I too can see the reasons that non-competes exist, but I see more reasons why they shouldn't exist. And even if a company thinks it's worth it to pay someone's salary for a year or two to enforce a non-compete, is this really what's best for the economy overall? Motivated, highly skilled people excluded from the job market?
For high demand folks (the kind we read about in executive emails between Apple and Google and so on) it seems very possible that a company would opt to pay 10% of the employee's comp to deny them from the competition.
eg, you get full benefits plus no less than 80% of all compensation of the previous 12mo. Non-cash compensation (eg equity) may be replaced with equivalent cash.
> "Non-cash compensation (eg equity) may be replaced with equivalent cash. "
What's the equivalent cash value of options? The variability here is huge. Seems better to just ban these schemes entirely, especially considering there's seemingly zero upside to allowing them.
Remember: California has never allowed noncompetes and we're doing just fine in the tech department. Better plan would be for the rest of the country to follow our lead.
But really the right move here is either no non-competes or employees getting to set their own prices for them. Being on the wrong side of a power asymmetry forces behavior changes.
In other words, the kind of person who is actually in a position to negotiate the terms of their contract. What bugs me most about the current situation is the ubiquity of non-competes for low salary employees, who have the least amount of leverage to negotiate contracts. I'm much less concerned about staff engineers at tech companies and portfolio managers at hedge funds, although I'd prefer to see non-competes banned altogether (except perhaps for non-competes for owners selling a company... I think it's fair that if I buy your ice cream shop, we can agree that you can't open one up across the street the next day).
If all employees rejected them, companies would have no option but to disband them.
The issue is that when one enters into a non-compete without equivalent compensation the government loses potential tax revenue. Income tax is maximized when workers are working most productively, so there is a strong incentive for the government to keep workers working productively. Similar reason for why we have minimum wage.
If non-competes provide sufficient "garden leave" then the tax revenue should not be impacted, so there is no reason for the government to care. The productivity is still captured. The government isn't in the business of spotting bad deals for individuals – you are quite free to make all kinds of boneheaded financial decisions – only bad deals for itself.
Granted, execution and enforcement can be a challenge. Say you enter into a non-compete with "garden leave" of $1. Is that sufficient compensation with respect to the intent of allowing "garden leave"? Now you need a tribunal to make the call and all the complexities to go along with it. And so, when drafting laws, it may be more practical to prohibit "garden leave" as well.
“Garden leave” is basically just being in paid employment with no duties.
Neither the FTC action nor state policies like those in California generally prohibit noncompetes while employed.
However, if the compensation for such a contracted “garden leave” was substantially less than normal full-time comp for the employee, and agreed prior to employment rather than as a separate independent agreement at the end of the employment-with-duties, I can imagine the FTC still seeing it as an unfair competition practice, and state courts, limiting recovery for breach to any “garden leave” compensation for the time in breach.
Where did you get that idea? In California: non-competes are carte blanche unenforced and even considered abusive and illegal in many contexts (for non-executives), whether you're currently employed or not.
From the actual case law of application of the prohibition by state courts, etc.
> In California: non-competes are carte blanche unenforced and even considered abusive and illegal in many contexts (for non-executives), whether you're currently employed or not.
This both a misuse of the phrase “carte blanche” and inaccurate in its substantive message. Prohibition on competing work while employed is a well-documented exception to both California’s general policy against non-competes and its general policy against employer prohibitions against moonlighting; your employer can’t stop you from working for someone else who doesn’t compete with in your spare time while you are employed by them, and can't stop you from competing with them when you are no longer employed by them, but they can prohibit competing work while you are employed:
https://www.dwt.com/blogs/employment-labor-and-benefits/2020...
https://www.mossbollinger.com/blog/2020/december/my-employer...
Productive work is a major factor in psychological well-being. And a lot of people have spent their career being a highly specialized expert in one thing.
Expecting them to abandon that for a year or more in order to instead contribute "entry-level skills" at something else can be difficult. It's already known how retirement can lead to depression and a painful feeling of emptiness -- imagine how much worse that can be in the prime middle of your career.
It's not about the money or whether GDP measures something or not. It's about the ability to contribute what you're best at, where your excellence lies, or having that ability taken away. For many people, there isn't any kind of easy substitute for their primary area of expertise.
2 years of non-compete aka 2 years of compensation to not work sounds WONDERFUL. Like, it means you're so good at your job we're willing to pay you to not do jack shit. You musta been working on something so cool that it's worthwhile to have you sit at home then let someone get even a whiff of it. It's the best possible compliment.
