Noncompete clauses violate labor law, NLRB lawyer says
wsj.com
wsj.com
Hopefully this leads to a more competitive landscape and gives some leverage back to the employee.
Non-competes should be a contract for a 'lengthy' severance pay period. It keeps the former employee out of the market, so the duration of the NC contract should be paid for at or above the normal rate of compensation + benefits. Depending on how it's booked for taxes / etc, E.G. if it's "You have to 'work' for us, and no one else, but on mandatory vacation, for X months, we'll pay you in full like that; and also do federal taxes etc."
Otherwise they clearly only provide damage to the employee and 'value' in extortion of that damage to the 'employer'.
Beyond that, it fails to account for all the other harms of non-competes -- such as the emotional toll it takes on that person (having no work to do is not something everyone considers a blessing at every point in their life), as well as the damage it inflicts on the rest of society as a whole.
I think an employee could, just not in that industry. In software that's relatively easy, I switch between two different fields and industries every other job. I'd be curious about adjacent fields for engineers working on tires like in GPs example.
My mother sank into deep depression after retiring... and not long after that, the dementia started setting in.
If it’s really valuable IP that they protecting with a non-compete, then it would be worth it to pay someone a mandatory vacation upon leaving.
But how often are non-compete clauses really meant to protect IP? Most of the time it’s a tool to depress wages, they know it, we know it, they know we know it. No one is being fooled here that’s all it is.
If you put a price on non-competes, they will go away.
Unless they calculate that competition would have a higher price, in which case, they might not go away for everyone.
It is probably going too far to ban the practice all-together, but no company should ever have the ability to stop someone from taking a job at a different company, today, if the pay is right. No union either for that matter, although that is a more controversial stance.
I would venture never. Or nearly never. A noncompete is a terrible way to protect IP.
Businesses know that the clauses are unenforceable, but since they are free to add them and they have some real impact - people not aware of their unenforceability may change their behaviour because of the existence of the clauses, and the threat of a lawsuit for any party involved is going to be a chilling factor in any case.
Time to make the cost of adding the clauses not free, to address the root cause.
Source: had a non-compete clause in employment contract that had no mention of any pay during period. Employer initially did not want to pay me anything during period. Hired some lawyers and they paid 100% of my salary during that period. All the lawyers did was write some letters, never had to go to court.
Unless someone is a high level employee and/or leaves under bad terms, most companies just drop the issue if pushed.
Hope you have the funds to see that through to completion including all the appeals! It’s not like tortious interference is a crime the state would prosecute—just like violating a non-compete isn’t a crime where the state would prosecute. Civil actions are handled via lawsuits and they’re expensive.
No state in the country will force a worker onto unemployment in order to enforce a private party's non compete. None.
And what “certain pay out?” The company sues the former employee, if the employee wins they get to keep their job, effectively making that job cost millions. The employee would have to countersue, and that would carry quite a lot of risk of failure even if the employee wins the original suit.
But I agree overall that relying on lawsuits to work this sort of thing out is just not practical.
In my case, employer didn't want to pay. Hired some lawyers to send a letter saying that either they paid me or the non-compete was invalid and ended up getting paid full salary for the duration.
That's going to be a pretty harsh limitation in itself.
“If your previous employer sues you they will lose” is not the counter you think it is. You were lucky they didn’t litigate and luckier still that they didn’t consider a non-compete of outsized importance like that Wisconsin company does: Some employers are extremely litigious, and will try to exhaust you in court because they believe they’re protecting internal secrets.
That sort of thing must not be discounted when considering what advice is appropriate in this kind of situation—and especially what the overall policy of a society should be: If the company I referred to above were a California company and you were an employee in California, “they will lose” and “you won’t spend millions” (or at least “you’d recover costs”) would actually be accurate.
Still, what I understood at the time is that, if the employer is not paying you at all during non-compete period, they will have a hard time enforcing it anywhere.
I am also surprised by the claim that it could cost millions to litigate about something like this, how confident are you of that number?
(And about CA, my understanding was that noncompetes are simply to allowed there, so it wouldn't even apply)
That specific company is delusional about where their profit comes from; they (specifically their founder/CEO and the surrounding execs) think it’s because of their awesome “ultra secret” technology and not a combination of regulatory and inertial lock-in. Like, they literally think their MUMPS codebase and the non-relational database backing it are what make them great, rather than something they’re successful in spite of. (And it does, to the degree that it encodes a huge amount of domain knowledge—derivative domain knowledge, based on the law, regulation, and insurance policies…)
Employer concentration has had a statistically significant negative impact on Wage Growth [0].
The fact that non-competes have spread beyond white collar roles into unskilled roles with nominal IP impact like janitorial work or sandwich making shows it has become an antiquated system.
[0] - https://insight.kellogg.northwestern.edu/article/wage-stagna...
Put a reasonable financial burden on companies to prevent abuse. I'd happily sign that agreement.
An outright ban on anti-competitive/anti-labor policies is just much simpler for everyone involved.
