When I was interviewing last year, I cut off an interview loop with a company primarily because I don't reside in California and their NDA was, "Anything you say, anything we say, forever." Since I was also interviewing with one of their direct competitors that I really preferred, I didn't want to put myself anywhere near a legal situation where they might try to mess things up for my career.
They freaked out when I told them I didn't want to complete the interview loop because apparently I had passed their initial "weeder" interview and they were getting really excited about the possibility of me joining. But I would have had to sign that "everything, forever" NDA to keep going, and they weren't willing to go back to legal or do anything to change it, so that was that.
I personally know several people in my state who had their careers impacted due to threats from former employers over an NDA, so I really don't feel like that was an overreaction on my end. And I'm super-happy where I ended up.
I just wanted to provide a data point on how NDAs that go overboard ("everything, forever") can cut both ways.
The thing that makes me so angry is how lightly so many people treat these legally binding contracts.
I showed up to a meetup at some tech company's offices. After putting in my name, I was shown a contract on a small tablet and was expected to click next and sign with my finger. I have normal vision and couldn't read it without putting it right in front of my eyeball. I don't sign anything without reading. I asked if they had a printed copy so I wasn't holding up the entire line.
Their response? "Oh, that's just all standard legal stuff, don't worry about it."
Easy to say when your lawyers wrote it. It turned out to include both a non-disclosure and non-disparagement agreement. I did not attend that meetup.
It’s ridiculous how flippant and deceptive companies are about signing non-competes. Sometimes they neglect to mention it until you actually show up for work. So there you are, depending on this new job, standing in front of your new boss, compelled to create and maintain a positive relationship, presented with a legal contract that significantly damaged your leverage and alternate prospects.
That might even be criminal.
Often, I hear from some about how non-competes in some states are “non-enforceable”. But even when that’s true it doesn’t inoculate you from serious problems.
A friend signed a non-compete regarding professional services when he want to work (as an independent contractor, mind you) and was sued by the company after he left. He lawyered up and won, but the case took 18 months due to stalling and delays by the company. During that 18 months the judge had granted an injunction preventing him from providing similar services, leaving him effectively unemployed. It did great damage to his savings and the strength of his resume, which now had a significant gap.
As I said, he won! But he was awarded no damages, despite the victory. Seeing this play out convinced me that even you’re in the right, the process can be plenty of punishment on its own.
He received no damages after winning a case brought on by a company that prevented him from working for 1.5 years? That doesn't seem like justice to me.
Careful with that word. Non-competes are non-enforceable in California and other jurisdictions. Some people say "non-competes are illegal in California", but it is not a crime to ask someone to sign a contract with a non-enforceable provision.
One of the best quant firms, TGS, is located in CA and enforces non-competes no problem. They had an employee sue, his NC got waived but he had to pay 7-figures to TGS.
Their response? "Oh, that's just all standard legal stuff, don't worry about it."
I'm a Canuck, so centuries of legal, common law separation here...
But if someone misrepresents what a contract is, and even more so applies pressure to sign, it's meaningless.
My understanding is that this goes back to "make your mark" and lower levels of literacy, and in modern times, that legalese is gibberish to many, thus misrepresenting what you're signing can effect enforcement/validity.
It's very stupid for them to brush it off like that.
(I wouldn't have signed either, and have walked from jobs and contracts over absurd NDAs. One client actually wanted me to sign a forever NDA, but 1/2 way through the contract! Wtf?! Negotiate that at contract sign, not months later!)
We do have what we call "fraudulent misrepresentation" in the US. It could give me grounds to seek damages or invalidation of certain misrepresented provisions, but doesn't automatically make the contract meaningless over here. The two problems are specificity and proof, both of which require more consent from the receptionist than they are probably willing to go along with.
It would be fraud to misrepresent a material fact at time of signing, such as the quality of goods or, say, if a loan officer says that interest is fixed-rate, when the contract says it is variable-rate. But for my case, what does "standard legal stuff" actually mean? I'd argue it is actually pretty standard for a Bay Area tech company. What does "don't worry about it" actually mean? If I asked the receptionist to explain more or "does this include a non-disparagement agreement?", I doubt they would have said anything.
For proof, I was in California, which is a two party consent jurisdiction for recording. So I could have pulled out my phone and said "I'd like your permission to record what you just told me about the contract. Can you please state your name, position at Company X, and what you just told me about it being all standard legal stuff?" If I was that receptionist, I'd probably call security.
In many jurisdictions much of the EULAs are unenforceable for this reason and others; they are effectively a set of false assertions about rights and prohibitions.
Most EULAs are basically meaningless in the USA. Once you have a legally acquired copy of the program the Copyright Act specifically and explicitly gives you the right to back it up and load it for execution. You don't need to be licensed a legal right you already have.
You can also print it off, cross out the shit you don't consent to, initial the changes, sign, and mail it certified to whatever their address of record is. I'm not a lawyer, but at that point my understanding is it's their job to say no we don't agree, just like it was your job to say no I don't agree.
California rental agreements are a particularly odious example. Liquidated damages (AKA late fees) are completely illegal in California. In fact it's illegal to even present a lease that has a LD clause to be signed! Sometimes I wish I were more into small claims swashbuckling, because I bet you could have a dozen small claims for various properties going against Equity Residential in any California city.
Oh yeah, it drives people crazy but I actually sit there and read the entirety of contracts I sign (though I not only read very fast but I'm also able to easily skim along where warranted). It took a bit longer than expected to buy a used car a few years back. In that case the car dealer seemed pretty impressed I was actually reading what I was signing. Most people respond to it like "uhhhhh..." hahaha
Like, honestly, I'm not going to subject myself to some legal encumbrance because of peer pressure. I got a bunch of pressure at a former employer where they wanted everyone to sign these new employment agreements and it took months because I wasn't getting sufficient answers to questions I had. I should have taken it as a warning sign of where they were headed based on how stuff proceeded there later on, but I was pretty young back then. :P
Yep. Got multiple eyerolls when I was checking in to a testing center for a certification when I actually stopped to read the full page of rules presented to me before I signed it.
Funny enough, they didn't even follow the rules themselves. The "end test" protocol was to raise your hand in the testing room and be escorted out, I sat there for a few minutes then just walked out myself and apparently that's what I was supposed to do.
> The thing that makes me so angry is how lightly so many people treat these legally binding contracts.
But most of them aren't legally binding.
I've never understood why people care so much about these unenforceable non-competes. They want me to sign a contract that's inherently void? Sure, I'll do that all day (or if I'm feeling feisty I'll ask them for a small salary bump for the trouble - may as well take the free money right?). If they want me to witness them signing a deed to the Brooklyn Bridge I'll do that too.
I had a former employer sue a friend of mine, it wasn't legally enforceable but had to go for enough toncost enough in legal bills to make it so my friend lost his new, great, job that he had moved for. Just because it's not technically legally enforceable doesn't mean the company won't try to enforce it, and that trying has a real cost in terms of lawyers fees and also loss of employment.
Does negotiating to not have a non-compete agreement really reduce your risk of getting legal hassle from a disgruntled ex-employer that much? The way I see it even if you don't have a non-compete it's not really any harder for them to call up your new employer and go after you with a meritless lawsuit.
It's an anti-pattern. People are pressed for time due to social pressure. The length of the documents adds to the stress, especially since it is full of legal jargon and looks like things you've seen before. Personally I think contracts need to be easily readable by laymen. Otherwise companies have an unfair advantage to tricking people. Isn't deception supposed to be illegal?
If you think that's bad, I've been to multiple medical practices where part of the "standard legal stuff" they want you to sign would have you give them the right to sell your private information and info about your visit to their partners for the purposes of advertising, etc.
those are larger groups likely owned by private equity investors
True private practices are definitely not doing that. they dont even have the financial incentive to make an investment for the legal advice add that statement, to their financial disclosure
This is where you say the word GDPR (if you're in Europe). I've done it to some HR person and subsequently received a long email apology from the (very nervous) boss of the company the day after.
I quit a job I'd been at for well over a decade, because the company's new owner was making everyone sign noncompete, non-disparagement, and intellectual property contracts. They would own everything I invented while employed with them, even if I did it at home on my own time, if in their opinion it had anything to do with their business. I checked with a lawyer first, who said it was probably all enforceable in my state.
I’m on this, it really really sucks. I have a good idea that has nothing to do with my work and I can’t / won’t build it
I love my job, and I have a family, so the risk reward is too hard, but I’m literally going to quit in the next year just to get out of that stupid paperwork
Note that while an unqualified “eveything ever” employment NDA is expressly illegal in California [0], California is not as hostile to NDAs and non-disparagement agreements as it is to post-employment noncompetes.
Contracts that restrict you, whether non-compete, NDA or otherwise, should be as narrow as possible and limited to a reasonable time. Overly broad restrictions are stupid, dangerous, and unnecessary.
I had quite a bit of discussion about this for my current project. It had two non-competes; one for the client and one for the intermediary, and the important one, the one by the client, sounded very broad and vague, and I wanted explicit and in writing how broad they meant it. (Turned out to be only about a handful of their direct competitors.)
>I personally know several people in my state who had their careers impacted due to threats from former employers over an NDA
I'm curious, was there any actual legal action or was it just the threat? I'm not dismissing the fact that a threat can create enough risk to make someone change their behavior, but I've also heard these NDAs are tough to legally enforce. Of course, nobody wants to be the one calling their bluff only to find out it wasn't an idle threat.
> I'm curious, was there any actual legal action or was it just the threat?
One particular instance that stands out in my mind was for someone who I saw hired into the company for a specific role with a certain scope. The previous company's HR then sent a letter to the new company's HR telling them about the employee's obligations under the NDA. The new company's management decided the prospect of a legal issue was too much a hassle, so they reassigned the new hire to a different role outside their direct area of expertise and with a smaller scope for a year.
AFAIK, there was never really an opportunity for the employee to say, "No, don't do that, I'll shoulder any legal responsibility if the previous company decides to get nasty about this." The simple "it would be a shame if something were to happen" letter between HR departments was all it took to put the worker in a career tarpit for a year.
My ex business partner and I founded Ruby Lane (I'm out now) and hosted our servers at he.net in Fremont CA. eBay wanted to meet with us so we were going to stop by on a server maintenance trip. When we walked into the eBay building, they presented us with an NDA and said it was routine and we couldn't walk into the building until we signed it. I refused, because they never told us we would need to sign an NDA and they didn't send it to us ahead of time to review. I didn't even bother reading it, because no matter what it says, if they later wanted to cause trouble over that NDA, we didn't have the financial resources to fight them. Even though they invited us and I told them we don't want to discuss any of eBay's trade secrets, they refused to budge on the NDA. So we met with an eBay person on their outdoor patio for about 30 minutes and then left.
What's hilarious is that many industries run on "expert networks" of people who are full of knowledge they accumulated while under NDA.
The thing you have to realize about commercial contracts is that the law doesn't enforce itself, people who violate them usually don't get caught, etc.
Note also there are other inputs to NDAs. I worked for a firm that did a project for a big accounting firm that itself had confidentiality requirements to its customers so it is natural as an employee of the first firm I help the second firm keep its commitments.
I'd say there are two threads in NDAs: one of them is threats against those who violate confidentiality, another is a description of the procedures that are supposed to be used to protect confidential information. The last time I was doing a lot of consulting I had an NDA that had no threats but lots of guidelines.
Smart choice. If they are trying to get you to sign an NDA before even being offered a job then they better be offering some kind of amazing package. I've seen recruiter companies try to do the same just to interview.
Everyone always thinks their non-compete is good for you and the industry, don't worry about it. They are all bs. I once had a job offer at a startup in seattle where the noncompete said something along the lines of you can't ever say anything about bill gates, who was one of the investors (it seemed extremely broad). I said fuck that, you aren't going to prevent me from making my own political comments about him, whatever they are. I think they wanted to limit people from saying things about his personal family or something. Anyway, I wasted some money on my own lawyer who negotiated a much stricter thing with them. Just say no to these.
Wouldn't they be making their NDA useless by having such a broad scope applied? I thought your contract had to be somewhat sensible for it to stand up in court.
Non-Competes being legal is only acceptable I think if the worker will continued being paid for the period of the non-compete. I can see reasons that non-competes exist, but those reasons don't really make sense in a world where patents and trademarks also exist. The fact that they are essentially illegal in California, and California's economy works shows that they are unnecessary and also don't hinder technological development.
But even that has major drawbacks -- if you're not actually working, then you're not building your resume, you're not getting promotions, you're not advancing. And if you find your work meaningful and satisfying, that meaning and satisfaction is gone. Not to mention who determines how much "being paid" means, when compensation isn't just base salary but also variable things like company bonuses, individual performance bonuses, stock compensation -- plus the increased compensation you'd get from potential raises.
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?
Some will, for sure. But plenty of others will struggle severely or even enter into depression.
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.
I don't buy the "plenty of others" -- where are you pulling this? No offense but it sounds like projection.
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.
Whenever asked why there's a gap in my resume, I take insult, laugh, and say I didn't feel like working. I am compensated handsomely for my skills and that offers me the opportunity to be away from FTE as I so desire. I also have this and that side project I worked on because I'm obsessed with this coding shit. And then I ask them why is there no break in their resume? What are they afraid of? Are they not good at saving $? Have no desire to see the world outside of work? Never seen the-- you get the point.
It's a single-sentence answer: "there was a compensated non-compete"
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.
You are also not making a higher salary you would have made at the competitor depressing tax revenue and wages (especially until that minimum profits tax passed companies were paying 0% income taxes anyway).
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?
To a lot of us, career growth and the knowledge thereof is a requirement; we seek to be onward and upward whether in skillset, enjoyment, pay, etc. I have learnt in recent HN thread that this is not as common as I thought [0].
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_ .
There's a big difference. Paid gardening leave means that the employer actually has skin in the game. I'd bet that 9 times out of 10 they won't actually enforce these non-competes if they actually have to bear some cost (certain industries might be exceptions). The problem with the status quo is that an employer will have the non-compete in play regardless of whether the "competition" would really hurt them.
When I look at the last decade of my employment, my base salary is less than 10% of my overall comp. Maybe even 5%.
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.
That can be solved by setting the payment terms to match some minimum % of total compensation of some period before the paid leave.
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.
That's an offer, not a solution. What if the offer isn't reasonable? What if the employee is leaving because the equity vesting has dropped off? (eg: leaving after 4 years)
> "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.
