Hacker News Reader

Comment by stephencanon | Hacker News Reader

There's a simple solution, of course (besides outright banning of such clauses): require that the employer continue to pay the employee's salary until they are released from the clause. See how many summer camps continue to ask for or enforce such clauses then.

View on HN

This is not only the obvious solution, but a necessary part of the basic idea. I want to keep you from telling $STUFF to a competitor? That $STUFF is valuable? Then there's a very good chance the opponent will simply try an buy it. Employment is only one of the many ways they make such a purchase, and so this ends up being a simple supply/demand problem.

If I'm serious about keeping $STUFF out of the competitor's hands, I better be paying the people that know $STUFF better than any likely buy price (legal or not). This isn't even for post-employment when the typical non-compete is relevant; it's the same reason you pay your employees enough so they don't take your ideas to a competitor (or regulatory agency).

This same problem of having to pay at least some minimum if you want to maintain any loyalty is perhaps best seen with soldiers. Having an important engineer take the ideas for your next project is bad enough, but shorting the pay for soldiers tends to cause things like a "coup" or other "high chance of getting shot" scenario. During the last big budget mess, congress played fast and loose with a lot of stuff, but were able to agree very early into that mess to continue paying the "retainer" for the military's loyalty. ( http://www.politico.com/story/2013/09/government-shutdown-se... )

Of course, maybe managers could start to realize that their money is often better spent in R&D or production or sales...

I do agree with the general point that at least they should pay the employee bound by such agreements, so as to eliminate frivolous use. If it's really economically important to a firm, they are more likely to demonstrate that by paying a cost.

But, is there really any reason not to outright ban them? Specifically, are there any strong economic arguments for allowing these?

It seems like everyone is worse off in an economy when talent has to sit on ice because these contracts, even if they still collect a salary they are no longer contributing to the wealth engine of society. It discourages more efficient uses of labor when people are effectively married to a company. It also seems like an inherently unfair practice with at-will employment being the rule.

This sounds like one of those ideas people hold up as protecting small businesses or start-ups from big corporations, but really doesn't end up being an advantage.

My impression was that "proper" use of the noncompete was to pay the employee the same salary for the time period with the purpose of preventing IP and other valuable proprietary information from being transferred to a competitor. I think this is reasonable.

>But, is there really any reason not to outright ban them?

Yes: making them pay the employee puts more money in workers' hands ;-). That is all.

> Specifically, are there any strong economic arguments for allowing these?

They benefit the employer, since it limits the job prospects of the employee.

IANAL but I understand that this is required by law in China.

If an employment contract contains a non-compete clause, the employer must may some agreed percentage of salary (I don't know what the minimum is, but the agreed proportion could be something like 50%) during the defined period of the non-compete. The employer can decide to end the period early, by notifying the employee. At this time they can also stop paying the x% of salary.

Naively, I would want x > 100%; after all, not being able to work doesn't just cost the employee salary. It costs them gained experience, bonuses, and vesting, to say nothing of a black hole on their resume. It's also better for the economy as a whole to have a strong disincentive to using noncompetes, even if the employee is compensated.

Yup, and you could try to negotiate this with your prospective employer at the time of joining. It can also be worth asking whether they've ever invoked the non-compete for employees of your title/role. If the answer is 'no', they you might let it slide and focus on other aspects of the negotiation.

Many non-compete clauses already do this, especially in finance.

Right; I'm guessing, however, that those covering hair stylists or summer camp counselors typically do not.

Many (and I would guess most) don't.

Reply on news.ycombinator.com