged information’.
- I think the thinking (perhaps unfairly) went like this: Whilst there is such a thing as domain skill, a noncompete should affect a secretary or assistant minimally in practice, as they generally have a broad, non-domain-specific skillset, unlike the executive they report to.
These aren't what people think of as 'secretaries'. These are highly skilled executive assistants with WAY more domain-specific skills than you're giving them credit for. I have friends that do this for C level executives. Including at $100bn+ companies. A non-compete within a given industry would severely hamstring their future career.
I knew this (correct) case would be made as I was writing my comment, but thought I could avoid including a sub-clause to deal with this topic.
So yes — I know folks like this too and fully acknowledge the skillset involved. Some of those folks have a deep skillset and yet don’t have any particular knowledge such that a noncompete would make sense to keep them from spreading it.
Per my comment I don’t like noncompetes — but I do think that this is the thinking that was used to define policy around this.
I also do think that there is an exclusion zone, whereby folks are either:
- Non-specific and not affected by this materially.
- Highly skilled and /would/ take material privileged information with them.
- High skilled and /would not/.
I suspect the last category is just elided in the thinking that led to this coming to be.
I don't think the answer here is necessarily all that clever -- charged conversation notwithstanding, I just wanted to get at the fact that it's likely /not a conspiracy/.
I would love to deflate this mess of a subthread. :)
Huh? The VP of Engineering has a hefty stock plan, a guaranteed bonus, and a three-year contract. Do you really think that her secretary has anything comparable? Heck, her secretary doesn't even have a three-year contract.
But I don’t know if that is why the carve-out is there or not. I doubt it, but some exec contracts absolutely allow for a guaranteed support staff of the exec’s choosing.
The VP's contract reasonably protects the VP from the consequences of a non-compete. The VP's staff has no such protection.
No it's not. If the VP's contract says "The company will hire an assistant for you" then the assistant negotiates with HR for their salary like a regular employee. If the VP's contract says "You get $100K/yr to hire an assistant" then the assistant can't get a raise until the VP's contract changes.
> The VP's contract reasonably protects the VP from the consequences of a non-compete.
It might, or it might not. Contracts do whatever they say they do. If the contract says "You and your staff can't work for any of our competitors unless it's a leap year and you say Pretty Please" then that's what it says.
More generally, above a certain level, executives are more like a small agency than a single person. If you hire Tim Cook to be the next CEO of your startup, he's going to bring his current assistant(s) with him, he's not just going to inherit whoever the old CEO's assistant was.
Most laws revolving around protecting corporate secrets are enablers of inequality that the public pays for. It’s one of these services the government provides to business that it really shouldn’t.
The only reason I commented was to dispel and push back on the conspiracy-esque style that the parent commenter used to characterise /how/ the law got written this way.
You’re absolutely right. I’d happy sign any non-compete contract as long as _I’m paid my salary throughout the non-compete cool-down period”
The last contract I signed (1 sheet of A4) bound me not to take work with a "competitor" for 6 months after quitting. Since the employer's clients were all local, I took that as meaning I was not to take a job with a web-shop in the same town. And I thought 6 months seemed reasonable - after all, we weren't developing patentable inventions, we were just making websites.
[Edit] I think the purpose of the clause was mainly to stop me taking customer lists to the competitor. I'd have thought that fell squarely into the "unfaithful servant" bag - it's a scummy way for an employee to carry on.
So do accountants and lawyers. But do try and enslave them with such a law and watch as the world erupts.
Why would rich and powerful executives lobby to make sure there is an 'exception' that keeps them bound by these contracts?
One answer: It helps them. If you're in demand, you can extract more money by promising to keep the secrets. This gives "executives" and "secretaries to executives" a special way to extract a little more.
I don't see how that's just secretaries. As a programmer I am:
a. A Professional
b. Staff
c. I work for Executives and Management Personnel.
So this basically means programmers are also in this bucket?
Though a real quick search did turn up a case where what the lawmakers intended by "management" was in question, so there is a distinct possibility they wrote their terms badly. It's weird reading a law that introduces terms like that without defining them.
I feel like the lawyers writing the law felt bad about saying: The people directly responsible for scheduling lunches and making sure executives have time to poop between calls.
I think the reality of it is that secretaries are a form of excessiveness and they are afraid of losing that.
(I'm kidding. But I'm not.)
Ask US citizens why we still don't have paid maternity or paternity leave...
Every politician sponsored by a large corporation
First one is the weather.