What if you allow the new employer to buy out the non compete? So if your old employer low-balls you, the new employer can buy it out on your behalf. If your knowledge is really worth it, that provides an incentive to make the pay worthwhile. Doesn’t help in all cases, so I’d couple that with stronger restrictions on what a company can call a competitor. If there’s a cut for the state, that will provide incentive for them to enforce.
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.
> the kind we read about in executive emails between Apple and Google and so on
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).
> Well if all companies are doing it, employees will have no option other than to agree.
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.
> I would agree these are system-wide less efficient, but shouldn't paid "garden leave" be legal if parties agree upfront?
“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.
> Neither the FTC action nor state policies like those in California generally prohibit noncompetes while employed.
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:
I assume Garden Leave would remain legal even if noncompetes were struck down nationally. You can pay people not to compete with you, without a noncompete; that's what a job offer is.
Should be reciprocal if it exists. I.e. if the employee leaves, the company would be barred from hiring anyone else for any remotely similar tasks. Make them taste their own medicine and decide if it's worth it.
It is always interesting to me how much 'morality' (in the sense that an individual/corporation 'should' abide by these rules) can be derived from applying symmetry principles.
People aren't particles, though. What symmetry tests are good for with regards to human beings, is to see if something like a principle which claims to be "fundamental" is really fundamental.
I think it's safe to argue that every single thing in a contract is for the benefit of the employer and has zero to do with morality. And it is up to the employee to have their own internal contract that the employer must align to. It's like legal court where the prosecution and defense go full court press not out of morality but because the belief that if both sides pull their hardest then the truth will be found.
I would love to take a short vacation to an alternate universe where all job descriptions say that applicants MUST NOT have any recent experience in the area of employment.
It IS reciprocal. You're welcome to present that "non-comparable hire" contract to the company before accepting your offer, but they no doubt will rescind your offer. You have the same right to reject the offer if you don't like the contract they present.
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 guess I'd say that's true to first order. Sure, if a company does something egregious that I don't like it is within the realm of possibility that I can go found another one, double their revenue, and grind them out of existence before doing things my way. I suppose you could say that's reciprocal since that's kind of what they did to me in this hypothetical example. Fortune rarely favors that, though, and if you ask me companies have vastly more economic firepower than independent contributors but haven't adopted the corresponding responsibility.
May as well really be fair. If the employee isn't allowed to work in that industry for 2 years, neither is the company. They'll just have to find some other source of revenue and retool their business for a couple years.
This is the standard I knew from the trading industry. I would say that, while it does initially seem more palatable, it also has some downsides. One that might be particularly relevant to programmers is that it sets up a structure that functions somewhat like a penalty of 1 year's worth of paid vacation for choosing a new job outside the industry.
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.
Even in California, you can get sued for violating an NDA when going to competitor if you bring private technical data, which seems like a reasonable compromise. You can bring your expertise, but no code. Intersecting with this are patents. A company can also protect its IP with patents, but when should choose to disallow, or have more liberal patent laws? It seems there are similar tradeoff between the value to companies, competitors and public interests.
> Even in California, you can get sued for violating an NDA when going to competitor if you bring private technical data, which seems like a reasonable compromise. You can bring your expertise, but no code. Intersecting with this are patents. A company can also protect its IP with patents, but when should choose to disallow, or have more liberal patent laws? It seems there are similar tradeoff between the value to companies, competitors and public interests.
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".
Also no material non-public information even if it's not technically technical.
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.
One of the biggest problems I see with non competes is that "competition" can be subjective, especially in a world of large employers with extremely diversified business interests.
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.
My current client had a non-compete in their contract specifying I would not be allowed to work for one of their customers, or something like that. This client is one of the big four accountancy firms; their customers can really include everyone, and I have no way to tell who is or isn't their customer.
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.
That sounds like it might be an audit restriction. Those places have very strict rules separating who they do accounting or consulting for vs who they audit, for obvious reasons. So it might be that they’re saying you can’t do work for them in one capacity and then go work for somebody they audit.
Non-competes do not protect an organization against IP theft or trade sceret dismenination. Those are portected by NDAs, confidentiality agreements, copyrights, patents, etc.
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)
> Those are protected by NDAs, confidentiality agreements, copyrights, patents, etc.
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.
Violations are determined via a legal complaint and review/investigation. Violations are not termined by company A hiring a person from company B.
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.
The legality, and even the exact definition, of IP is not black and white and comes up all the time in copyright discussions. If we want to say that the NDA states that your brain while at this company is ours and must be wiped if you leave, uh what? I think the spirit of an NDA is more that you don't release private information about the company.
I look forward to the day I can add inventions to that one field that asks for them upon being hired!
> 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?
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?
> It's not like they can just ask to see Amazon's code to see if the knowledge has been ported over to there.
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.
IMO it should be full compensation of your last years' w2. In finance they pay you garden leave but only base pay. So they are only out a small portion of your actual cost.
My understanding is that this arrangement is common in finance. However the worker is not given benefits or bonuses during this time. Since private health insurance is massively expensive and bonus comp can be a significant fraction of one's pay in the field, it can still be onerous.
In some cases the total comp is less than 50% salary. Might be fine for some quant PhD to go from $1M to $250k, but if this "workaround" to enforcing non-competes becomes more popular and spreads to different fields you could see positions that go from (say) $80k + benefits to $40k without, with furlough enforced for a year. That would be devastating for a family with children.
But the people you are concerned with are not paid 40k plus 40k bonus that can be clawed away they are paid 80k.
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.
This wouldn't be a widespread practice outside of fields with proprietary data, relationships, or trade secrets, which tend to have better compensation. The costs of having a non-working employee on the payroll, even at the $40k-level need to be worth it. It isn't going to be the case for a random grocery store manager or whatever that they are worth the costs.
If they pay me close to my salary for doing nothing I’m all in. I can always side hustle something completely different on the side or just take the money and focus more on my kids. Please do enforce the agreement :D
That'll still hurt you because entitled employers will want to know why you didn't just take another job and will worry that if you sign their non-compete, they might have to pay out your salary + benefits for a year or more when you decide to leave.
"The fact that they are essentially illegal in California, and California's economy works shows that are unnecessary and also don't hinder technological development."
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.
I mean, if you want the counter example; we already have it. Texas and Massachusetts both had much more developed and supported engineering industries + talent pools in the first half+ of the 1900s. Talent specifically moved to California to be able to innovate without the encumbrances of current legislation in those states.
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.
> but those reasons don't really make sense in a world where patents and trademarks also exist.
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.
Pay shouldn't just continue, it should increase exponentially at a rate that outpaces inflation by enough to disincentivize maintaining it. Make it compound monthly at 200% APR.
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.
> The fact that they are essentially illegal in California, and California's economy works shows that they are unnecessary and also don't hinder technological development.
That's no argument. Parasites work as organism taxon, doesn't mean all life can become so.
> The fact that they are essentially illegal in California, and California's economy works shows that they are unnecessary and also don't hinder technological development.
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.
That seems crazy to me. Why should I have to move to start a business? If I can start a new bakery with no following and run the old out of business, then it seems like the industry was ripe for competition anyway.
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.
if you work at a bakery, you're not going to be allowed to open your own bakery two blocks away within a year
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?
And if Starbucks closes a shop because of unionisation, can the employees reopen it as a co-op? I certainly think that should be possible, and encouraged.
This example seems extra crazy. The only entities it protects are large companies. The biggest threat to a local bakery is not their employee leaving and starting their own bakery, but a large bakery chain coming in and undercutting their prices. No non-compete will help with that. Meanwhile, the large bakery chain does benefit from being able to stop you from baking for someone else if you leave their employ. At a minimum it helps them suppress wages.
their investment in teaching you their IP -- that's the theory
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
I really get a kick out of this thinking, because there's literally no alternative from the employer's point of view. If you want to hire someone to do a job, you have to teach them how to do the job.
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.
Yeah, that theory's a load. If the fear is formal IP theft then as you point out there are harder protections for that. If the fear is they'll learn your business practices and use them to compete with you, then you suck and they deserve to win. Because you're the established business with all the advantages and existing customers, even if they have the capital lying around to start a copy-cat business tomorrow you should be able to wipe the floor with them and make sure they never get off the ground.
> their investment in teaching you their IP -- that's the theory
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.
Uh, how does that make any sense? What if the local bakery sucks? Why is the bakery you work at immune to competition but the bakery a couple of towns over isn't?
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.
This is a bigger deal then the title suggests since it appears it would be retroactive and nullify existing non competes
> The commission’s proposal appears to address this issue by requiring employers to withdraw existing noncompetes and to inform workers that they no longer apply. The proposal would also make it illegal for an employer to enter into a noncompete with a worker or to try to do so, or to suggest that a worker is bound by a noncompete when he or she is not.
This is very unclear to me, and seemingly experts, if the FTC has this power, but it would be very far reaching if it were to go into effect. Given the hostility of the current Supreme Court to federal agencies, the pessimist in me says that this would be challenged by an employer go all the way to the supreme court and be used by them to dramatically limit the power of FTC
The old common law barred non-compete agreements as contracts in restraint of trade. It was superseded by statutory anti-trust regulation and the creation of government agencies like the FTC. If you think the latter doesn't have power to regulate these matters, we fall back to the old common law and non-competes are still unenforceable.
> Given the hostility of the current Supreme Court to federal agencies, the pessimist in me says that this would be challenged by an employer go all the way to the supreme court and be used by them to dramatically limit the power of FTC
More likely, in the short term it will be challenged in individual arbitration and we'll never hear about it.
I'm not sure that would not be possible given what the article describes. This regulation would retroactively nullify them and bar companies from trying to enact anything like a non compete period
Why shouldn't Congress be able to delegate powers? Congress writes the laws and it seems appropriate that they should be able to write a law that allows a group they delegate to write and enforce regulations on their behalf. Especially when the scope of such laws is so narrowly and explicitly defined.
Do you really expect Congresspeople to have the educational background necessary to regulate agricultural products, automobile emissions, and how medical testing is conducted? Do you really want AoC or MTG deciding which medicine you can take? Remember the ACA/Obamacare debacle? Without agencies, the entire government becomes a series of "let's pass the bill to see what's in it" laws.
The whole point of delegation is that experts make the important decisions, and Congress approves a leader for the department that is accountable to them for oversight. Requiring Congress to bring every decision an agency makes to the floor for a discussion and vote is akin to having the Board of Directors of a company approve and modify every PR it Github.
Yes, I do expect Congress to either build up that expertise, or hire their own staff yo do the footwork for them. The Library of Congress, in point of fact, was established to fulfill that very need. Congressional research. Also, until Gingrich in the 104th-ish Congress convinced them to shut it down in the 90's, the Legislative branch had their own independent Office of Technology Assessment research arm which to my understanding was a thorn in lobbyists side, because not only did they have a mandate to run down discrepancies (i.e. lobbyist said X, but our research/subpoenaing found Y is the case).
It was nuked because "we should just listen to lobbyists more", and basically the replacement enacted was to take double OTA's yearly budget, and drop that onto the Library of Congress, I suppose with the implication the GOP believes that Congresspeople should do their own research.
The level of follow thru on that is probably just what you'd expect.
If OTA came back, I'd be one of the first to throw my hat in the ring as a researcher/go-for, just because I believe it is such an essential piece of a healthy legislative institution, and we have suffered greatly over the past decades for want of it.
Delegation is essential. There simply isn't enough time to regulate all the various industries that need regulation. Unless you want congress to read even less of what they pass than they do today. Congress can always override regulations that go too far or not far enough.
Unelected entities should not be writing "regulations" (that have the power of law). Particularly when they both write the "regulation" and enforce it with police powers, such as the ATF, creating a dangerous fusion of the separated powers.
This would not be a law, and an agency cannot issue laws as it goes directly against the constitution. This would be a regulation, which is specifically the purpose of Federal Agencies. It is onerous, slow, and ineffective to have congress pass small laws for every little thing that needs to be regulated. Instead Congress creates agencies with a charter defining the scope of what they have purview over, and the agency then creates regulations on what it deems fit. These can be challenged in federal court, which is specifically what I've been mentioning
It's good to let agencies make laws if they make good laws. It's bad to let agencies make laws if they make bad laws. The liberal obsession with process is what lets the far right make inroads everywhere, since they don't share it.
What is good law and what is bad law? This is subjective, and likely shifts with the context of the surrounding society. Law is not morality, even though it may derive from social mores. For this reason, process is crucially important to prevent tyranny.
Yes, it's subjective. The ones I like are good. The ones that help my allies are good. The ones that punish my enemies are good. Pretending that things are any other way is madness.
Lets be honest, the common American does not have the bargaining power to corrupt anyone powerful in their favor unless they move to the third world where their dollars go further and corruption is even more accessible.
This is the point of left IMO: to collectively develop the power to corrupt things in favor of workers. This was the point of Tammany Hall. Some Irish immigrant off the boat in 1890 was not a Democrat because he believed in liberalism, but because his ward healer got his brother a job in the sanitation department. When organized labor is strong, they can get Democrats to pass pro-labor policies. The point of all political economy is to corrupt the system of money and power in your personal favor (including your friends, people with similar class interests, your family, etc.). Sometimes that means "anti-corruption" but it's simply a bad idea (pointless, stupid, naive) to point out that some official is corrupt if they are doing what you want them to instead of what someone else does.
I agree to an extent, but I also think this is kind of kicking the can down the road: how do workers collectively decide what is in their interest and what isn't? The historically successful socialist answers to this question have generally ranged from "something that looks a lot like liberal democracy" to "something that looks a lot like oligarchic despotism".
Sure, that's the tough part of left politics. Capital has it easy, they can just pay people to do what they want. We have to get along and (more or less) agree.
My conservative dad said the exact same thing—almost word for word, just reversed—about liberals and process in 2009. I'm inclined to believe that there are groups of every political persuasion who believe the end justifies the means.
EDIT: To clarify, I mean that my dad said that liberals will do anything to accomplish their goals while conservatives play nice. The same idea but in reverse. This is why I think that what is actually happening is that there's a small group of people in any movement that believe the end justifies the means, but it's hard to see the ones in your own movement because you agree with them.
That's the left's problem IMO. The right knows that their game is to gain power and use it to achieve goals. The liberal left (which is most of it if we're honest) thinks they are just trying to gain enough power to make everyone play by the rules. The problem is that there is not enough power in the world to make your enemies bargain in good faith.
