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Comment by ajsnigrutin | Hacker News Reader

I understand the need for noncompetes in some areas, but this can be solved differently... In my country (slovenia), if the company wants you to sign a noncompete, they have to decide the length of the noncompete (months, years after you quit) and a monetary compensation has to be written in for the duration of the noncompete. The wording is kinda loose and a few "decided by the court", but this would be an interesting compromise, especially if tweaked a little. So, if you get employed and educated for an eg. rocket scientist, and the company wants you to sign a noncompete, so you could only get a job as a burger flipper, the company would have to pay the difference between what you earn due to a noncompete, and what you'd earn if you continued working the same job (so your previous pay plus inflation + some added percentage as a safety margin).

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I don't think there is any reason for noncompetes. They won't pay me if one makes me unemployable. They should be generally disallowed. They only help companies restrict their employee's mobility.

Maybe those companies wouldn’t have existed without noncompetes, and not have provided those employees with jobs. Would you invest a large sum of money to build a site and hire a team if you knew it could not only vanish but also be turned against you at a moment’s notice? Surely the situation where employees have noncompetes is worse than the situation where there are fewer jobs because noncompetes don’t exist?

Would you really want to create a company where the only reason employees stick around is that they literally aren’t lawfully allowed to work anywhere else? An alien, yet common mindset.

I would not.

On the other hand I have no idea how to deal with a situation where a small tech company develops some highly specialised expertise in house only to have all their employees poached over night by a far bigger competitor that can pay them a salary or signing bonus that would be uneconomical for the smaller company to match.

How would you discourage this kind of hostile takeover?

A small company handles that by offering equity to the critical employees and having them share in the success of the company.

Also, intellectual property and a stiff legal budget.

Be a better working environment?

Prohibiting someone from competing with you is not at all the same as forcing them to work for you. Furthermore, if an employee doesn’t want to be subject to a noncompete agreement, they could just…not work there? Also, non-competes don’t prohibit working anywhere else.

Surely noncompete clauses are mainly to allow companies to treat their employees poorly, knowing that they won't be able to get a job elsewhere. The alternative to having noncompetes is to value and reward your employees sufficiently.

What if the company pays 100k for your extra education in some specific niche field, and you then quit and get a 50k starting bonus at a competing company, that doesn't have to invest 100k for your education?

How would you know what specialized education the next employer needs? Also, that assumes that classes are equivalent to on the job training.

I guess you could get a job in the non-compete window, but only be trained by the next employer while the previous one paid. That seems complicated and silly though.

Companies do often have strings attached to paying for training/certifications/relocation. That doesn't require a non-compete.

This is the risk they take in exchange for being able to fire me at will.

What if I spend 100k moving across the country and the company decides to fire me?

The answer is the same.

I mean, that’s on them right? What these companies want is free market workers without the risk of having to provide a reason to stay at a place.

Common clause here if you go to a more expensive conference that you won't leave in 1 year or else you repay the costs. Same more or less can apply to learnings.

Said company should have you sign a contract promising to pay back that $100k if you quit within X years.

It's reasonable to allow them for certain positions, such as executives. Since NDAs aren't perfect and certain knowledge can and will be transferred. But only very high level positions should ever be subject to them.

This is basically how it works in many finance jobs in NYC. Companies pay you for the duration of your non-compete normally at your base salary.

The one catch is that 50%+ of your compensation in these jobs is typically a yearly bonus which is not paid during your non-compete period.

But pretty much everyone knows this and socks away some money to limit the shock. The system works well both for employees and companies. There's some grumbling here and there but legislation like the one proposed in NYC would have needlessly broken a system that works pretty well.

> legislation like the one proposed in NYC would have needlessly broken a system that works pretty well.

Makes sense. I assume there is a pool all the finance people pay into every month that covers all the people who don't work in finance and are subject to non-competes?

No, it's up to the individual company to continue paying those employees.

Parent is saying that noncompetes affect more than finance companies, and other companies may not pay for them in the same way.

