Hacker News Reader

Comment by steveBK123 | Hacker News Reader

There's been moves by the FTC to ban non-competes as well.

I work in financial services so am often covered by these clauses. Firstly, it seems insane that unpaid non-competes are legal at all, to start with. Also, seeing them applied to very junior level and even hourly paid roles is overly onerous.

While my industry pays your base salary during your "garden leave" even this can be misleading in more senior roles where 50% or more of your compensation is bonus, plus some firms cut your healthcare coverage on resignation as well. Some companies have also extended the terms as long as 18 months or longer.

Further, I have been under non-solicitations with terms as long as 5 years which is frankly insane.

So all that is to say the free market is not exactly working here, and seeing some legal guardrails put in place would be good - pay required, terms limited, benefits defined, etc.

View on HN

> Firstly, it seems insane that unpaid non-competes are legal at all, to start with. Also, seeing them applied to very junior level and even hourly paid roles is overly onerous.

They're not. I mean they're legal in that you can write one and ask someone to sign it. But good luck getting it enforced!

I went to a college where people typically went on to finance roles and strategy consulting. I myself worked at Bain for a few months before deciding it was not for me.

Our corporate law professor told us the same thing. She was head general counsel at an aerospace company. She said ignore all non-competes and don't accept payment for them.

If there's no payment in a contract, there's no consideration. A non-compete has to be signed upon resignation. So just don't take the resignation bonus.

Moreover, it doesn't really matter because no one is going to put someone on the government dole in order to enforce a non-compete. It's safe to ignore in almost all circumstances. Why would a state possibly take on yet another unemployment figure in order to protect a private company's interest? They want the tax money.

Non-solicitation is different.

IANAL, but take that as you will. I've followed this advice religiously and nothing happens. Most companies will be weirded out when you don't take the resignation bonus, but as long as no money changes hands, they have no power over you.

Fair. Something that is common practice but not going to hold up in court are uhh quasi-legal.

A problem is that if you are moving within an industry that enforces non-competes they all generally respect each others for fear of invalidating their own. They also tend to know the terms of each others contracts as well so you can't exactly bluff your way through.

So your new prospective employer will not do anything that is seen as soliciting you to break the prior contract.

Also at the low end it works especially well because you won't take the risk of court / having to hire a lawyer.

One of the issues is that many small firms are just going to pass if you have a non-compete. I guess you can lie and just say you don't but that's probably not a great way to start a new employment relationship. I worked for a very small firm and someone having a non-compete was just a hard pass from our COO. Just too much risk.

That is true now due to the FTC ban on non-competes, but it was not true before that. The enforceability varied widely from state to state. Here's a table showing how it was in 2016 [1]. My guess is that your corporate law professor was talking about enforceability in the specific state you were in.

Also, most I've seen were required to be signed when employment began, not when employment ended.

[1] https://beckreedriden.com/50-state-noncompete-chart-2/

Overly specific non-competes are just not enforceable. Just tell the judge you're going to go on unemployment and medicaid (You can, since you have no income), and they'll quickly re-arrange things to make it worthwhile. Why would a state possibly do this?

Going back to your list. Look at the 'protected activities'. Simply being employed in the field is rarely one of them. Yes, you can't take clients or poach employees. Some might require repayment for training, etc. But no one can make you unemployed and destitute for it. Why would any state want that?

The key word in many of the tables is 'not against public policy', which is what it means when states don't want people to start taking welfare when not able to work.

That being said I am glad states are now pre-emptively fining businesses that attempt to use these. It shouldn't be up to employees ignoring what they presume to be valid contracts.

What does free market mean, in this particular case, even philosophically?

Non-compete, as in preventing people from selling their labour, a violation of free market? Or is stopping people from agreeing to non-competes, a violation of free market?

Is allowing a man to sell himself into slavery free market, or is banning such practice something that helps to ensure the market stays free?

The more American idea of a free market is a kind of natural law of the jungle, where the strongest wins.

The more European idea of free market is that it can only exist with rigorous protections and watchful eye of a government

What makes them anti-free-market in my mind is.. monopsony.

Non-competes are a feature of monopsony because in a given industry all the buyers of labor enforce them. This is a concept related to monopoly, but on the demand rather than supply side. Even bad old USA takes (an increasing) hard line on monopolies.

TIL "garden leave", a period of time when you are mandated to be out of work. Thanks.

It's pretty good for say, 3-6 months.

Long enough to reset, not worry too much about health coverage, and if timed right.. not miss out on a bonus cycle. It's also short enough that you can interview and get a job offer from a company willing to wait for you. Often you can negotiate a signing bonus at the new shop to make up for compensation you may lose due to deferral or bonus cycle.

The firms trying to force 18 month terms are also some of the highest turnover shops. Arguably you'd need to demand a 50-75% bump to take the role since on the way out the door you are going to miss out on 1-2 bonus cycles. The term is so long you likely need to quit before finding a new job too, and then kick off interviewing in the last 6 months.

Importantly compared to almost all non-competes: Garden Leave implies you are being paid to not work.

And often it's some percentage of your salary and doesn't include bonuses, RSUs, benefits, etc. It does make a company put some skin in the game and may even seem like a decent deal depending where you are in life but isn't a panacea. (E.g. MA put some much-delayed legislation in place a few years back over strong opposition but it's still something like a 50% of base pay requirement.)

Reply on news.ycombinator.com