Anyway this derailed from the OP which is about some new rules that might slightly tip the power in the employer-employee relationship in favor of employees. As an employee (leftists like to say "worker" but it means the same thing), this would be good for me.
No, I'm saying that my dad gave me this exact lecture in 2009 but in reverse—he said that the problem with the right is that they play nice while the liberals will do anything it takes to take power and accomplish their goals. Literally the exact same thing that you're saying but in reverse.
I think what it actually is is that there are factions within each group who match your description and it is hard to see the faction in your own group because you agree with them.
I know it will sound like a slight to your dad, but in 2009 many conservative news outlets were pushing this narrative extremely heavily. And, I don't recall any actual evidence to back it up. It was more a weaponized accusation, much as marital infidelity was in the mid/late 90s. Worse, by all evidence since then, the record seems to be far more in the opposite direction. :(
No offense taken: I strongly disagree with my dad on politics, and a big part of the reason why is because of just how bad the conservative media was in those years.
Also, even he was appalled by the turn the Republican party took with Trump. I doubt he would argue the same today. He's a diehard believer in constitutional law, and he projected his ideals onto people who didn't actually hold them.
That said, I do believe the same tendency occurs on the liberal side. It's easy to notice when your opponent cheats, it's much harder to see it when a teammate does.
Agencies do not make laws, full stop. Agencies are empowered by congress via laws to regulate industries. These regulations can be challenged in court as to whether they have overreached the scope of their regulation written in the original law, but they are not making laws.
Agencies should not make laws (in the United States). Even good ones.
They do in all but name. One day a polymer80 frame in a box with a jig is a gun. Another day it is not. The only difference is a letter from an ATF agent.
Lawmakers make laws intentionally vague to hide their nefarious motives, and then let the courts "determine" the agencies can "clarify." Then the lawmakers point their fingers at the evil agencies while secretly laughing it was all in their plan to offload blame for what they planned all along.
That’s not “making” a law. The law already says certain types of firearm are legal and certain are illegal. Now if this law were to be maintained by congress, they’d need, I don’t know, a group of experts who understand firearm and congress will constantly revise and add or remove items from a list. May be they’ll give this group a name at some point and then they’d realise that it’s really hard to manage all this while also having to make new laws. So they’ll hire someone to execute this for them and assign this group of people to that executive.
Title 27, Code of Federal Regulations, section 478.11 defines a
“firearm receiver” as, “[t]hat part of a firearm which provides housing for the hammer, bolt
or breechblock, and firing mechanism, and which is usually threaded at its forward portion
to receive the barrel.”
ATF has "regulated" that an AR-15 lower "receiver" is legally a "firearm receiver." Now show me where the "bolt or breechblock" is housed in the lower receiver. I promise you will not find it. They are basically making law.
Two things: first, are you referring to a regulation and saying that another regulation is inconsistent? It seems that neither is making "law" in the sense of an act of Congress. It would be different if the law had its own definition.
Second, your citation appears to be out of date and the current regulation defines "frame or receiver" differently.
ATF acts are not congress acts. Brilliant statement. No one is saying ATF is congress, so by definition their act is not an act of congress.
>Second, your citation appears to be out of date and the current regulation defines "frame or receiver" differently.
At the time of US v Rowald there were pretty clear inconsistancies. If you're referring to recent changes there's barely been enough time to create a historical record as the judicial process is slow, so it seems kind of silly to constrain to only post-latest change examples.
[Put this in another thread but adding it here since I didn't realize it was a duplicate thread]
My Dad was forced to retire early as a network engineer after the small (5 person) RSA consulting shop he was working for actively threatened his livelihood with a non-compete. No one in the industry would touch him because of how aggressively and proactively the owner of the shop was defending the non-compete.
I offered my financial resources and network to help him fight it, but he was nearing the end of his career and just didn't have the energy to fight. He now delivers dry cleaning at $15/hr just to get out of the house.
In Germany we have non-competes, however, the employer has to continue paying the ex-employee (a part of) their salary for the non-compete to have any effect.
Even that seems too much in favor of non-competes. Instead it should simply be treated like another job that I can quit at-will.
If you don't want me to work for a competitor, pay me some amount of money we negotiate like a salary. It's up to you if you think it's worth enough to pay me not to work, and me to be paid enough not to advance my career how I choose during that time.
Yes, exactly. As it should be. If you don't want me to work elsewhere but also don't want me to work, that's on you to figure out. Compensate me adequately to do nothing or let me be. If companies are unwilling to do that, perhaps it's not a real concern.
Agreed, but how is that different from what the person you replied to said? I assume they can't pay someone for their silence against their will. Or maybe I'm wrong.
If non-competes are enforceable by the German style listed above, the employee forced silent by the non-compete, even after they are done working, but the company is also forced to pay them.
However, in that case, the company has two options: Forced non-compete with whatever percentage of salary is forced by law, or don't do a non-compete at all. While the employee has only one option: Whatever the employer chooses. Similar to most of the US (barring a few states) except US employees don't even get compensated.
Meanwhile, if employees aren't forced to accept non-competes, the employee and employer can work out a deal or not. Given that as far as I know, California employers don't regularly pay people their TC not to work after they quit, it seems that non-competes are more of a threat against employees than something actually necessary to prevent trade secrets or whatever.
Although even outside of California, I don't know anyone personally who had a non-compete enforced after quitting a job (unless this happened and they didn't tell me).
Imagine that the employer does not have a non-compete in place with her current employees. In the US, she may offer a single, token amount in exchange for signing an agreement containing a non-compete clause. This could, for example, be described by the employer as a "bonus". It does not have to be reasonably-based on the amounts the employee might gain from working for a competitor. It could be much lower. The employer could make signing the agreement a prerequisite to continued employment. Arguably the purpose of such a "bonus" is primarily to protect the employer against challenges to the enforceability of the agreement, not as an incentive or reward to current employees.
You can always turn it down. Contracts have whats called consideration.
I've seen companies try to get away with NCA/NDA by tying severance to signing one. I would have to be truly desperate to take the money over the health of my career, yet that is exactly what a lot of companies rely on.
In the US, I have never seen a severence agreement that did not include confidentiality provisions. However (IMO) the inclusion of non-compete provisions has become more common across all levels of employment and all job categories. The vast majority of US workers will sign these agreements. That cultural trend makes it (a) easier for employers' legal counsel to manage any issues raised by the minority and (b) more difficult, if not impossible, for the minority to negotiate.
Yeah, having been in that situation, my thought is that negotiation is worth a go, but the real response is having a good BATNA. Yet another reason to have savings at the 6-months-of-expenses level.
To be honest, this always made the most sense to me. If they want a non-compete, fine, but it should have money attached because it has value they should pay for.
How much pay is given for this?
This doesn't really give the desired effect unless the payout amount is guaranteed to be a substantial portion of salary. If a company can just pay $1/year for a non-compete then it is as good as nothing. In theory an employee can negotiate their contract but in practice it is much harder to do this since it involves lawyers and the power balance of the relationship is fundamentally unequal. Having a blanket ban on non-competes or requiring a significant percentage of compensation is needed to make this work.
I think we're all pretty familiar with the arguments against non-competes. Does anybody have a compelling argument for them, as practiced in 2023 in the US?
While we're at it, does anybody have a compelling justification for allowing non-poach agreements, too?
From my perspective, they both seem like a non-durable benefit to $current_employer at the expense of a compounding opportunity cost to the greater economy (insofar as it hinders an efficient execution of the labor-employer matching process).
Curious if anybody has an interesting argument for why this is OK. The only thing that comes to mind is "trade secrets" arguments, but don't we have separate laws for that?
Only thing that comes to mind is a scenario where a sales person goes to another company and takes all their sales leads with them. This happened at a previous employer, at which time they instituted noncompetes for all the salespeople and most of the engineering force.
They forgot to have me and several other very senior engineers sign the noncompete, which was extremely hilarious to me when I went to another company in roughly the same industry and my old boss asked me about it...
It matters more where your old company is than your new one. If you work in a state that does allow non-competes and move to a new job in CA which does not, your old employer can come after you in their/your old home state courts where CA law does not matter one bit.
The argument is basically that trade secrets violations are incredibly hard to detect and pursue. You can’t see inside a person’s brain, and (short of industrial espionage) you can’t see inside a competitor either. So a person could come work for you, gain some knowledge of your trade secrets, and then go get a huge offer from a competitor based on that knowledge.
In contrast, it is extremely easy to detect a person’s employer.
I’m not saying this is a valid or correct argument, I’m saying this is one of the arguments.
Another argument (that I know less about) is that there is knowledge that is valuable and proprietary, but does not actually qualify as “trade secrets” under those laws.
"Trade Secrets" have always sounded like a form of protectionism to me, anyway. If you believe software patents shouldn't exist, then you should follow the same logic to lead to the conclusion that trade secrets shouldn't exist either. Both are expressions of business processes that shouldn't otherwise be restricted by blanket clauses or gag orders.
To me (a non-lawyer and non-legal scholar), an NDA seems more appropriately legal than a non-compete agreement, because it at least depends on enforcing a specific action rather than blanket gagging a person's ability to do an entire job where they might not necessarily disclose pertinent information.
It begs the question, where is the line between NDA and non-compete? If I have an NDA and then go to a competitor,
my former employer still has a right to enforce that NDA, but how would they ever determine (prove) I violated it? I guess this difficulty is where the justification for non-compete comes in, but I think the onus should be on the employer. It's not fair to the employee if the employer can just blanket forbid them from working somewhere because they might disclose some information to their new employer in a violation of an NDA which the old employer is either too lazy or incapable to detect.
With a non-disparagement agreement, it's often pretty easy to see if someone publicly disparaged them. A public tweet about how your last job was a hellhole or your boss was an idiot coupled with a Linkedin profile showing where your job was, or just a series of posts on one platform where one indicates your employer and another is disparaging.
Edit: Oops, I misread NDA as Non-Disparagement instead of Non-Disclosure.
A reasonable counterargument here is that if the improvements from misusing trade secrets are that hard to detect, then they were perhaps not sufficient to be worth suing over. Especially given that the discovery phase of a lawsuit does indeed let you see inside a competitor.
This is a solid summary. Another, related argument I've heard is that it incentivizes R&D + upskilling. Much of the value is "we now have people who can do X", not X itself. Without noncompetes, it's a better strategy to try to poach your competitor's R&D employees, rather than invest in your own, which very quickly leads to less research + upskilling.
That's a somewhat reasonable concern. But if it really matters to an employer...pay for it. For example, offer a security that vests after 5 years or whatever. Saying 'it's already built into the compensation' doesn't cut it, because then it starts becoming the norm for everyone.
The issue is that it's very difficult to tell trade secrets from expertise in certain fields. In a field that is sufficiently niche, like non flagship chip production - a lot of architectural ideas are well known across the industry are but the implementation details that enable them are trade secrets. You can't "un see" these details and IP law is loose enough that you could easily reimplement those features or products for a competitor without violating IP laws because you've seen the idea before and can come up with infinite implementations.
IANAL but I had (kinda unconsciously) assumed that what can be protected by trade secrets was broader than what patents protect (patents merely implementations - which might be broad.) So I'd like to know more; though I wouldn't be shocked (now that I think about it) if you're quite right.
In any case, even if the employee refuses to work on a given task, that's information. Having to say: "Yeah, I think you want somebody else to design that particular part" (implying "because they'll be freer to innovate and free to choose the optimal solution") is a big fat clue that could attract a lot of resources to the design of that part.
As far as I understand it, the only time trade secrets are protected is when they are forced to be revealed in court. If for example Zildjan cymbals is in a lawsuit, and discovery requires that they divulge their trade secret for making cymbals, then the court will issue an NDA for everyone that sees it, and seal the records. However, if a former Zildjan employee writes a book with the details, then there is no protection. Which is why they only limit the secret to family members. Fun fact, Sabian uses the same secret technique, because it is the same family.
Difficult to defend "as practiced". For example trying to enforce a non-compete for sandwiches is ridiculous.
There are obvious scenarios in competitive industries where losing key people to competitors creates risks for everyone involved (not just the losing employer). The problem is when employers expect the individual employee to absorb the costs to mitigate that risk. Or where the non-competes are applied overbroadly. Rather than ban non-competes, it would be better to require compensation for the term of the non-compete. This prevents frivolous applications of non-competes, which is the actual problem.
1. I have a relative who is an MD. He was recruited cross-country at great expense. (Average cost to recruit an MD can be about $250K). So, if his comp was $200K/year and it cost $250K to recruit, a neighboring practice could monitor for new incoming docs, and make an offer of $220K/year in salary to the newly hired doc. If that happened, it would be in the best interest of the doc to switch jobs, but the original practice would be out $250K in recruitment costs.
2. In the case of an acqui-hire, the team is often the special sauce. You embed a bit of non-compete in the form of stock options that vest on a particular schedule, but it may be tricky to structure the deal in an attractive way without a non-compete and non-poach agreement.
3. Trade secrets are often hard to cover in NDA's. Your trade secrets may become embedded in the employee's mind in a manner that they cannot extricate. So, if your employee receives training that includes your trade secrets, those trade secrets will be implicitly used at the next job.
So, I think the argument basically boils down to there being a vast upfront cost to the employer for getting a new employee. If the employee switches to another company, the value of that upfront cost transfers to the new company with no compensation to the old company. It seems a new, more pernicious workaround to non-competes is where employers are charging their employees for training if they leave early. That seems even more hostile than a non-compete.
(As a side note, I think non-competes can be quite damaging. In the case of the MD relative, he was fired, essentially without cause, and his non-compete forced him to be unemployed for a year before he was finally able to convince the former employer to waive the non-compete. So, there should be very hard parameters around non-competes. One thing I think should be mandatory is a written buyout amount for any non-compete that has some basis in reality. For example, if my MD relative was recruited at a cost of $250K with a 2-year non-compete, then he could buy himself out at $250K, minus about $20K for each month of service he completed. Obviously, I haven't fleshed this idea out all the way.)
I think those are all reasons a company might want it. But asking the government to force people to not work requires reasons why it's good for society, not just the company.
In the first case, you're talking about a company that wants to pay below-market salaries. Why should that be the employee's problem?
In the second, there's a case for carrots to make the acquired team stay, like the stock options you mention. But from a societal perspective, why should the company be able to use the courts as a stick if the carrots turn out to be insufficient?
In the third, I again get why companies want to treat employees like property. But I don't see any societal argument for that other than "rich company wants things".