Back in 1995, working for an Investment Bank in London, Perot Systems tried to have us sign a non-compete that included the primary industry, adjacent industries and basically a circle drawn around London with a (IIRC) a 300 mile restriction on working in IT. Which not only prevented me from working anywhere in England, but ruled out a big chunk of Northern Europe. I assumed that it was because the guys who wrote the contracts were Texan and had a different view of distance than us Brits, but the cultural clash was enormous (contract failed after 12-18 months, but I was gone anyway).
Probably not legal in the UK at the time, but irritated enough of us to leave and go and work somewhere else.
https://www.upi.com/Archives/1988/10/14/Perot-says-he-didnt-...
I recently quit a company with a non-compete clause and joined one without, and ended up with a 30% increase in pay for the exact same work.
Either way, they make little sense for the vast majority of non-C-level employees. Employers should be bidding on the employee's knowledge and skills, like you say. If it's imperative that the employee not move to the competition, then do the cost-benefit to retain that employee.
On the flip side, you're still getting paid 6 figures to relax, recharge, travel the world and have fun. I would personally love it. But my ex-colleagues feel very differently
A noncompete does not ban you from working in the industry. Typically it only restricts you from working on competing products. You are only being banned for a period of time from a small part of the giant space of the tech industry.
Besides, even in situations where this is not the case, it's still absurd. Companies are all like "free market, supply and demand and bla bla bla" until it goes against them. If you wanna be a capitalist, then be accept capitalism as it should be: a great competition.
I wish there were good terms for what we sometimes think we mean when we say "capitalism". "Free market" seems good, but the word "capitalism" often shows up in the definition...
The terms of most non-compete prohibit you from working on a "competing product", they prohibit you from working at a company that works on a competing product. Specifically if there is an intersection in products made by two companies, they are competitors.
If you're in a small town there aren't that many different jobs, so a non-compete means "you cannot work" - e.g. if you have a Walmart job with a non-compete, you can't go work at Target.
At the other end, if you work at a large tech company it turns out you probably can't work at any other large tech company. If you work at a startup you can't move to a large company, and vice versa.
And "only banned for a period of time" is a nice way of glossing over a sim to twelve month period (pretty much as long as the company thinks that they can get away with) in which you no longer have healthcare, and ability to pay rent, etc because you can't get a market rate job.
If a company believes that you leaving and working for someone else will cause them harm they should be willing to pay you to not work for those competitors.
Normally I wouldn't be in favor of putting more people in jail, but we do need some form of a real deterrent for corporate crime, and making people think about their personal actions at work will hopefully change the culture of compliance.
In principle, I agree that jail time is too harsh, but I have to admit I find it satisfying to turn the tables like that. Plus it's not like the jail term is ever going to be used.
[1] https://www.cliftonblacklaw.com/practice-areas/criminal-defe...
[1] https://www.vera.org/publications/price-of-prisons-2015-stat...
Right now plenty of people look at that and say, "It's obvious that Those People will only learn if they're strictly punished. We can't be soft on crime!" But if we have similar sentences for things like wage theft, where many more people will identify with the perp, I think they'll be much more willing to say, "Gosh, that seems like overkill."
$750 is ridiculously low to the point where almost any company would see that as a cost of doing business. It needs to be much more harsh to do any real damage to corporate finances.
The punishments we give are too harsh on petty crimes committed by the poor and powerless, but far to lenient on the vast crimes of the rich and powerful.
I was pleased to learn that the new supreme court nominee has worked as a public defender.
They may be able to argue that a software or hardware engineer would need a non-compete as they are exposed to confidental IP and don't want them bringing it to another company. Same for a line cook that has knowledge of "secret" recipes or techniques.
That seems very naive. Judges don’t usually jail companies for labor issues.
At best the company would have to pay comp’ for the non-compete, though realistically the most that’d happen is the non-compete gets struck down and the employee gets saddled with the bills.
And that’s if you don’t get a “business friendly” judge who decides some nonsense like the ratio of water to secret sauce syrup is a trade secret so the NCC is valid and you can’t work in any place of eating for 5 years.
> contracts with executive and management personnel and employees who constitute professional staff to executive and management personnel.
Has anyone looked into what "professional staff to executive and management personnel" means in practice? The broadest reading could include software engineers as "professionals" who report to "management personnel" (their engineering managers). That seems broad enough to make this basically useless, so I assume I'm missing something.
We'll find out when the first company tries to enforce and the court defines "professional staff".
These aren’t “We’ll sue you!” laws. They’re “You’re getting a cell, dude!” laws. They also cover the new employer, who would solicit and use this information.