My (possibly incomplete) understanding of ‘gardening leave’ in finance is that it’s based on the idea of specific knowledge of trading positions or specific deal term sheets. It’s not that you can’t compete against us in general or use general techniques, but for 30/60/90 days you have specific knowledge of ongoing operations you can’t use.

The hiring firm pays for, but cannot use, the hired person.

>There's some grumbling here and there but legislation like the one proposed in NYC would have needlessly broken a system that works pretty well.

The system needs to be broken. What works well is paying and treating employees well enough so that they do not want to leave and go to a competitor, like businesses in California have to do.

So workers is California never switch jobs and all work at the same company until retirement?

> The system needs to be broken

Why?

Why protect the company who doesn't treat their employee well?

That seems tangential. There is nothing particularly wrong with non competes if the worker is properly compensated.

I personally wouldn’t mind a 6 month NY hedge fund style gardening leave each time I switch to a different job.

> So workers is California never switch jobs and all work at the same company until retirement?

The opposite, here in CA you can switch jobs at will because noncompetes are illegal. That's the primary reason I can't imagine working anywhere else.

We’re talking about people who discuss their own compensation in terms of “bucks”—“10 bucks” is 10 million dollars. I don’t think people who sign these noncompetes for highly lucrative knowledge want the system to be broken, nor do they want to adopt California’s model.

Sounds like you are talking about non disclosure agreements.

The fast food workers expected to sign one of these lest they can't work even a basic job probably disagree.

Has any fast food worker ever been sued for violating one of these?

When has "but this has never been enforced" ever been a valid argument to defend an existing law?

You’re dismissing the harmful effects that these arrangements have on the vast majority of employees at such firms.

There are only a handful of traders and PM’s at successful firms that make such high comps.

The compensation of rank and file employees are quite similar to working in tech but are encumbered with huge risks following termination of employment. The firms I have worked at apply non-competes down to administrative employees who aren’t even involved in the business and have no valuable proprietary knowledge.

For employees whose residency status is tied to employment, these non-competes can result in having to leave the country.

For those with families, they are unable to pursue their primary profession and lose healthcare coverage or pay massively increased premiums.

You don’t understand the population these agreements harm or understand the effects they have.

>The system works well both for employees and companies.

It's bad for the economy because it slows the circulation of ideas. A part of why there's been so much technological growth in Silicon Valley is because ideas could move between companies much faster.

Yeah but try convincing the government to get rid of copyright, patents, and intellectual property laws for this same reason.

I was given knowledge of specific trading strategies that, if taken to another company, would be competed away. Nobody would invest money in finding these if a competitor could buy all the IP by hiring a single employee

* would have needlessly broken a system that works pretty well.*

For some people.

For other people, they just can't work in the industry without fear of a lawsuit and don't get compensated at all. This is much more common when you start looking at lower paid people - sometimes fast food workers can't get another foodservice job because of these.

The system works great for these companies because they make it harder for their employees to get better jobs. It doesn't work so well for the employees in these cases.

> sometimes fast food workers can't get another foodservice job because of these.

there should not be any non-competes for job levels for which the skill is mostly commodities. Non-competes should be only for companies hiring a specific skill, and their working in said company would allow them to garner knowledge that can help a competitor - thus a non-compete. And it needs to be paid for.

If a company is found to be abusing it to ensure their employee cannot be mobile (for wage competitiveness), then the law should go down hard on them.

You’re all over this thread making this statement about fast food workers having to sign noncompetes. I could find no stories of this practice happening currently, the most recent I could find is in 2016 and the article is about this practice ending in 2016. Which fast food chains in the year of our lord 2023 are putting noncompetes in their employee’s contracts?

I haven't found anything about fast food restaurants in 2023 either. However restaurants had been using non-competes in 2017 [1]:

> While the prevalence of the practice may vary by region, one labor study published in April estimated that around one in six people working in food preparation or service jobs was bound by a non-compete agreement, according to a survey of nearly 67,000 workers.