Sorry, I thought it was obvious from context that I was talking about forcing people not to work at particular jobs. Which is what a noncompete is. You say you won't do X, and if you do X they ask the government to force you to stop doing X. If you refuse to comply long enough, men with guns will come and drag you away (contempt of court, and if you keep going, resisting arrest). So yeah, force. "Come and see the violence inherent in the system" and all that.
1. If the doc is worth $220K, why couldn't the practice that hired him match the offer to save themselves the $250K they spent hiring him? This feels like exactly the kind of wage suppression that the FTC is arguing against.
2. Workers are not serfs to be bought and sold. If the acquiring company wants the talent, then they should structure the deal in a way that makes the talent want to stay, not use legal handcuffs to force them to.
3. I can see this as an argument for noncompetes being legal in some very limited cases, but most jobs don't need this. Others have suggested requiring garden leave in lieu of a noncompete, and in the few roles where this applies I suspect that would work out fine.
You’re focusing on the specific numbers in the example, but missing the point. Imagine the salary difference is larger.
Basically, you have one company that has already paid $250K recruiting the doc and another company that paid close to $0. So if it comes to a bidding war over salary, the former company will always be at a financial disadvantage. And budgets always have limits.
No, I'm not focusing on numbers. In fact, if I focus on the numbers they seem suspect: $250k is the cost to recruit, not the relocation costs[0]. A good chunk of that (upwards of $220K) is going to occur even with a local recruitment, which makes the disadvantage of the initial recruiter much smaller.
Further, as others have mentioned, there are other ways to contractually recoup relocation costs without a non-compete. A "you must pay back your relocation costs if you leave within a year" clause is far more justifiable than a "you can't work as a physician within 30 miles for at least 1 year if you ever leave us ever" clause.
(The same type of payback clause could apply if you did something drastic like pay off their entire student loans in one lump sum, though I am assuming that in most cases practices don't do that.)
All that said, my point had nothing to do with the numbers and everything to do with the principles: non-compete clauses are an extremely blunt instrument and are inappropriate in most cases. Firms should be required to come up with more limited contracts that accomplish their stated goals and nothing more, rather than throwing in something that is so damaging to the worker because it's easier for their lawyers.
In your first case, I'm pretty sure I've seen contracts that require the repayment of e.g. relocation costs if the employee leaves within x time period.
> In the case of the MD relative, he was fired, essentially without cause, and his non-compete forced him to be unemployed for a year before he was finally able to convince the former employer to waive the non-compete.
It seems like an easy and obvious solution that the non-compete is automatically null and void if the employee is let go for any reason.
Unfortunately, that also has easy workarounds, like making the employee's life hell until they quit. So you'd also need to solve for constructive dismissal: https://en.wikipedia.org/wiki/Constructive_dismissal
1. I think the end-game here is salary-parity, no? If Practice A learns that Practice B is taking their employees for a marginal salary difference, that forces Practice A to improve their compensation package.
But I don't think I fully understand this example. Why does it cost $250k to hire an MD? Why does Practice B not need to pay this cost, is it because they can skip the vetting process since A has already performed it?
2. If it's an acui-hire, the only way it can be successful (in real terms, not just fake "retention" terms) is if the acquired team is consenting to the acquisition and partnership. If the acquirer can't create a deal (involving stock options, work lifestyle guarantees, whatever) that's successful in the eyes of their prospective future employees, non-competes and non-poaches simply delay the inevitable. This is to the detriment of "we the people", because we want good people to be productively working on important things.
In my not incredibly informed opinion, NCs for acquihires smell lazy and inefficient, because they optimize for the wrong metrics (employee retention vs value creation + satisfaction). If there's uncertainty about the long-term success of the merger, it can be factored into the acquisition price.
To me, this implies that outlawing NCs would lead to fewer acquihires, on the margin. This seems like it would probably be a good thing.
3. I think there's some "basement" of trade secrets that we just need to accept are going to spread around. As a company, you have to understand that this bottom 20% of ideas are going to osmosis their way out with every departing employee, and there's nothing you can do about it other than work to retain employees and innovate new ideas.
Similarly to the acquihire issue, NCs simply delay the inevitable here, and don't seem to provide much benefit "we the people" (or protection to "we the entrepreneurs").
1. There's two costs being confused here. The impact of a doctor burning out or otherwise retiring and no longer using their qualifications, requiring the training of a junior doctor with required specialisations at a potential cost of USD$250k-$1M[1] and many years of waiting. And the much less significant impact of a doctor using their qualifications to find an equivalent job with a different employer. In the later example, it's a fairly standard professional recruitment process and cost.
2. Stock options are a risky gamble for employees and employers alike. Neither party can rely upon stock options too heavily as a retention tool because no one knows what the stock options would be worth 3 years in the future. If it's really essential to keep employees on for numerous years then guaranteed salary increases would be a better way to ensure employees are adequately compensated for the detriment to their career of staying in the same organisation doing the same work for a long period of time. And of course, proactively ensuring employee salaries are _always_ in the top decile of industry/specialisation salaries is needed too because it is not uncommon for some labour rates to move +10% in a single month. Many employers with a high NIPE/PPE[2] could easily pay higher salaries if they desired to keep employees for longer periods of time.
3. Aren't patents are meant to protect such R&D investments? Employers benefit from hiring from each other creating a mixture of technical knowledge and culture that is gained from employees having worked in different roles and projects elsewhere. Thus I struggle to comprehend why employee movement would be viewed as a net negative overall that justifies non-compete agreements.
> So, if your employee receives training that includes your trade secrets, those trade secrets will be implicitly used at the next job.
That's not a compelling argument for NCCs. It's an argument stifling competition, which should not be what NCCs are used for.
Every company takes a risk hiring someone that may leave with field expertise specifics to the company. Them using that expertise elsewhere makes the market healthier and more robust because it increases competition.
It's conceivable that NCCs are more anti-competitive than protective of the company's trade secrets, at least that's how it appears they're being effectively used nowadays.
In theory, it lowers the risk of hiring in certain situations. So, if the alternative is not hiring, that's beneficial.
For a lot of companies, the "sauce" is a personal relationship that isn't trade secret. If you hire a salesman, and give them access to Mr. Big, you create an incentive for the employee to trade the relationship for your competitor's money.
Penalizing the change in employer is not the only way to deal with it, of course. Without a non-compete, you might have to buy/keep the salesman's loyalty. Which may or may not be an economic deadweight.
That makes sense as to why an employer would want a non-compete.
Is there some way that this translates into why "we the people" would want to allow companies to enforce non-competes?
From my perspective, if a company's sauce is personal relationships, the non-compete is not particularly effective in engendering loyalty and extracting the greatest value from that relationship.
A disaffected salesperson is not going to be enthusiastic about leveraging their relationships for an employer they're unhappy with -- whether they're under a non-compete, or not. This means they'll extract the minimal value to keep their salary, but not the maximal value out of the potential they have access to.
In fact, a non-compete prevents that salesperson from bringing that relationship to a different company, where that relationship might produce greater dividends for "we the people" (as measured by the new company's ability to attract salespeople and engender their loyalty).
1. Shifting profits from the entrepreneur (with skin in the game of providing consumer wants) to the middleman can be deadweight. You'd want some evidence that rewarding disloyal middlemen results in we the consumer surplus, not just a flourishing middle-man economy.
There can be price-discovery benefits to middlemen, like market makers at the NYSE. But the financial markets usually involve fungible goods. Consumers seem to benefit from finding ways around the middlemen, though.
2. We the people have egalitarian ideals about jobs and opportunities. The old-fashioned way to 'lock in ' people to loyalty is to hire family or from the same social strata. Historically, those benefits have been distributed unfairly.
So the non-compete provides some mechanism for the "haves" to spread around opportunities to the "have-not-so-many-reasons-to-be-loyal," understanding that the law will enforce the agreement to be not-disloyal.
Good points! Let me try to dissect them, let me know what you think.
1. I agree with the themes of not paying disloyal middlemen, but I'm not sure if it applies to the example.
> You'd want some evidence that rewarding disloyal middlemen results in we the consumer surplus,
If entrepreneur Y is willing to pay 2x the salary of entrepreneur X for the same employee, presumably its because Y thinks they can use the salesperson's relationships (at least) twice as productively.
In that case, Y has a product to sell that is twice as valuable as X's. As a consumer, don't we want companies we engage with to use the most valuable products?
I'm not suggesting that we pay unaligned people more (obviously, this is bad). Rather, I'm saying we shouldn't erect barriers to prevent disgruntled employees from leaving, because we're paying the opportunity cost of them not being a more productive employee at a competitor.
2. I'm not sure if this holds up in 2023, where talent networks are global and talent discovery is so cheap.
I think this argument makes sense if the skills of people who are signing non-competes were not so rare and in-demand. If I exclusively depended on family ties to run a company in 2023, I'd expect my competition to run me over.
1. > "presumably it's because Y thinks they can use the salesperson's relationships (at least) twice as productively."
I'm not sure that's true. Y thinks Y having the profits from S's relationships are worth the marginal cost of paying 2 x $X (the salary). Presumably, he could offer that to S's Boss -- but the angle is that S will usually sell out for less. S has less skin in the game.
As you note, it's hard to tell how much S is actually benefitting consumers, versus how much they're trying to extract rent once they've got Boss over a barrel. And it seems the best time to solve that is with a voluntary agreement between consenting adults before Salesman has Boss over a barrel.
If Boss runs the risk of being gutted by S, the usual response is to raise prices, or conclude that it's just too expensive to make this good. So probably consumer prices rise under this regime. Now, maybe if you're the party of middle management, that's a political good!
2. I don't know enough about that to BS beyond what I've BS'd already. But it strikes me as mostly a toss up -- sometimes it's good, sometimes it's bad. And, again, I think the libertarians are mostly right about respecting deals between consenting adults, even when there's a wealth or social gap. The parties will have a much better idea about when they're good and bad. I'm not sure why you'd outlaw them.
I guess the best argument I have against myself is that California has already done something similar for awhile, and it hasn't crippled their market for talent. So whatever effect I might be worried about, it's de minimus, and it seems to be a morale booster for middle-management types.
I think NC clauses are pretty bad in general. But, I can't shake a weird feeling that crops up from time to time. Anyone out there operating without one of these things over their heads that feels like maybe they should?
I started out at a tiny company that didn't think their app idea would make it as far as it did. It mostly has. Now I am looking at the terms of my employment and finding myself approximately as encumbered as a McDonalds employee on their first day.
Some of the things I know could be leveraged to turn our biggest competitor into an unstoppable explosion in very little time. I'd never actually do this (there are always higher-order effects w/ betrayal), but I do think I could use this concern as part of my salary re-negotiation this year.
Equity and other forms of compensation serve as a very powerful carrot to abate this temptation. Carrots don't always work though. You usually need some kind of stick at some level.
If your target goal is something like "maximization of worker pay",for example (really, i'm not suggesting that's what you want, it's just a convenient example), then no, there will never be a compelling argument for non-competes, because they always stand in the way of that particular goal.
This is because costs by employers can always be expressed without non-competes somehow to within some reason, and not get in the way of that goal (but may harm others).
For example - there are fields where large amounts of on-the-job training is paid for by employers.
Certainly they don't get nothing out of it in the end, but they have upfront costs too. It is more frontloaded cost wise, such that if the employee leaves immediately after training, the employer would lose money.
The literal training cost can simply be expressed as an actual penalty for leaving rather than a non-compete.
But the loss of time and need to train someone else (IE the time during which you would have made more money on the person who just left) is harder to value as a penalty (since it depends on what your profit would have been, which is probably variable, and lots of other things). So that is often expressed as a non-compete.
But that would still stand in the way of "worker pay maximization", so that particular difficulty is not compelling for that goal (IE you could just assign a value to it and deal)
Similarly, there are fields where there are not enough people, and great upfront cost may be spend in acquiring people (doctors in rural areas, etc).
Normally they would non-compete them and give a significant hiring bonus.
You can also express this as a penalty, but it still puts you out a doctor for the time it takes to recruit someone else, etc, which is bad for the community.
But not for worker pay!
If you go for worker pay maximization, them taking a 250k bonus to go work in that area, then leaving a year later (or whatever), maximizes their pay. It also likely forces the community to pay more to the next person to have that not happen!
So again, if your target goal is maximization of worker pay, no, I think there is no compelling arguments for non-competes.
If you switch your goal to say something like "maximization of production of useful things", maybe you could get to more compelling argument, because constant job hopping by everyone, while maximizing worker pay, probably interferes with maximizing the production of useful things.
I think my goal would be "maximization of [responsible] production of useful things".
Constant job-hopping requires an employer who wants to hire you. If you're a "constant-job-hopper", you'll find few people who want to hire you.
NCs are not only a meaningful barrier to fair compensation, they also seem to be a barrier to the allocation of labor to more productive businesses that, by virtue of their productivity, can afford to pay higher compensation.
The main time I see them make sense is with very skill-based, client-based practices like accounting. You're likely giving this hire a lot of clients, and you don't want him leaving in two years and taking half the clients with them.
I have to believe that some, if not most, Republicans would go for a bill like this. A bill that's "freedom-from", costs nothing, is pro-worker while not being pro-labor, you get free talking points for "see you don't need unions."
I understand noncompetes in some fields... but this can be solved in other ways. In my country (slovenia), a noncopete is valid only if you're being financially compensated by some amount while the noncompete lasts.
It's a bit complicated here, but ideally companies wanting noncompetes could be forced to pay the difference between what the worker would've earned if they stayed (+ some safety factor for a potential raise elsewhere, eg 20%) and what they earn now with a noncompete.
So if a worker earned 100k, with the safety factor for a raise that means 120k, and can only earn 50k due to a noncompete, the company would have to pay the difference of 70k to that worker if they wanted to keep the noncompete valid (for a limited amount of time). Company keeps their 'secrets', but has to pay for the secrecy.
> a noncopete is valid only if you're being financially compensated by some amount while the noncompete lasts.
And this is about the only way they hold up in court, otherwise the non-compete would be a one-sided contract.
IANAL, but I was once sued by a former employer over a non-compete (an entry level IT job). The judge basically swept the floor with it.
Also, it made me understand why severance packages exist, it is usually a salary compensation for the non-compete duration. Now when you hear outrage over some bank exec getting a million dollar severance, know that this can be because of a non-compete.
> Now when you hear outrage over some bank exec getting a million dollar severance, know that this can be because of a non-compete.