If you can quit the extended severance period, it would force employers to pay the market rate of their anti-competitiveness. If someone’s salary is X and they find a new job at 1.25X, then some would take X to do fully paid vacation for a few months after quitting, but surely some would force the old employer to pay up.
It's board members only. Non-compete clauses, overall, are not a thing in the EU.
Likewise, most tech sector companies also claim ownership to all IPR created by their employees, but by law that is only limited to actually patentable inventions.
[1] https://news.ycombinator.com/item?id=36132534 (robbiet480's root thread comment)
(Not your lawyer, not legal advice)
It's about time to unlock that innovation in the rest of the country.
https://www.cnet.com/tech/tech-industry/calif-supreme-court-...
All I'm saying is that you get well past the Google IPO before it becomes broadly accepted that noncompetes are invalid in California, which certainly rebuts the idea that Silicon Valley succeeded due to a lack of noncompetes. (Noncompetes are mostly very bad.)
I do agree that the NLRB should go on an advertising campaign to inform employers that previous employers threatening legal action basically have no basis in law and you should just send them a reply saying 'No thanks'. Because that's what you should do in virtually all circumstances.
When people say "Silicon Valley succeeded," they're talking about Silicon Valley, the mythologized founding of the semiconductor industry in the 50's and 60's, beginning with the so-called Traitorous Eight. I think Apple's origins are also believed to have been enabled by the non-compete-less environment. It doesn't as much play into the success from the Dotcom era onwards.
https://leginfo.legislature.ca.gov/faces/codes_displaySectio...
People have been known to write them. In fact it got so bad that the California AG had to issue a press release a couple of years ago as a "reminder" that they weren't enforceable. But they have never had any effect other than to intimidate the stupid.
The 1990s Web kids had a certain ideology that led them to believe that no law could possibly say what California law has said since 1872. But it has always said that.
There was definitely a trade secret exception to California noncompetes; maybe it was broadly (over)applied?
There's a recognized carveout for business sales, and I think a couple of other things that don't implicate the ability to ply your trade. You might be able to stretch some of those to some restrictions on employees in some rare case. And I think that at some points the intimidation got bad enough that even some lawyers had lost track of reality, so I wouldn't be surprised if some people had settled some cases they shouldn't have settled, or even gone to court and failed to raise arguments they should have raised.
But the basic thrust of the law is refreshingly clear, and it's statute, not just customary law.
I forgot to mention that people also get noncompete mixed up with nonsolicitation. You can't hire me as a framing carpenter in California and try to demand an agreement that I not work as a framing carpenter for another contractor, or even that I not start my own company. But you can require that I not use relationships I built with your customers when I was your employee to convert them into my customers. And obviously there can be grey areas there.
For "Valley" purposes, that usually only affected people in sales, though.
... and you can NDA me and say I can't use your secret hammer grip. You just can't completely stop me from competing with you if that meaningfully restricts my ability to do the kind of work I know how to do.
I do not care for that characterization. Most people are not familiar with the intricacies of employment law. It is unfair to expect the average person to know that this magical spell in their employment contract is invalid, unlike the other magical spells in that thick document, because a magical spell at the state capital says otherwise.
It's more complex when you work at a megatech company and there's barely anything you can do that could not be consider competition, but at a smaller company, it's not too restrictive.
Yes and I think that was a big factor when tech was made by "hackers" who had an open disdain for the rules. I think that lately even an unenforceable noncompete is enough to scare people away from competing directly with a former employer. And let's not forget the infamous Meta/Oculus fiasco (trade secrets issue, but close enough).
However, since we have seen several U-turns in the US recently due to changes in political party, I am apprehensive that this will be flipped immediately the next time there's a Republican president in power (and consequently, their appointees at the NLRB). Unfortunately it seems as if only one party is interested in these sorts of pro-worker regulations.
Or am I worried unnecessarily?
(via https://news.ycombinator.com/item?id=36132479, but we merged that thread hither)
Courts rule (in this context) on the validity of laws passed by congress, as well as the consequences of their implementation.
An NLRB lawyer saying something is merely an indication of a policy direction. Should the NLRB act on it by, for example, fining companies that have non-compete clauses in employment contracts, the companies would have to take the matter to the courts to seek redress. From there, a court may side with the NLRB, deciding that banning non-competes is within their mandate and that the mandate from congress itself does not violate the constitution. They may also side with the companies, determining that such fines exceed their mandate or that the mandate itself is unconstitutional.
I assume that you mean "at will".
"Right to work" bans closed union shops - employees have the right to join the union or not at their pleasure.
While people get those mixed up all the time, "right to work" seems like the appropriate phrase to mock here.
For the specific reason of getting confused with the existing context, I would understand a conclusion of "don't use either" but I don't understand why that's a reason to prefer one or the other.
> Observers on both sides say that limitations on the clauses will compel employers to get more creative about how they retain talent, using everything from compensation to career advancement to keep workers engaged.
Hmmm...we wouldn't want that now, would we?
dang: consider merging threads