It’s just that proving that an engineer who went to a competitor, then provided privileged information, is difficult, expensive, and time-consuming.
It’s much easier to just prevent the employee from going to a company, where they could casually reveal the information, and the new company could dilute it, making it harder to prove they got it.
And, one way to avoid a lot of these problems, is to simply pay your employees well, and treat them with respect, so they aren’t tempted to head for greener pastures.
That seems to be too big an ask, for most corporations.
If a company sees that they'll probably get away with something because nobody will have the patience/resources to sue and win, and even in the worst case they'll pay X million/billion which may be less than they gain through their illegal behavior, they're very much incentivized to just try. And the managers making and implementing the decision have no skin in the game, so they'll happily play along.
If a person is at risk of going to jail for it, they're suddenly very much incentivized to not participate in that.
I'm not against non-competes, but I think that you should be compensated for any harm they cause. If I get fired, non-compete should be invalid. If I get a job offer, my company should get a right of first refusal to match compensation.
Why do you assume compensation is the only motivation? Countless studies show that bad management is the primary reason for leaving.
By your argument, if I’m being sexually harassed at work in such a way that I can’t likely win in court (never done in front of others), as long as my current company matches any offer I get, I’m not allowed to leave?
Why does the company get the benefit? If I can’t go to a new company, why can you fire me? It’s absolutely impossible to prove every infraction that could be done by the company or employee.
I dunno about the right of first refusal, but the firing thing should absolutely make non-competes invalid.
If you don't want someone to work for you anymore, then that's your problem when they work for someone else.
Think about normal relationships - anyone who left their partner and then insisted that their ex cannot start a new relationship would be considered insane by everyone party to the conversation.
And yet, when it comes to something even more important, like making a living, we totally allow it, tolerate it and normalise it!
The issue for the worker is that the “high end” of their current position may not be near the median of the next position they want to move to.
For employers, there would be very very very few jobs where this was worth it. Which still might be “better” for them than a California style blanket ban on non compete.
The whole point of my market value comment was that if you can get an offer for $X total comp, then if your employer wants to enforce your non-compete, they would have to pay you a 20% (or whatever) premium on that. For the vast majority of employees companies would just stop having non-competes. For higher level employees it might even reduce the amount of stupid "I can get a better raise by switching company" cycle that currently exists.
For executive level folk in CA that is functionally how it works already
To my knowledge, companies in CA have the option to counter their former employee's offer from another company. If Company A really doesn't want their employee to work at Company B, they can offer them a fair amount of money to not work for a year.
I think that would be a fair middle ground that doesn't require non-competes.
That's not a law, and doesn't need to be (I'm not even sure how you would make a law in which a company could not offer a raise to prevent you from leaving?). The alternative would be that you were legally required to accept an offer once it was made, which seems to be even more absurd than a non-compete.
I do not exactly understand this though: "contracts with executive and management personnel and employees who constitute professional staff to executive and management personnel"
Why are they any different? Does it mean that let's say CFO of company A can not quit and be CFO of company B (assuming they do not disclose A's private data / secrets)?
The idea is that the CFO people are compensated so highly that they’re not substantially harmed by the existence of the non compete. Losing out on a $100 million opportunity when you made $10 million in the last 4 years is much, much less painful than losing out on a $130,000 opportunity when you made $70,000 last year.
Granted, a lot of CFOs are making $300,000 or sometimes even less. But they are seen as having a lot of power to destroy a business.
Another way this works is that people like Anthony Levandowski could get a “CTO” esque title to go along with their stratospheric salary so that the non compete is still strictly binding in Colorado, even absent proof of trade secret violations.
General population finds the exceptions more palatable when the language can be presented to sound like it’s only binding deca-millionaires.
This language is a compromise solution, so contracting firms like Accenture will attempt to figure out what they can still get away with.
My understanding of it:
General employees have minimal bargaining power, and while they may have knowledge of, or even be responsible for generating IP - overall they're not seen quite as important as senior executives who have knowledge of longer term plans.
Those senior executives may also have better bargaining power - so for instance they might accept a 2 year non-compete for the industry, but in return get a sizable payout upon departure to compensate for that.
It's basically to stop your C-Suites of FooCorp going to work for their direct competitor BarCorp and having direct internal knowledge of how you'd take down FooCorp.
Serious answer - it is a figure of speech.
Read as written, it sounds like CO has strengthened non-compete agreements. I'm glad to see it's the other way around.