But, as you pointed out with your story, much of the outrage is still directed at the rank hypocrisy that goes on - companies easily try to force noncompetes with little or no compensation to low level workers, but then automatically know they need to pay execs millions for the same privilege.
The only time I've ever heard of a noncompete being enforced was when an IT worker bid against his employer on a contract renewal he was working on, and won. His newly former employer had sued him and won, and made him unhappy for a long time via the courts. Some things like noncompetes really exist for the worst case scenario, but is threatened in all cases.
> And this is about the only way they hold up in court
I think if your company gets bought and you get stock compensation of the company buying it, both as a founder or an employee, they can also make it hold in court.
I don't understand them in any field. I was forced into signing one for tech that blocks me from working from any competitor for up to 2 years. Depending on how loosely you define competitors that could mean I can't work in tech for 2 years after this job. Unfortunately for me I can't afford a lawyer. Fortunately for me non-competes of this level are generally unenforceable.
You have NDAs already. It's not like you're working for Lockheed with secret stealth aircraft knowledge where a non-compete might be a national security protection. It's a representation of the inequality of bargaining power. If I didn't take the job I would've been out another job for possibly months to reach my payscale (Staff). They are a representation of the scourge of the neo-liberal variety of capitalism. It's not true capitalism, it's actually neo-feudalism, and it's not the only symptom of it.
You will never get anyone in power to agree to make non-competes force payment of a stipend while you're under one. The powers that be have paid off congress. The fact the FTC even wants to look into this after decades of this abuse just demonstrates that fact further.
Non-competes make more sense when you're working a highly personal job. It's very common for doctors to sign a non-compete saying they can't set up a practice within 15 miles of their employer for some time so that they don't take all of their clients with them when they leave.
The power imbalance is such that it won’t matter if a non-compete clause is enforceable or not. If it scares former workers from trying, they are in effect despite never actually being enforced. I think this is probably true of most workers which sign them.
you're not automatically entitled to use or benefit from the IP developed by others and then disclosed to you just because you signed a paper that promises to pay you for work. maybe it makes more sense where your opponent is a horrible but huge company like facebook but this move can kill development of sensitive or novel tech by underfunded entrepreneurs. it is a mistake for the USA. maybe you guys should downvote me more while you ride around in your teslas powered by slave labor batteries.
I think you are confusing non-compete and NDA, IP rights, non solicitation agreements and the like. You can go work for competitor, but it doesn't allow you to use any of your previous employer's IP, poach colleagues, clients etc. Doesn't prevent you from using your expertise and come up with novel things.
And some big companies do care that you don't do it, because they don't want to go into litigations because layers like to target fat cats.
i'm not confusing them. i know what i wrote. humans cannot avoid using IP from previous companies. what's your background ? (are you technical?) and there's more to this than existing big companies and their disposable funding.
I don't think my background is important here. But I'm technical if you need to know.
I had first hand experience of colleagues specifically not working on certain parts of projects because of NDA from their previous employments.
What does tesla batteries have anything to do with this? And california has banned them for years but its tech sector seems to be thriving and much, much stronger than anywhere in Europe that actually enforces them. So what are you basing your prediction on?
Banning noncompetes would be an awesome policy for economic growth and dynamism. It’s pro-freedom in the useful sense of the word. It’s also incredibly pro-worker.
How did the supposed captured government agency (FTC) happen to even propose this? Is it a) FTC is not captured b) proposal that goes nowhere (ie, Lucy with the football scenario) or c) perhaps that "group politicians really care about" realize the gains may be worth the cost ?
d) The FTC is not a monolith: it's a large group composed of a great many people, who have varying levels of loyalty to the organisation's purported raison d'être.
The only loser is the company with the best whatever while all their competitors have a shot at bidding for employees who know the whatever. It tremendously levels the entire playing field.
I’m surprised it’s taken so long. Companies have abused this practice to an absurd degree. Got a job at a sandwich shop? I guess you are prohibited from getting a different job down the street based on the agreement you signed at the beginning of your employment.
I know here in Colorado they recently passed a law that under a certain pay you cannot be made to sign a noncompete. However it was only like $110k so wasn't going to help many developers.
I've seen over and over this harm friends in frustrating ways. Tech aside, non-competes in other industries are completely insane. My wife is an optometrist and all local shops have draconic noncompetes you are forced to sign. If you leave the shop you can't work within 30 miles (or more!) of that location.
I've had friends move entire cities just so they can get out of a terrible work situation. Worse, I've had friends stay in bad situations because their noncomplete would force them to move or drive way too far for work.
And since everyone does it, they're resigned to "it's just the way it is" and nobody wants to risk being sued.
>If you leave the shop you can't work within 30 miles
I know one person who worked in sales and was banned from selling in an entire region of the country. She was completely open about this when being recruited by another employer. That new employer appeared completely willing to work around the non-compete clause to bring her onboard.
That was, until she was actually hired and she was almost immediately pressured to sell throughout the forbidden area. When she said she was willing to, but only if the new employer would sign an agreement to cover any of her associated legal fees, they eventually backed off on the demands.
These situations always seem to push the risk to the employee to the benefit of the employer.
In normal countries these are only valid when the previous employer pays for the time you are not allowed to work.
If I work at a bank as a developer then I can go straight to the next one, if the previous employer doesn't keep paying me a compensation for not working at the next bank.
Not being able to 'in sales' as sibling commenter says here is just insane, and should not hold in court anywhere.
IMO the primary concern at an office like that is having access to patient data and then enticing them to go elsewhere. If the person wants to go work elsewhere, totally fine. The concern is trying to take customers or other staff with them.
I know somebody that happened to. Company opened a branch office and one of the senior staff rented an office around the corner, took half the staff and patients. Stuck them with multi year lease agreements, after the business already bore the entire startup cost of paying people while building up a patient load, marketing, etc.
I understand the opposition to draconian non-competes but there’s a flip side of this to protect an investment that is very valid.
There are usually non-solicitation clauses as well that prevent you from actively recruiting former co-workers and clients/customers. That's different than a non-compete.
Non competes are often necessary in the most interesting jobs. A few years ago I took a job at a hedge fund with a 2 year noncompete. I took a calculated risk doing so.
In the 2 years I worked in the fund, I learned a tremendous amount thanks to being exposed to the "secret sauce" which would have been really damaging for me to take to a competitor.
After I left the fund, I took the 2 year non-compete (ie: don't work in another fund) to explore other industries, ended up in a FAANG and quite happy.
Point being, as an adult I weighed the risk of the non competes vs the opportunity of the role and made a decision. I am not sure how this kind of role would work in a world of no non-competes but I suspect it would be suboptimal for everyone.
The bottom line is, a non compete is not something that springs on you. It's something you evaluated in context and chose, as a professional. You don't have to take the job.
//but I fail to see how it was optimal for everyone.
It was also optimal for me as the employee because the fund could (a) hire me and (b) structure my role in a way that I could quickly learn and make impact which (c) enabled me to earn what I want.
Without the non-compete, the role/hire would not have been possible and would have to be structured in some less optimal way.
Like I said, if I didn't think this role was even w the non compete I'd have done something else.
The onboarding was optimal for you, having the non-compete was not optimal for you. The ideal situation would be to have that great onboarding experience while also not having a non-compete, something that companies in California do all the time.
Non-Competes are absolutely sprung on employees and I am an example of that. The company I worked for was acquired and the 2 year non-competes were high-pressure "Sign it or you're fired" conversations. So I sit at the same desk, doing the same work, for the same compensation and can now not take another job with anyone doing work in my field.
> The bottom line is, a non compete is not something that springs on you.
It's pretty standard now for employers to spring on you a previously-unmentioned non-compete clause at the time that you're onboarding. I've learned to ask for it before accepting an offer but I don't think most employees know to do that.
I'm a capitalist and I think non-competes have a very valid purpose in a limited set of circumstances. But the ubiquitous use right now is to make it harder for employees to leave.
I can get behind that. Non-competes between two consenting adults - great. If presentations are shady and opaque, that's a different story and a problem (and I would say that about any attribute of the employment contract that isn't easy to understand upfront)
Sure, and when you invest millions into developing the financial models (or GPT-like models) - you are welcome to release them into the public domain if you wish.
However you don't get to dictate what the people who have actually invested the resources get to do with them, including what conditions they attach to who can be exposed to it (a la the non-compete). As an adult, I retain the option to not take the job with the non-compete.
The way it worked (in my case at least) is that as part of my signing on with the fund, I consented to their ability to block my employment with anyone for 2 years post departure (technically, they could have blocked the FAANG job but there'd be no reason to - and similarly they could have approved a job in finance if it was sufficiently removed from what I was doing.)
There was no "money for the non-compete" involved, other than perhaps the premium baked into my compensation to begin with to make the deal attractive.
I work for a market maker. Have a maximum possible one year NC. Thinking of doing something similar in case my firm slams me with NC > 6 months, when I resign.
Definitely one of those obviously broken things that should be stopped. Whatever legitimate usage they theoretically have in practice the vast majority do not protect against a bona fide company risk.
This is a big deal if they can pull this off and I'm very impressed with the FTC being proactive and doing something about it.
Noncompetes are a huge incentive for companies to prevent employees from being paid their true market value for their skills, especially true for those who are very specialized and only few employers can make use of their skills.
I disagree. The law can only mandate salaries during noncompete periods. It cannot mandate bonuses or stock grants, both of which can be significant.
And as an employee, I prefer that noncompete has no effect. Even if I were paid during noncompete period, I would be outcompeted by other people who are working rather than being idle. It would set my career back.
I could imagine it poses some risk of gaming the system (ie, have your friends startup fake hire you at 2/5x and use that to bypass noncompete or get a huge raise) - but then the company's out is to not enforce their noncompete (which is essentially what CA enforces) so I think it's a nice "velvet handcuffs" option for employers.
My fear around banning is that if an employer were willing to buy you out but non competes are banned the only real option they have would be to not hire you, no?
> The rule should be that they can make you not compete, but you must be compensated monthly at your salary level prior to departure.
> A non compete without having to pay is having your cake and eating it to so to speak.
Agreed. Noncompetes and NDAs have become standard boilerplate in job contracts despite being inappropriate in the vast majority of cases. In my opinion, it's an intimidation used by employers against employees: "we don't actually enforce this, unless you do things like leave us a negative review on GlassDoor".
Despite being unenforceable where I live, I know several people who have been threatened by their ex-employers. Even if such legal action is frivolous, most people don't have the time or money to spare fight it off, and employers know this. This relates back to the bargening inequality mentioned in another thread.
Be careful what you wish for, there are significant non-salary benefits (stock ESPP and RSUs, healthcare subsidy, etc.) that matter a lot. These employers would just restructure compensation to effectively recreate low-cost non-competes.
Happy to see this. Unfortunately, the business community has completely abused these, with companies like Jimmy Johns requiring its minimum-wage employees to sign non-competes.
Of note, an FTC commissioner (Trump appointee, so a minority voice in the executive atm) released a dissenting statement outlining the strategy that will be used to defeat the proposed rule: https://www.ftc.gov/system/files/ftc_gov/pdf/p201000noncompe... (warning: pdf). In her dissent, she speaks eloquently about how darn important noncompetes are to Business and Competition, and "encourage[s] all interested parties to respond fully to all parts of the NPRM’s solicitation of public comments."
Which, well... I'll also encourage all interested parties to respond fully to all parts of the NPRM’s solicitation of public comments! You can do so at regulations.gov
>The proposed rule would generally not apply to other types of employment restrictions, like non-disclosure agreements. However, other types of employment restrictions could be subject to the rule if they are so broad in scope that they function as noncompetes.
Do we think it would apply to non-solicitation clauses?
Hey! Hopefully you go back and read comments on old posts, since the public comment period has begun and comments can now be submitted on regulations.gov:
The notice will be posted on regulations.gov. You can leave a comment there.
It's not posted yet. The public comments should open shortly. Set a reminder for Wednesday next week and it'll almost certainly be up on regulations.gov.
It really does seem to me that the simplest solution would be to require non-competes to be paid at the maximum of the past ~N years total earnings (and benefits value), with a minimum of say $100k/year.
I had a company that had a very vague noncompete. As worded it could be 'Anything, everywhere'. I asked about it and was told 'Yeah,but we never enforce that.' I wanted to work for the company, but that was a full stop. I hired a lawyer a friend recommended. He went over it and confirmed I should be concerned if I did anything outside of work that could create IP that I might want to sell later. He drafted some new language that confined the noncompete for me to industry and specific region for 1 year only, that everything I working on outside of work and on my own resources outside of that industry was mine, as well as some set-asides that clearly noted work I had been working on before coming on and we're my own work. It cost me a little under $1k
If you are going for a job that pays $100k or more, get a lawyer (ideally a lawyer in your sector) to look over your employment contract, NDA, Non-compete, etc. It is worth every penny, in my opinion.
Whether or not this goes through, I think a lot of folks on HN should consider refusing to sign non-compete agreements... especially if you are a subject matter expert in your field of work.
If a employer wants you to sign a non-compete it should cost them something (extra salary, extra signing bonus, pay for a period of time after you leave the company, etc.). You shouldn't just give away your right to work for nothing.
I stopped signing non-competes a number of years ago on the basis that I'm hired for my expertise and know-how and, as such, "I bring everything to table" in my domain of expertise (not my company or they wouldn't have needed me)... it is my experience,knowledge and capability and I should be able to do whatever the hell I want with it, with the exception of stuff specifically covered by trade secret protections, classification, etc.
I mostly think this is a good thing, but there are some fields where I feel like employers will have to take other precautions that are not as nice.
Most of us here are in tech where "ideas are cheap" is mostly true and commonly thought, but there are other fields (in particular, finance) where single ideas can easily be worth millions of dollars. (Imagine something like "the stock market goes down on Friday the 13th's".) How are employers supposed to let employees know these ideas? If there aren't noncompetes then I suspect employers will limit employees (and their growth) in other ways.
At least here in NY firms will pay ex-employees during their non-compete. My understanding though is that they only have to pay the base salary, which is usually a minority of the total compensation (even guaranteed compensation). Would be nice if that were fixed.
I doubt employers just won't hire. That would be self defeating. They'll look to protect their trade secrets in other ways, mainly through aggressive enforcement of non-disclosure agreements.
This is obviously great for workers and competition. It's actually good for companies too, even if they are too short sighted to realize it. See: silicon valley.
What you're missing is that most wealthy decision makers have highly concentrated holdings, so a general raise in national wealth doesn't necessarily provide them with a net benefit.