The news article is from 2021 [1], but the one page in the labor study mentioning food services uses data from 2017 [2]. (The paper is on SSRN and there is no open-access mark, but I was able to open the PDF. Check page 51 out of 61 if you're able to open it.) There's still a problem even if only non-fast-food restaurants use non-competes, and a ban on non-competes should cover all restaurants at the very least.

Biden signed an executive order asking the FTC to consider banning non-competes, though the FTC hasn't actually passed anything about non-competes yet.

[1] https://thecounter.org/biden-targeting-non-compete-agreement...

[2] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3814403

There is a huge difference between fast food fry cook, manager at the local Texas Roadhouse, and head chef at a 3 Michelin star restaurant. The claim was that the first was being made to sign a non-compete. Again, the only “fast food” level non-compete is the 2016 story where Jimmy John’s stopped doing it:

“For example, readers may recall the infamous Jimmy John’s non-compete controversy of 2014. According to a Huffington Post report, the fast food chain required its employees and delivery workers to sign contracts agreeing not to work at any restaurant where sandwiches comprised 10 percent or more of total revenue (that’s right—not just sandwich businesses but any store that sold sandwiches or wraps) within three miles of a Jimmy John’s location for two years after leaving the company. Following an investigation from the New York attorney general’s office, Jimmy John’s dropped the clause in late 2016.”

I don’t disagree that non-competes are a problem but this sort of hyperbole undercuts the stronger arguments that can be made for why noncompetes (without attendant compensation) should be forbidden.

So if I'm to reconcile both your and the GP's statements, "one in six people working in food preparation or service jobs" works as a head chef at a 3 Michelin star restaurant?

More like, incentives for non-competes scale upward from fast food restaurants (close to zero incentive) to 3 Michelin star restaurants (higher incentive by an unspecified but nontrivial degree). My previous comment in the thread expressed the sentiment "close to zero incentive is not zero", and abduhl correctly pointed out that I was getting sidetracked from the main topic of the overall discussion, which is that noncompetes are generally bad in principle, not because a few outlier businesses who definitely don't need noncompetes use them anyway.

> The system works well both for employees and companies.

Taking a ~50% pay cut for potentially a year or longer doesn't seem like it works out too well for employees.

If a finance job pays let's say 250k that means you're missing out on maybe 125k. Over 30 years at 5% that's $540,000 on that 125k. If your non-compete is for 2 years that's a loss of over a million dollars. If you can happily live on 50k a year that 2 year non-compete just cost you 20 years of financial freedom.

In my experience finance bonuses are much less guaranteed than in tech. You don’t calculate your bonus as part of your compensation until it happens, because it’s so performance based that “no bonus” has a reasonable chance of happening.

So garden leave amounts to a bad performance year without having to work, which is a pretty reasonable trade off. At least it always was for me.

That's not enough. You're going to be much less likely to find another rocket scientist job after a couple of years flipping burgers.

Non-competes should have limits of months, and be paid at normal salary rates.

They might have to sign a non-compete at the burger flipping job as well, meaning they can't even get a better foodservice job. They'll have to get stuck in retail if they don't like foodservice.

And it'll still be equally hard to find another decent job.

there are multiple trillion dollar companies in California, where non competes are banned

it has long been seen as related to the success of Silicon Valley and one of several reasons why random jurisdictions can’t compete with merely being excited about attracting tech companies

In the US, fast food companies often use non-competes to prevent part time burger flippers from working a second job to supplement their income.

The effect is that two restaurants can each hire two people for a total of 40 hours per person, but don’t have to provide either with full-time benefits, like health care, paid time off, reliable hours, etc.

I wonder how your law works in situations like this.

>The effect is that two restaurants can each hire two people for a total of 40 hours per person, but don’t have to provide either with full-time benefits, like health care, paid time off, reliable hours, etc.

>I wonder how your law works in situations like this.

In Europe health care has little to nothing to do with one's employer, and paid time off is mandated by law no matter how much or little one makes.

How does it work in practice? Can company write contract saying compensation for non compete is $1/yr?

What incentive would there be for the employee to sign such an incredibly one sided contract when they could literally go to any other job?