There are PLENTY of ways to do productive work -- take a class, work on a certification, work on a side gig, or take a job in a different industry for a spell. Volunteer at the YMCA and do an AWS cert while sleeping in until 10am every morning.
"entry level skills" is also simply untrue -- plenty of non-entry level stuff you can crank away at. Start a Master's degree, or shoot for the high end Cisco certs, etc. etc.
You can contribute to where where you're best at in a ton of different ways. You need to ditch this hustle culture mentality, there are plenty of ways to generate excellence and they don't require full-time, ass-kissing jobs.
Have something to show for your time, like you took an online class or something, but it's not a huge surprise. You didn't pop on multiple DUIs and spend 2 years in the slammer.
Non-competes are stupid period and thankfully in California are not enforceable. It's similar to a prenuptial agreement in marriage except who the f is marrying their employer?? A good employer wants to keep you, will compensate you to do so, and if they can't, they are proud of you and wish you well, _even if that means a stronger competitor_ .
The trade secret argument the poster above you alluded to is very unlikely. Usually a competitor is hiring you because you are already somewhat trained and up to speed in their field... and perhaps the competitor can slow your company's operations by hiring you away.
In the end, many companies only pay you what they have to keep their operations stable and feel more than free to pay the very top of management more than what they deserve, and keep those executive compensations while laying off people in operations quite freely when times are bad. Noncompetes only for the company, not the worker, during good times.
Now there's an idea - a fair noncompete. Employee can't use their knowledge/skills for 2 years after they leave, but also the company can't hire anyone with any industry knowledge or related skills for 2 years after they leave either. Wonder how many companies would like that idea?
Only do unto others that which you wish others to do unto you (or something like that, you get the idea).
It's common for executive's lawyers to negotiate contracts with the firm before accepting an offer (including what the firm can or cannot do to the executive without penalties). I wish it were more normalized for ICs.
I don't have the business or economic bonafides to back this up, but it seems likely to me that such an incentive structure would not serve the benefits of society as a whole, and might become quite damaging were it to become widespread. My own sense is that, with the possible exception of the "you can't take your client sheet with you" style of noncompete that sometimes gets applied to salespeople and hairstylists, non-competes are simply anti-capitalist. Not in some sort of ideological sense, just in a very practical, "This is nothing but a tool for retarding GDP by further concentrating wealth in the pockets of the already-wealthy," sort of way.
The standard I'm familiar with is, knowledge you acquired during your time at a previous employer is safe to share with your current one if you can support it with a citation.
What does that have to do with non-competes? What you're describing is IP law and theft; and is illegal pretty much throughout the western world.
Non-competes specifically and only exist in the context of barring employee competition and migration of talent. All via legal labor servitude at the justification of "training investment" and/or "unfair competition".
Eg. If you move from one big tech co to another, you may be technically moving to a competitor, but the subject matter of your work could be unrelated.
This is probably true of other industries too.
And my work doesn't even include any contact with their customers! What they really wanted was that I wouldn't do for, or even share with, the other big accountancy firms what I was going to do for them, because it's something unusual that's their idea and they think it gives them an advantage. That's completely fine of course. The original reading was ridiculous.
I don't think they changed it in the contract, but they did explain it by email.
Non-competes limit where your staff can go to. Without proper compensation for the time period in which they apply for, they're a very one sided (and in some cases illegal [NCs are legal in IL unless they assert an economic hardship]) way to prevent employees leaving. The claims for them is "training cost is expensive and it's to limit staff from training at one company and leaving" (which as we know.. companies generally don't do training in house)
This gets thrown around HN a lot but I don't think it matches reality. Say I work in machine learning algorithms for show recommendations at Netflix. Amazon hires me to work on their machine learning algorithm recommender on Prime Video. Sure, I might have NDAs to protect what I learned at Netflix, but how does Netflix realistically show whether or not I disseminated that knowledge at Amazon? It's not like they can just ask to see Amazon's code to see if the knowledge has been ported over to there. The only way to really show that I infringed an NDA is for someone to rat me out, which is probably pretty rare. To that end, I understand why companies want non-competes (I'm not saying they should be allowed to have them... I'm just saying that there are reasons that they exist beyond "we don't want employees to leave). In finance, it's very common to get a paid non-compete where you get your full salary for as long as the company wants to enforce the non-compete. Companies aren't paying these high salaries just because "training cost is expensive and it's to limit staff from training at one company and leaving". They are doing it because they actually fear the consequences of the employee's new firm competing with them based on the knowledge that the employee has. For this reason, it's also pretty common for companies in finance to not pay out gardening leave when they aren't worried about the employee's new company directly competing.