Ending non-competes would be good for GDP growth and the US economy writ large. But it's not necessarily for any particular company. See: all the businesses killed off by silicon valley.
Similar to how rent collection is a massive drag on economic productivity but fixing the housing crisis would be terrible for certain rent extractors in particular.
If businesses think their employees are so valuable that blocking them from working for a competitor is necessary... then how about just giving them incentives to stay? I don't know, maybe a huge bonus, or above-average salary adjustments against the competitor, etc? Or fix the toxic work environment so that they'll actually want to stay?
Otherwise too bad, the business created unfavorable conditions for their employees, so workers should have every right to leave and work for anyone else, including competitors. Either employees are that valuable or they're not, can't have your cake and eat it too, Mr. Big Boss.
It's a way of establishing an "intellectual property" claim inside your skull. I put that in quotes because a limited term government grant of monopoly, which is what patents and copyrights actually are, are not "property." There is no property right in that grant of a monopoly. Congress could reset the term of patents and copyrights at any moment, on any terms. That's a much weaker thing than actual property rights.
> Congress could reset the term of patents and copyrights at any moment, on any terms. That's a much weaker thing than actual property rights.
Property comes in many forms. There's real estate, and movable property, in the most basic sense of property. But there is also intangible property. You can own a licence for use of part of the radio spectrum in a region. This is a valuable thing and you can sell it or buy it from another licensee. Radio regulation is basically all created by government legislation, and it could probably be changed at any moment, too. There are also financial assets, such as shares or bonds. Corporations themselves are legal fictions, and might be modified by legislation, with associated impacts on the property.
I strictly avoid the term "intellectual property" myself. Because conflating all these senses of property is highly confusing. A car is not a steel mill, which is not a patent, which is not a taxi licence, which is not a share in a corporation, which is not land. We need to carefully distinguish these, in most cases. But in a political science sense, they are property: legally recognized rights, usually transferrable, that claim exclusivity to something, tangible or intangible.
No. A bill setting patent or copyright terms to less than what they are now is constitutional. Some might argue the opposite side of that, but I don't think anyone can deny the Framers were wary of the kinds of monopolies monarchs granted, much less did they think a patent is property.
My point is all ownership is a legal concept. Congress can abridge many property rights, including real estate, and the only thing keeping them from going further is the custom enshrined in our Constitution.
It's more than "custom." Since we have judicial review, courts can strike down an unconstitutional taking of property. It goes back to WWKGD? ("What would King George do?") ...and doing the opposite. So we have constitutional protections against seizing private property, but arbitrary terms, except they must be limited terms, for grants of monopoly.
Not perfectly observed of course. The Mouse always stretches the definition of "limited term." But the intent is there for anyone to see.
> more than "custom." Since we have judicial review, courts can strike down an unconstitutional taking of property
The custom cited is the power of the Constitution. The point is all property is an invented construct.
This isn’t some neo-Marxist hot take. It’s reflecting that IP is simply a novel form of e.g. drawing lines on a map and calling them deeds. One is older and more precedented. That’s a huge advantage. But neither is more “fake” than the other.
That's all true. Likewise I am just pointing out the underlying reasons why property deeds get more protection than stuff that the people writing the constitution thought was less worthy of protection.
Where we stand now is that courts are less likely to say that congress has no right to shorten patent and copyright terms, than to allow congress to take land without compensation based on market value.
And, in the case of non-competes, that may say even existing contracts cannot lay a proprietary claim to something between your ears.
For those wondering how this relates to hairstylists...
People are not a customer of "Awesome Hair Inc". They are a customer of Laura, whom happens to work for said company. Because Laura knows exactly how to do my hair properly.
So when Laura switches company or becomes an independent, her customers follow her. Awesome Hair Inc just lost half their regular customers. A source of perpetual drama. Now you know why hairstylists are so excellent at bonding with people. It's how you create forever customers.
An interesting variation of this dynamic is found at the very publication of the article: NYT. Some of their journalists have become very savvy on social media, building up an enormous personal following. A following that is loyal to the person, not specifically to NYT. Yet it was NYT that paid for it, as these journalists tweet on the job, as part of their job. At the very least, NYT could hope that this sends a lot of clicks towards their articles, but even that is questionable as increasingly these journalists tweet screenshots of key sections, knowing that nobody on social media actually reads anything.
News outlets already have social media policies (often inconsistently enforced, but they exist). If they were really worried about their employees using their good names to kickstart their Substack they could do something about it. In reality, NYT and others actively seek out writers who get a lot of engagement on social media.
Would be interesting to see how contracts in HFT are going to change. From what I heard, when some specialists (e.g. hardware folks) are changing jobs, then the firm is likely to lose an "edge" as competitors will have access to similar technology/knowledge. Garden leave helps to mitigate this effect.
If non-competes are banned, then TCs are (probably) going to rise even more.
> when some specialists (e.g. hardware folks) are changing jobs, then the firm is likely to lose an "edge" as competitors will have access to similar technology/knowledge.
So without the employee the firm can't compete? If that's really true, then that employee should be able to extract as much blood as they want. They are literally the keystone of the business.
The good news is that the FTC rule would allow the firm to enforce a non-compete by giving the employee a 25% equity stake. That seems like a fair trade in exchange for with-holding such incredibly valuable specialized knowledge from the market.
It's less that and more that once you see the inside here you can pass that on to the other place. Knowledge is everything. And it turns out you don't have to be the one to make something in order to memorize it.
I work at an HFT. I am expecting most of the major firms, especially Citadel Securities, lobby hard against this.
While non-competes on our side are paid, they're a pain in the ass to navigate if one is a visa worker (my case). So, I am praying for this to pass. If it does, I am starting interviewing with competitors the very next day.
Is it harder to come up a new idea for a trading strategy or is it harder to actually implement the system to perform those trades?
Not being in that industry, to me it seems like the easiest part is coming up with a new trading idea. The hardest part would seem to be actually implementing it without bugs. Therefore, I'm not sure if noncompete clauses really provide a super-significant amount of value. Even if you left a firm with a super good trading strategy today and wanted to implement it elsewhere, you're still going to have to perfectly re-build it, which is probably not trivial.
Both. If one is on a competitive exchange or a latency-sensitive asset class, need to be both smart and fast.
Also, strategies change all the time and are mostly the domain of quants and traders. What they did a year ago, could very well be history at the firm they worked at.
I'd say an idea that generates alpha is tougher. I have seen firms like XR have great technology, but sucky ideas. They were fast, not smart and hence they didn't make a killing like their competitors did, due to all the volatility in the last three years.
Probably just as well. Garden leave can be a pretty unsatisfactory mitigation, especially if it's not 100% of salary or if a lot of total comp is in bonus or equity. And even money aside, some people may not want to put their career on hold for a year.
Essentially garden leave is a compromise that's better than nothing and will make companies think twice about trying to enforce a non-compete. However, non-competes still raise flags for potential employers as well. (I used to work for a very small company and we wouldn't touch anyone who had a non-compete in place.)
I recently had to deal with some onerous IP clauses that were essentially a non-compete. Fortunately they agreed to drop it.
But for the future: Any advice on finding a good IP lawyer who knows software/media? Lots of IP lawyers around here happy to charge me $300/hr, not so many I'm confident understand the creation of videogame code & assets.
Uncompensated non-compete clauses have been pretty much unenforceable anyway given the cost of enforcement and the actual value to the enforcer (usually less than 6 figures). It's a good step to ban these given that all they do is make people afraid to work somewhere else.
Compensated non-competes are a totally different story, and probably better to hold on to.
This has been my experience. One employer tried. With the help of a labor attorney, I told them that if they wanted to enforce the clause then I would voluntarily withdraw my acceptance of a new job offer and then avail myself of the courts.
Burned a bridge, of course, but it took them about 20 minutes to decide I wasn't worth the hassle.
Non-competes do not protect an organization against IP theft or trade sceret dissemination. Those are protected by NDAs, confidentiality agreements, copyrights, patents, etc.
If you see someone making a claim that it's to protect company secrets, that is misinformation used to justify NCs. Please inform them otherwise.
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)
When I want to leave a company and look for a new job, I hate non-competes.
When I want to stay at a company and a good co-worker quits to go work for a competitor, I love non-competes.
When I want to stay at a company and a toxic co-worker quits to go work for a competitor I cheer that a non-compete did not block that move. And yes, I’ve been in this situation and the toxic employee was CEO of the start-up. I’m pretty sure the competing start-up he went to failed because he went there. Smartest move the start-up I was at ever made to let him go there.
I think the best solution is for companies to make damn sure that good employees don’t want to leave to work for a competitor, instead of making them sign a non-compete, especially before you really know if they are toxic or not.
However, if my would be ex-employer wants to block me from joining a competitor then he has to pay me 150% of the salary that the competitor would have paid me for the duration of the non compete while I twiddle my thumbs.
Noncompetes are a classic example of employers abusing their position and their ability to lobby for laws such as these in the first place, to benefit their bottom line at the expense of their employees.
If you had some sensitive information that an employee knows about and you are worried about losing them, why not just pay them more to stay on then, versus making them absolutely unmarketable in the workplace because all their relevant skills and experiences are illegal to be used again? What are you even expected to do in that case then? Get a job at McDonalds until the noncompete expires and you can actually send your resume out gain?
One of the FAANGs tried to get me, as an independent contractor, to sign a non-compete that exactly described my business. And they wanted a multi-million dollar indemnification for work that amounted to 2+2=4. As in, no one owns the work result, it's a discovery of facts about how the world works. At first they suggested I needed to sign the agreement before they'd pay my invoice, but then quickly paid it and nixed further work planned. I was not going to sign something so blatantly lopsided. Not everyone is in a position to do that though.
Wow, that's a big deal. While NCCs I've signed have generally looked fair, I've seen a few lives destroyed by them. When somebody has expertise in a career in a certain field, and leaves a company, they shouldn't be punished for continuing on with their expertise in another company, even their own. This is called competition. It shouldn't be stifled. Stealing trade secrets is one thing, but competing in a field should be regulated by companies that don't wanna compete.
Does that mean engineers working at FAANG no longer will be subject to noncompetes?
Amazon is known for enforcing non competes on employees (especially AWS employees) who leave to join the competition.
Their CTO has been vocal about this on Twitter and a quick Google search will reveal a lot more details.
What about job offers that require employees do waive away some rights and agree to arbitration as the only avenue to resolve a labor/employment dispute?
I think noncompoetes should be bound on income as in:
- illegal if your income isn't majorly above the average (like 50+% above)
- in situation where legal bound in maximal time by a combination of how much your income is above average and how long you worked for the company before you stopped doing so
- in no situation should it be longer then 1 year
- in no situation should it be longer then half the time you worked for a company
I suggest we also implement open source peer reviewed employment contracts.
Almost always in the end of the recruitment process are you showed the emploment contract fine print.
Been through a non complete clause myself I highly recommend against it. Your skill and work experiance is the most valluable asset to a future employer. Non compete clauses prevent you from seeking jobs in a similar field.
Doesn't this diminish the value of a startup, say, if the buyer hands the principals a mountain of cash in a buyout then the principals use that cash to build in the same industry / market the startup they would have if they had all that cash in the first place? Without having the non-compete with the principals, who would even want to buy your startup?
I don't know if you've noticed, but there's this little state "California" that gets a lot of press in the start-up scene. Non-competes are basically illegal there, and it doesn't seem to have hampered either the start-ups, nor the build up of megacorporations who buy them.
My understanding is that most non-competes in the US are not enforceable in the first place. So while I think there are situations where non-competes are valid, I think it would be pretty safe to make a rule that says, "if you are not prepared to actually take an employee to court to enforce non-compete, you should be willing to go to court to defend it."
The problem is that the threat of litigation is enough to make them essentially enforced. Sure you could go to a lawyer that says this isn't worth the paper its printed on, but either you, or maybe your employer, is now going to have to fight this out in court.
This is not theoretical. A few years back, my wife, who is in ad sales, had very deep relationships with certain companies. These people had become her friends, we vacationed with them. She took a job at AOL, which at the time held many properties like Engadget, Joystiq- there was a whole host of sites that no one had realized on the surface were owned by them, but they had a decent sized media empire at the time. She had to sign a non-compete saying that she couldn't call on anyone she called on at AOL for a period of 2 years. She joins, and smashes her goal. However, about 3 months in, there was a re-org, she was let go, probably for making too much, and got some paltry severance.
She asked to be released from the non-compete. They said no. We lawyered up. He said straight out that he had represented AOL employees before, and they fight these things tooth and nail. He said we would probably win, but it would cost tens of thousands of dollars, and be a cloud over our head for at least the next year or two. He was just being brutally honest with us. We ended up not going that route.
It took her several years to recover. She had to take some jobs at kind of shitty companies because no one wanted to touch her with a non-compete like that, and most of her value was in the relationships she brought to the table. AOL essentially got a book of new business for the cost of a few months salary and commission. Its absurd.
My last company also tried to put an onerous non-compete on me- they only wanted to pay me my base salary which was a fraction of my total comp. They wouldn't even define who their competitors were. I fought against it hard. I was then labeled "difficult" by HR and what had been a bit of a rocket ship of a ride up there all of a sudden came to a stop- I stayed for another 2 years there, but it became clear there was a glass ceiling above me.
Non-competes in any form need to go away. This is restraining the US economy from achieving its potential by reducing labor mobility.
This was 2015ish? Right before they turned into Oath. AOL existed for a lot longer than anyone realized- and actually operated more like a hedge fund buying media properties with funds from people who were still subscribing to what was left of the online service. Millions of people, literally still paid the fee, many thinking it was the only way to keep their email address.
This is both something I support (a huge win for labor), and it will accelerate the tech giants shifting work overseas to save money (incomes will rise as labor is able to more freely act to take advantage of opportunity, big tech will have to pay more for the same labor; to offset, they'll attempt to offshore more aggressively).
I agree with the notion of ridding noncompetes entirely. Former employers should be limited to bringing cases against former employees who actually take something of legal value-i.e. trade secret misappropriation claims which require a higher standard of proof, as opposed to the broad restrictions that noncompetes impose on employees.
Of course, it was entirely hearsay, but I've always heard that non-competes were unenforceable and primarily a scare tactic. It's yet to impact me tangibly, and I understand the need to protect IP, but I don't think non-competes are the way to go about it. I believe this is the right move!