What incentive is there for the employee to sign a non-compete today that has $0/year compensation for the non-compete duration?

However, another comment in this thread suggests that the law in question requires the compensation be the same as that of the job itself, which avoids this issue.

> What incentive is there for the employee to sign a non-compete today that has $0/year compensation for the non-compete duration?

If it's the only way to get a job, that's the incentive. If the whole industry does it, or at least the vast majority, then workers don't have an actual choice.

That was the point of my comment. The comment I was replying to asked " What incentive would there be for the employee to sign such an incredibly one sided contract when they could literally go to any other job?", and my answer was to equate it to the incentive they have for signing existing even-more-one-sided non-competes.

I think it’s more telling to look at the opposite question, “what leverage would employees have to turn such a term down, assuming such practices were considered ‘industry standard’ and all employers of note made sure to include it?”

The answer in an environment with a ban on non-competes is “they’d either have legal recourse if someone tried to write them a contract with that term, or the term would be treated as non-enforceable and therefore harmless”.

In the current environment, broadly speaking, most employees wouldn’t have leverage to turn such a term down, and generally don’t.

It's not most employees, its the employees that an employer would even bother with a non-compete for. And many (most?) of this group would have the leverage to turn down an undesirable offer.

Arby’s, Auntie Anne’s, Buffalo Wild Wings, Carl’s Jr., Cinnabon, Jimmy John’s, McDonald’s, and Subway have all made low-wage workers sign non competes.

This is plainly false and I have no idea what makes you think it's the case. The only reference I could even find was Biden saying something like this. That's somewhat fortuitous because it resulted in one of the 'fact checkers' actually bothering to fact check this here. [1]

The most places like McDonalds used to do was to force franchise owners to sign a sort of non-compete to prevent poaching each other's employees. That practice was ended half a decade ago and now even franchise owners don't have to sign non-competes, let alone low-wage employees.

[1] - https://www.politifact.com/factchecks/2020/jul/28/joe-biden/...

In the analogy, I don’t think you could “literally go to any other” rocket science job or whatever. Even within my field, which is pretty broad in tech, it’s not that easy to switch jobs and I’ve had non-competes meaningfully interfere with new prospects because of the subject matter of the new opportunity.

The existence of a non-compete can be a real showstopper, especially at smaller firms even if the noncompete probably doesn't apply. I worked for a very small company for a number of years and our business office basically wouldn't touch anyone who had a noncompete of any kind.

Same argument applies to the status quo. Zero pay for non-compete duration, just don't sign.

> when they could literally go to any other job?

Can they, though? This fight is moztly not about the spoiled tech sector.

Some fast food places require these.

I'm pretty sure they aren't gonna get literally any other job. Sign it or no paycheck.

It sounds like the requirement is that they pay to give you the same salary until the non compete expires.

These laws in the EU countries that apply them are usually stating that the compensation has to be reasonable in regards to the salary the employee is normally getting and the potential loss of money created by the non-compete close so no, one dollar won't work.

Also the non-compete clause need to actually protect some company knowledge, a non-compete clause on a bus driver will never be enforceable, regardless on how much extra the company pays.

In practice, noncompetes are rare, because noone wants to pay for someone who quit (or got fired).

I personally know only one person with a current non compete, he worked at some niche company, that paid a few tens of thousands of euros for specialization in one specific niche branch and one specific software. He can still work in the same industry, just not with that specific software, and he got 75% of his previous paycheck for (i think) 18 months (the length of the noncompete) + of course the current paycheck he earns in a similar industry (with obviously a different software solution).

The noncompetes are usually a case of having to invest a lot to educate a worker in the first place (again, niche stuff). General stuff (like a php programmer) would never get a noncompete, because the courses are cheap, anyone can learn that themself, and the monthly payouts are more expensive than udemy courses. On the other hand, there is some abuse, where people get employed, especially in the public sector, to get the expensive (cisco, redhat, microsoft,...) certificates paid by the employer and then quit and do freelance work.

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