Probably not, but I would imagine that in cases like this there would be a third party given access to both sides, and charged with determining if theft has occurred.
Personal integrity. If you have it, you are valuable. If you do not any value you have is short lived.
Cuts both ways. Does Amazon have the integrity to not expect the violation of your agreement with NF?
Life is simpler with honesty
I look forward to the day I can add inventions to that one field that asks for them upon being hired!
If they can get enough evidence to make it through the pleading stage of a lawsuit, then they can ask exactly that during discovery.
Non-competes (non-paid out) only put time between companies (in some states it might be beyond the lifetime of the person under a NC). To put that, and not fully pay out at the current salary, puts a uneven pressure on the individual who was pressured into agreeing to it for (unguarenteed) employment.
Additionally, non-competes survive termination by the company.
Sure you get paid less than you are used to but you are still getting more than 95% of the population to do literally nothing.
Bonuses are like options being worthwhile in that they are mostly out of your control. When I see a position pays 140,000 plus bonus which was almost 40,000 last year I know I can only count on 140,000 this year and if 40,000 happens to be awarded great.
If there were another US state where noncompete agreements were "essentially legal" whose economy "worked" what would that show.
Are there any other factors one should consider that affect whether a state's economy "works".
Is it possible to work for a competitor of one's former employer without violating the former employer's intellectual property rights.
(NB. I am in favour of regulating non-competes.)
It works!
Sure, it's more complex than that and there are other reasons. But ultimately, a single piece of legislation had a huge hand in turning California into the preeminent global leader in the vast span of technology industries.
Trademarks don’t really help with this. The bigger issue is trade secrets. You can’t make someone forget how your as-yet unreleased prototype is designed, and proving that their subsequent work for a competitor draws on that knowledge is expensive and time consuming. Not to say that non competes are a good idea, just saying trademarks are irrelevant to the conversation, and trade secrets are a more complicated issue than patents.
Might be worth 3 years of pay to keep someone silent and idle for 2 years in some exceptional cases, but 7 years for 3 years would be exceedingly rare and 15 for 4 would be unheard of.
I'd be happy to sink all my time in my hobbies for 200% APR exponentially growing pay as long as anyone would like.
That's no argument. Parasites work as organism taxon, doesn't mean all life can become so.
An example of an economy outputting businesses at the highest levels of performance while barring non competes is an argument.
The general rules that most states use for deciding when non-competes are enforceable aren't that bad. E.g. if you work at a bakery, you're not going to be allowed to open your own bakery two blocks away within a year, but it's fine if you do it a couple towns over. That doesn't seem especially crazy to me.
What if you work at Starbucks and want to open your own coffee shop. Is it reasonable that you should not be able to open a coffee shop within two blocks of any existing Starbucks?
you trade getting to learn for agreeing not to use it against them for a while -- is the theory
at line worker level i'd argue this is nonsense, at 'how to mill iPhones from a single block of metal' or 'self driving car brain' maybe its real, but there are ndas and patents for that
In your example, they cannot claim the skills and basic education that gets you up to the point of "how they mill iphones within a context" (i.e. the milling, operating the machinery, physical properties of the metal, etc)
They are not legally able to include a huge educational backbone of knowledge (that they may have taught you) as their prioptary IP. Again, NCs don't prevent that disemination. That disemination can happen without employment.
https://beneinstein.medium.com/no-you-cant-manufacture-that-...
To impose punitive measures after-the-fact because someone taught you how to do a job that they needed you to do seems hilarious even on the face of it.
To be clear, saying "You're not allowed to use our IP or our machinery or our supplies" is totally reasonable; if I quit Starbucks, then of course I won't have Starbucks machines or merch. To say that you're not allowed to do something because they happened to be the ones to train you seems just silly.
I get very strong middle-school vibes, where you introduce your friend-from-another-school to your group, then get mad when they become better friends with someone else than they are with you.
I do think it is reasonable for the competes to include not stealing recipes or IP or other capital from the business. Contacts are harder to legislate but there is a difference between remembering your best contacts and contacting them via LinkedIn vs exporting a contact list from your company's Salesforce and using that.
How are you examining these rules that it "doesn't seem especially crazy?", what's the rationale?
Capitalism requires competition to produce positive outcomes, the only reason to limit or ban competition is in the edge cases where the model doesn't work (patents, utilities, etc). Frankly we have too many regulatory moats as it is IMO.