The proposed rule would apply to independent contractors and anyone who works for an employer, whether paid or unpaid. It would also require employers to rescind existing noncompetes and actively inform workers that they are no longer in effect.
We have various "professional services" folks at my fortune 500, essentially staff aug. Some of those folks I'd like to convert, but there's a non-compete. I wonder if that goes away now? (non California)
Might want to double check the text of the noncompete. I've never worked anywhere that forbade converting. Rather, it was to stop permatemps from hopping vendors when they inevitably found out some of them pay more for the same work, or from offering the client the same services and entering into competition with the vendor.
My understanding was that this was one of the big competitive advantages for California. I could be totally off, but wasn’t a reason to work in California that you’re not getting stuck with hostile noncompetes?
Fully supportive to this move! However, I am worried if this will change the typical "all source code available to all employees" situation to limited read access to everyone.
Noncompetes in any form should be illegal, in my opinion. They are a form of intellectual slavery - saying the company owns my mind and my mental work products.
If they look to California's noncompete ban as an example, leaving your company to compete with them would be fine, but double-employment could still be restricted (because they can just fire you).
But the relevant point here is that California has long had state law banning most forms of non-compete clauses in employment contracts. It's considered to be one of the strengths of Silicon Valley and other California industries -- talent can move from established company to established company, or established company to startup.
I think noncompete clauses have their uses so rather than see them eliminated completely you make a company pay the employee under a noncompete the equivalent salary for the duration. Company wants you to sign a noncompete for five years after you leave? They can pay for you five more years.
Companies that truly need the protections will shell out for it. The ones that include it in their employment contracts because that's just what they do, won't.
Garden leave isn't a panacea. For example, in Massachusetts, there's a relatively recent requirement that employers have to pay at least half of an ex-employee's salary for up to a 12 month non-compete coverage.
Better than nothing I guess. And it does put some skin in the game for the employer.
But while that might look like a good deal for some people who are in a position to just travel, start a project of some sort, etc. it isn't for everyone. Someone with a mortgage, kids in college, or other financial obligations might not think that dropping to half their base pay--to say nothing of just taking a year off mid-career--is so great.
And, depending upon how specialized they are, there may not be a role open to them which is a good match with their experience and skills.
But in MA, the "reform" doesn't apply to existing employment contracts, only ones signed after it went into effect.
The MA law was watered down after some lobbying by large Hopkinton MA based company(s) that had taken A.I.M. at non-compete reform in the state. In fact the reforms that did pass, I think only did after of a certain acquisition that occurred involving said company(s).
Yeah. EMC was one of the big blockers. I had to sign upon being acquired in 1999 although it didn't affect me (and was actually reasonably scoped). And I left after a few months.
It's interesting to consider Marx's viewpoint here, namely that businesses are always, even during good times, in a rigorous exploitation contest for the right to stay in business; and so only the businesses that use every possible means of exploiting their workers to the max, and thus piling up the biggest heap of surplus value as liquid assets; will be able to draw on pile that long enough to survive severe economic downturns (thus selecting for max exploitation over the longer run.) (Really a dollar auction, not that he used that phrase.) This seems esp poignant, and accurate, re low-wage and low-skill workers having to sign non-compete clauses. (Downturns were both more frequent and more severe in Marx's day.)
However I think Marx would be confounded by the Justice Department fully pushing this initiative, if indeed it does; since he believed the elites had an iron grip on democracies that was not going to be shaken. He would have predicted a far higher GINI than the (kinda high) one we have. More like Russia's, at least.
I may be selling him short though, he might view the Justice Dept action as mostly theatre; allowing other forms of exploitation to proceed apace and only addressing abusive clauses that weren't being enforced anyway; and the expansion of skilled and better-paid work in our day as only an apparent exception to his views.
the cynic in me wonders if this, now, is a planned diversion from the seeming universal outrage at SBF being out on bail, with widely documented vanished stolen investor money having been given to politicians (of both parties).
Part of the problem, IMO, is the idea that rules can take the place of integrity.
Rules are useful. But they are useful for "other people". We all act with integrity because we are decent people, not because we will be punished if we do not
For some reason I jumped to hoping the title also implied that union-only anti-compete clauses in government contracting were also banned. But that was too optimistic.
Noncompete clauses for workers is the most anti-american, anti-free-market policy anyone could pull. If workers aren't free to switch to better jobs and at the same time are left to fend off for themselves them the economic system starts to resemble feudalism.
I go back and forth on that. It seems like the free market ideal would be to allow them and if people didn't like them they wouldn't sign them. No one telling anyone what to do.
The idea is well known for hundreds of years, but here's a particularly salient quote for your line of thinking.
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"In so far as the reduction of costs of production and distribution thus achieved is reflected in reduced prices, society as a whole ultimately benefits from the use of standard contracts… The use of contracts has, however, another aspect which has become increasingly important. Standard contracts are typically used by enterprises with strong bargaining power. The weaker party, in need of the goods or services, is frequently not in a position to shop around for better terms, either because the author of the standard contract has a monopoly (natural or artificial) or because all competitors use the same clauses. His contractual intention is but a subjection more or less voluntary to terms dictated by the stronger party, terms whose consequences are often understood only in a vague way, if at all."
F Kessler, ‘Contracts of Adhesion--Some thoughts about Freedom of Contract’
Workers have mechanisms to balance that power. E.g., forming a union, which could ensure the contract is more fair. I don't know what to make of the fact that they don't use them.
In your opinion, is there a reason why something like a union couldn't be used to negate or modify non-compete clauses?
You are right, they do. But in practice it doesn't materialize. The other problem with "just create a union" besides the risk involved and inequality of bargaining power in starting a union in the first place is that you typically create a bureaucratic institution which has its own drag on economic efficiency. Banning non-competes has no clear downside, but does have clear upside. It makes sense to allow workers to form unions and to also ban non-competes.
Those are all good points. I would probably push back on the idea that economic efficiency is treated as an end to itself, rather than a means to an end. There's a tipping point where increased economic efficiency isn't necessarily a net good for society overall.
I think part of me just laments the fact that previous generations took a much bigger risk to form unions and modern generations have largely let it fall to the wayside.
I would agree that treating economic efficiency as an end to itself isn't ideal - that creates lots of obvious problems. It's probably super efficient to have child labor, for example.
> I think part of me just laments the fact that previous generations took a much bigger risk to form unions and modern generations have largely let it fall to the wayside.
I agree, and it's frustrating not just here but in the political realm as well. I think the Greatest Generation came back from the war and took hold of, and created instutitions: universities, the FDA, the CDC, the FAA, the MacArthur Foundation (just a random thing that came to mind), and importantly unions that protected workers rights and living standards. In the political realm I recently volunteered as a poll worker - it was a ton of fun, truth be told albeit a long day. But many people, friends, family, etc. thought it was a bit weird. We can't have nice things if we don't take care of them or do the hard work of democracy (or unionization, or maintaining valuable institutions) if we don't actually do it.
I'm not sure where this apathy and angst crept in, but I bet suburbanization and social media helped create and subsequently accelerate it to the point where we have some serious problems that need to be addressed.
Basically non-compete negatives for the worker don't outweigh the costs & downsides of forming a union -for just this issue-. Forming a union, negotiating, membership, etc all have transaction costs. Also unions come in a bundle with negative effects too (corruption, forced to go along with decisions where you are in the minority opinion, etc).
So if there was a super light weight union that only focused on non compete, then maybe it could level bargaining power. But since unions have a cost and come with downsides, it's not used in practice today.
Upvoting cause I agree in principal with where you're coming from in the sense that employers and employees should be able to bargain in their contracts and include clauses like non-competes as long as they square with the public policy of the state.
My issue (and probably yours) is the way non-competes get handled by employers
* Every non-compete I've signed has been sprung on me while filing out paperwork on my first day. What am I supposed to? Walk out and be unemployed while I look for a new job?
* What do I actually get for a non-compete clause? Judges routinely rule that continued employment is enough consideration for near-anything including non-competes. But if some companies don't have non-competes, to me that isn't true consideration. Me signing a non-compete that isn't worded in this-for-that like standard contract clauses should be should be treated as a gift on my part by the courts that can be revoked
* Many states have restrictions on non-competes but most non-competes for national companies are boilerplate and often too broad. Combine this with a mandatory arbitration agreement and employers are doing an end-run around state labor laws either through arbitration or just strong arming employees
I don't think that's the free market ideal. Let's switch away from employers vs. employees and ask, "Would an ideal free market allow companies to collude to fix prices? Would an ideal free market allow consortiums of companies to set up exclusivity contracts with vendors to block competition from entering the market? Would an ideal free market allow companies with profits in a monopoly to run other businesses at a steep loss to prevent competition?"
"Freedom from regulations" is a very thorny problem, it rarely leads to what people imagine are "free" markets.
They should be legal, but expensive. If it is so valuable to companies that their workers not leave to work for competitors, they should be required to pay 100% salary for the non-compete period.
> they should be required to pay 100% salary for the non-compete period.
I'd argue that falls way short of being useful and still screws over employees.
People switch jobs because they get better offers, and being forced to not only forego better offers but also get stuck with the same income while your offers get taken away from you hardly seems something that's in the worker's interests. In fact, it looks an awful lot like plain old unemployment benefits.
If you get a written offer from company B while working for company A under a non-compete, A must either:
- Allow you to leave unopposed
- Keep you in your current role by negotiating a more attractive offer
- Pay the value of offer B to put you on gardening leave for the non-compete period or 12 months, whichever is longer, and also compensate B for their recruitment costs
Would never happen, but it would be amusing to watch CEOs pitch a fit about it on Twitter.
There are a lot of requirements that need to be met to make non-competes enforceable in MD, eg must meet salary bar, geographic location and duration must be specified, etc.
But I don't think it requires paying the employee during the non-compete time.
> It seems like the free market ideal would be to allow them and if people didn't like them they wouldn't sign them. No one telling anyone what to do.
I’ve grown to learn that arguments on labour markets and free market ideals tend to be very simplistic and, knowingly or not, always boil down to victim blaming.
When we’ve unemployed and actively looking for a job, if we have bills to pay and our budget is tight, our goal is to get a source of income as soon as possible. Consequently, we are vulnerable for unscrupulous conditions, such as non-competes. This does not mean that the job market finds them acceptable or encourages them. It just means employees that push these abusive conditions upon their new hires are abusing their dominant position to exploit workers, specially those in vulnerable positions.
> It seems like the free market ideal would be to allow them and if people didn't like them they wouldn't sign them.
This only works with a robust social safety net where a worker can have no job and still be ok. Otherwise you're usually going to be choosing the lesser of several evils when it comes to employment contracts.
I agree, absolute freedom doesn't mean a desirable outcome will occur for individuals or society, or that freedom even remains the defacto standard. Free markets are often a vacuum waiting for a bully to fill & exploit.
One confounding factor: In a true free market(tm), limited liability corporations wouldn't exist in their current form. So employers can be a lot larger, and gain more bargaining power over employees because of a government intervention that protects corporation owners from liability.
It's hard to be a true free market libertarian when the initial conditions aren't really that free...
No. Well at least in capitalism, that is a big no. There are no barriers to entry or exit the market in "real" capitalism (which no one has or has seen). This includes non-competes as it does any other barriers which distort the market.
But none of that matters when most people still don't understand profit vs economic profit.
There are many things that still resemble feudalism. Per capita tax, property tax, conservation easements on deeds, zoning, etc.
I'm not saying these things are necessarily good or bad. Just saying that most laws around income, taxes, and land have their roots in feudalism. And of course the ruling class still make themselves well to do off of the hard work of their subjects, just not to the same degree as kings. And yes, I know, people today have "choices" via voting. Even if those choices are between a shit sandwich and a shit sandwich without the bread.
> There are many things that still resemble feudalism. Per capita tax, property tax, conservation easements on deeds, zoning, etc.
Nonsense. Contributing back to society doesn't even register as a concern when your employer can force you to not have any alternative to work for him under his term, and apply harsh penalties to you and your loved ones if you step out of line. These nonsensical anarchist tropes only come in play to pull the focus away from the one-sided social arrangement between employers and employees in the US which his highly exploitative and outright resembles feudalism.
You're doing a lot of personal attacking and not much explaining.
How is what I said "nonsense"? Do you not see that if the government decides to zone your land as conservation so you can't build on it that is one sided? Or if they use eminent domain. Even if it's in the best interest of society it's certainly one sided for the affected individual. And if they decide not to comply, you can bet the punishments will be much harsher than a non-compete.
You see, in this example society and company can be largely interchangeable - a group of people imposing something on an individual. Yeah, sure, most of the time society is acting in everyone's best interest. However, you have to remember that isn't always the case, such as with salvery or segregation. There are still injustices today.
If you reread my original comment, I never said those activities were good or bad, merely that many of our laws have their historic roots in feudalism. In many cases, those activies can be applied to either good or bad ends. There are examples of eminent domain being abused, and others which have provided benefits to society and generously compensated the owners. The important tie in to feudalism is that in either case the government is the one who owns the land while the "owner" holds the title of deed. You can hold the land as long as you abide by the rule of the government. Violate that rule (not paying taxes, use it for committing criminal activity, violate zoning) and they can take that land back, fine you, imprison you, etc.
Your reply is nonsense much more than the one you're replying to. Voluntarily entering a contract with bad terms has a lot less in common with feudalism than heavy handed government does. It's fine that you prefer the authoritarian government, but it doesn't change what feudalism was.
FWIW, and not meant as a contradiction: while (talking Britain here particularly) many were still literally slaves under Feudalism (not serfs) and others Villiens (serfs tied to a property - the root of the once-classist word villain); there were also a great many free people taking contracts under bad terms, if only because it's easy for Lords to collude re wages for servants, etc, etc.
"Voluntarily" is doing a lot of work there. There is a huge power imbalance between employers and unemployed people looking for a job, especially as they may face bankruptcy and homelessness if they go too long without income.
Still less of a power imbalance than talking about the government. Let's not forget that the government is the one who enforces those non-competes. So you're really only talking about one subset of the government authority.
I think non-competes for workers should be banned. But I'm just saying there are other more feudalistic examples (good or bad) that exist.
I would say that this issue is the lack of consideration for the duration of the non-compete. If a company is willing to pay me my full salary for the entirety of the non-compete, they seem reasonable. That said, it should still be something that’s optional.
In the US, "free market" generally means one of two things...
1 - a fictional market with no externalities and perfect information symmetry. Ayn Rand fans think it's real, but it only exists in an ECON-101 textbook.
2 - code for "rules for thee, not for me" as said by the billionaire class. Or, really anything that keeps them rich and the rest of us beholden to them for basic life necessities.
Edit - I prefer a phrase like "functioning market" to "free markets". Or maybe "fair market"? Not sure. The current labor market in the US is dysfunctional, at least when considering the share of increased productivity seen by the working classes (vs business owners).
Edit2 - changed "perfect information asymmetry" to "perfect information symmetry"
Totally agree. “Free market” usually means that the big guys can do whatever they want to do including suppressing competition. “Competitive market”, “Functioning markets” or “fair markets” would be much better goals.
We should especially work on reducing information asymmetry. Big examples are salary negotiation and US healthcare. There we have parties (employers, hospitals, insurances ) that have almost all information and then the employees/patients that have almost no information. The old rule is that whoever has the least information in a negotiation will lose.
Basically agree, but what we're increasingly facing in the US is growing barriers to entry to compete with behemoths in the form of an increasingly complex tax and regulatory structure which just isn't compatible with free market principles still applying to how those behemoths treat employees.
In short, we have quasi state-sanctioned hegemons that have undue negotiating power.
There are two solutions: nerf the barriers or buff the workers through more targeted regulation. There's no single regulatory body that can do the former, so the only option left is the latter.
Totally agree. If the problem under consideration is "corporate behemoths", then this is just nibbling at the edges. Which is better than nothing, but we can/should do much more.
But, if the problem is the much smaller/simpler "remove barriers to job changes", this is a pretty significant change in policy. Not as significant as divorcing medical coverage from employment, but still pretty big.
CA, ND, OK, and DC seem to be the ones of note. A slew of other states have thresholds under which non-competes are invalid, but above which they are. Washington's, as an example, are here: https://lni.wa.gov/workers-rights/workplace-policies/non-com...
Those thresholds mean most software engineers are subject to non-competes.
Aspects of non-competes are not enforceable in some places--and enforcement may require payments to the ex-employee in others (e.g. MA). But some non-compete conditions are generally enforceable even in CA as I understand it (e.g. if you sell a business, you can't set up shop the next street over and contact all your former customers). But they're not illegal as far as I know.
The FTC is specifically proposing a carve-out for selling a business. So it is mentioned. The parent made a blanket statement about non-compete legality.
This is a huge deal for improving US competitiveness worldwide, can't wait for the comments period to open.
This is won't affect early stage startups much: startups have limited negotiating power and non-competes are a <blink> tag: it's such a bad look, entrepreneurs are quickly pulled aside by advisors, lawyers, etc.
This might affect California, which used them (their ban) to compete with other states. It's a soft thing along with sunshine, funding (easier, faster, better terms) and the talent pool (larger, better connected).
I've been affected by non-competes all my career and it was part of my decision to move from New York to California - the software industry was simply too volatile to attach yourself to one employer. As I graduated, I had companies recruiting me, it was impossible to pick. Decades years later, I have enough power (and savvy) to cross-out NCAs from contracts along with overly prescriptive SOWs, toothless financial promises, etc. But kids, if you're reading this, the negotiation never ends if you want to get paid and earn a living.
When it comes to startups, arent most noncompetes basically in the form of stock compensation? It would be hard to work for somebody while being invested in a competitor, or am I completely off base?
Is such a move not one of the purposes of these agencies staffed by (supposedly) experts and run by appointees? Legislature is so dysfunctional that the House can't elect a speaker at this very moment, and who knows if such a measure would even see the light of day in committee let alone get to the floor if the lobbyists got wind of it.
If the lawmakers take issue with the ruling they can issue a mandate to roll it back, no?
The problem is, the courts may decide to kill it off before Congress gets out of its gridlock and approve or deny it, as many other regulations have been. Executive decrees or questionably legal actions of government agencies are fundamentally bad - but have become commonplace and a necessity of life since Congress is fundamentally broken.
And at the core, the problem is that the US' political system unlike everyone else's system does not enforce that the executive has a parliamentary backing. That provides a lot of perverse incentives that historically were only prevented by a basic code of ethics and conduct - but since the Obama days, open obstructionism has become acceptable and a target in itself in politics.
> Executive decrees or questionably legal actions of government agencies are fundamentally bad - but have become commonplace and a necessity of life since Congress is fundamentally broken.
Two wrongs don't make a right. Everyone involved should remember that the US is a federation of fifty states that share sovereignty with the federal government, and that nothing stops the various states from enacting their own noncompete bans in their better-functioning state legislatures. They can even do that in cooperation with other states, in order to accomplish the goal in a harmonious manner; see the Uniform Commercial Code for an example.
I don't see gridlock in Congress as an example of it being fundamentally broken. I see it working as intended, since only few matters have such broad agreement among the people in all fifty states that Congress should decide on it for the whole nation. In fact, the fewer things decided on in that fashion, the better for the country as a whole.
> They can even do that in cooperation with other states
This is actually super interesting in that Article 1. Section 10 suggests this requires Congressional approval.
I'd also that the US is a de jure federation of independently sovereign states, whereas we are a de facto central government with weak provincial governments. States cannot act independently or as a peer to the federal government or with each other, and state sovereignty has been eroded since the ratification of the Constitution.
Debating whether or not Congress or the States should make these laws is purely academic. 250 years of history has shown that the only way for meaningful change to be enacted anywhere is for it to be done everywhere, by Congress, with the support of the Executive, and without a meddling Court to nullify it. If we lived in a country that you're hypothesizing about, we would still be segregated.
> This is actually super interesting in that Article 1. Section 10 suggests this requires Congressional approval.
The UCC is not an interstate compact in the sense of Article 1 Section 10. They're merely the same code that each state chose to adopt, with no legal ability for any other state to question if one state chooses to deviate from it in part or whole. It absolutely does not require Congressional approval. Interstate compacts are more like treaties that states make with each other.
You're absolutely right that state sovereignty has been steadily eroding, and I posit that this is to everyone's disadvantage. As in your example, just because states' rights were once used to champion the evil cause of slavery then later Jim Crow, does not mean that the whole concept of states' rights is wrong.
Besides, tort and contract laws are historically the primary domain of state law. I don't see why the US Congress has to be the one to define it for everyone.
> You're absolutely right that state sovereignty has been steadily eroding, and I posit that this is to everyone's disadvantage.
The evidence suggests otherwise. When states wield their power on rights, it's usually against the interests of their people until the federal government forces them to stop by removing their power to do so. That doesn't mean the federal government is without issue, but it is the entity designed to protect liberties.
I don't think this is a simple case of tort that could or should vary between states. It's about the freedom of individuals to choose who employs them and protecting them from those with power. The existence of this as a state law would only serve to exist in opposition to states that don't, to the detriment of their citizens.
> The evidence suggests otherwise. When states wield their power on rights, it's usually against the interests of their people
States decriminalizing pot, for one, would be an example of state law trying to broaden liberties that federal law restricts. Or Massachusetts legalizing same-sex marriage long before the US Congress did anything about it. Or even at a smaller level, San Francisco city officials doing so before the state of California did.
There's plenty of examples where a more local decision went in furtherance of liberties than a more distant decision, so I'm not sure where you get the idea that politicians become more enlightened and virtuous the higher up in the federation they go.
> The existence of this as a state law would only serve to exist in opposition to states that don't, to the detriment of their citizens.
I'm not sure I follow. I think it's perfectly fine to let the fifty laboratories of democracy play this out, keeping the locus of control as close to the people as possible. The people of California have shown that the lack of noncompetes doesn't necessarily impede commerce or progress; the people of other states may learn from that and follow, or decide otherwise. And if those states that keep enforcing noncompetes do end up doing poorer for their people, they will change the law, or vote with their feet.
Courts overturning regulations like that is exceedingly rare. The doctrine of chevron deference means that, in the absence of overwhelming evidence to the contrary, it is the prerogative of executive agencies to interpret their own mandate as they wish.
no. they have specific laid out bounds with which they can operate in. it's deeply dangerous and disturbing for them to try to exceed that. especially because they aren't elected. they don't get to just exceed those bounds and wait for legislature to issue a ruling to roll it back. it's quite the opposite.
its the equivalent of if the tsa started trying to pat you down before you got in your car. and then saying its okay because congress can just roll it back.
The FTC believes this is part of their congressional mandate as per their interrogation of Section 5 of the FTC act[1]. If I recall correctly they were enforcing this under one legal theory previously that the Supreme Court struck down so I presume they have come up with a new legal theory.
IANAL, but the US federal law roughly consists of USC, i.e. US code written by congress, and CFR, code of federal regulations, written by executive branch of the government. They can't write anything they want, only using powers given to them by congress in USC.
too bad people's brains can't process stuff like that. they can only do a single level of "do i agree with the outcome" and not whether or not its actually legal or sets a bad precedent. or god forbid, think what powers that would give their political opponent when they take power.
student debt was another one. whether or not you agree with forgiving it, it's deeply disturbing for the president to knowingly do something unconstitutional and do an endrun around congress' power of the purse. With the hope that no one has standing to challenge it
Congress is rapidly becoming a failed institution. They have gradually outsourced their duties to various administrative authorities (such as the FTC) to the point that the only thing they must do to keep the US running is pass the annual budget and raise the debt ceiling.
I think any time an administrative authority or, even better, the courts do something that a legislator wants done, they breathe a sigh of relief that they don't need to spend any of their valuable political capital trying to do it themselves. The fact that what someone else does, they can also undo, never seems to play into their calculus.
One example:
Well after Democrats were established as the pro-choice party, there were periods in which both chambers and the presidency were all controlled by the Democratic party. So obviously, with pro-life activists agitating to get pro-life justices appointed, congress spent nearly zero time passing any pro-choice laws.
> congress spent nearly zero time passing any pro-choice laws.
What pro-choice federal law do you imagine would have substantive effect in the face of what would be (and was) necessary for Roe to fall:!a Supreme Court that is (1) so dismissive of well-established precedent as to strike down the cases establishing abortion as a 14th Amendment right (thereby both removing the independent bar to state anti-abortion law and removing the enforcement clause of the 14th Amendment as a basis for federal law), (2) from a faction also opposed to expansive readings of the Commerce Clause (thus rendering abortion protection grounded in the Commerce Clause unviable).
This isn’t like same-sex marriage where Congress has a separate, less factionally controversial in bounds, Constitutional grant of power (in the Full Faith and Credit clause) to act under.
Throwing out a simple "states may not restrict abortion except in the following ways" federal codification passed by Congress (in e.g. 2009) would have taken a lot more justification than overruling a previous court decision. The latter was a "whoops we changed our minds" and the former would have been more of a "only one branch of government counts and legislative ain't it!" Perhaps there are five ethically bankrupt justices serving now, but I can only count three, and it would have been good to uncover the others sooner rather than later.
Besides, if you truly have so little faith in our institutions (congratulations on paying attention!), why bother working with them at all? It soon will be time to do something else.
There are still intellectual property laws in place that could protect the original companies. Non-competes stifle innovators at big companies from being able to leave and pursue their own ideas that are in the same domain as the parent company.
I'm not saying the existing solution is complete, either. But banning noncompetition itself is not the right answer. Why do contract noncompetes clauses exist?
What about the small companies and inventors and IP owners? None of these replies I'm seeing have considered the side effects to the world except what would clearly also benefit giant companies.
If you allow a company to hire someone, then they left their current job, move to another place (worse if it is international and require visa) then the company says sorry but we have to let you fo without this being illegal. Now why this is different?. This at least restore some of the power balance.
so maybe regulators should introduce nullifying noncompetes with certain cases, not nullifying them in every circumstance. but still, they serve an obvious purpose, even if you are laid off by that company. the idea is you are given confidential info that you are not supposed to use because that's unfair competition. not that you're likely to care
In my experience noncompetes aren't enforced, unless you are very high up in the company and even then C-level folks usually get nice incentives to stay away from their competitors.
Government intervention is heavy handed and will cause unintended side affects with 100% certainty.
What should happen is for:
1) employees to choose to not join companies with contracts that they don't agree with
2) employers offer better incentive to not leave for roles at risk to poaching e.g. RSUs.
A natural market response to bad company policy is always preferred to government mandates.
> employees to choose to not join companies with contracts that they don't agree with
And do what? There's not a robust social safety net in the US, if every company in your industry has a boilerplate non-compete you can't just choose not to sign any of them.
> employers offer better incentive to not leave for roles at risk to poaching e.g. RSUs.
Why would they do that when they can just put non-competes in their contracts? Or to put it another way, it's extremely hard to quantify how many people didn't sign an employment contract due to a non-compete (and even harder to quantify the value of that potential employee), it's extremely easy to quantify the cost of an RSU program. Which solution do you think an entity optimized for profit maximization will choose most frequently?
Often times you are not informed about non-compete until your first day of work unless you know to explicitly ask about it. They have you over the barrel at that point.
I once took a job at a design service company. Asked about any non-competes and invention stuff. Said there wasn't any verbally. I get there and they have this draconian non-compete that you can't work for any other design services, start your own design service, or work for any of their clients for five years.
How are you not informed in advance? Every job I've had, there's a contract I sign in advance with all terms, and no addendum on day one. I'd think you could refuse to sign an addendum, and even sue for promissory estoppel if they fire you for not signing.
Yes, a lawsuit aimed at a big corporation will be surely at the fingertips of everyone who is forced by circumstances to sign such clauses.
Let's be real, most people will sign whatever is presented to them on day 1 of their new employment because they need money now. They could refuse to sign, in which case they will be shown the door and encouraged to seek opportunities elsewhere.
That in 4 years time they might've won a legal battle they can't afford is little consolation when they won't be able to make rent now.
Nevermind that once they are in a legal battle, they'll have great difficulty being hired again.
Please don't take offense, but the level of disconnect shown on HN from the prospects and struggles of an average person is sometimes staggering.
How is banning your employees from getting jobs with competitors aligned with a free market? That's the opposite of a free market: it prohibits me, the worker, from choosing a company that I want to work for. If I can't get a job with a company I agree with because I'm under a noncompete (perhaps the incentives aren't good enough anymore) then I'm kind of fucked, huh?
NDAs are just one axis when considering employment that has no upsides but the downsides are not necessarily bad enough for people who need work to consider them.
They’re just not useful and themselves an arbitrary restriction of employment that has no place in a a free market.
Why is what you are describing preferable to the government outright banning them? California has effectively banned non-competes for years and their economy seems to have survived the ordeal.
