

How non-competes are damaging the Massachusetts economy: Angela's story - ilamont
http://www.boston.com/business/technology/innoeco/2011/09/noncomps.html#

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demallien
Non-competes are incredibly unfair on workers. Companies already have a way of
stopping their trade secrets from walking out the door - make the employee's
life better than what they would have working for the competitor.

Instead of that, what do we see? Employers that grudgingly give tiny pay rises
to loyal employees that are essential cogs to their operations. I can't feel
terribly sorry for the company when the employee decides that their career
would be better served working for the competitor.

~~~
epoxyhockey
Another way companies can stop their trade secrets from walking out the door
is a confidentiality agreement. I tell all of my prospective employers that I
don't sign non-competes, but I will sign a confidentiality agreement.

A non-compete is professional suicide, in my opinion. There is no upside to
the employee at all.

~~~
dhimes
A non-compete should be accompanied by a commensurate severance package in
order to be taken seriously by a prospective employee.

~~~
nvarsj
Agreed. In the finance industry this is the norm in my experience - 100%
salary for duration of the non-compete and a severance package.

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geebee
I agree that they are unfair, though that alone won't get them eliminated.
Part of the problem is that there is a huge imbalance of power between a low-
level employee and a corporation. I guess many programmers are talented enough
to say no to jobs, but a lot of people have to work for a while and endure
many months of unemployment to land that first job. Once they do, they'll be
hesitant to do something that might jeopardize it.

I suppose some people might say "so be it" - after all, we don't normally
intervene. Two weeks of vacation with a forced closure over the summer and
winter that eats it all up might seem unfair as well, but we (at least in the
US) don't typically look to the gov't to force companies to act differently
(though obviously we do set some standards, just not to the same extent you
might see in Europe).

Even so, I think that non-competes are a terrible idea, mainly because they
damage the economy and do harm everyone. They're also different from many
other contracts in that they have a powerful effect on people who were not a
party to the original contract. The employee may have signed an agreement not
to work for anyone else, but the new company certainly never signed an
agreement not to hire that worker!

The main reason I can see for enforcing these non-competes is the notion that
companies will increase hiring and invest more in training unexperienced
workers by providing reassurance to the employer that the person will not
immediately take the skills straight over to a different company. I wonder how
big a problem this really is. Even if it's a problem, is it a bigger problem
than what we have here? This woman is now on unemployment insurance rather
than creating wealth through employment and contributing to the tax base. As
you can probably tell, I doubt this has much effect. I don't think that
software patents cause much innovation that would not have otherwise occurred,
but I do think they stifle innovation. I don't think that non-competes cause
much hiring that would not have otherwise occurred, but I do think that they
stifle hiring.

Interesting that the journalist here expressed surprise that the owner of the
business enforcing the non-compete is actually opposed to them in principle. I
don't think people in software are surprised. There are all kinds of things,
from non-competes to patents, that we don't like but engage in anyway (to
refrain on principle seems, to many people, like "unilateral disarmament" in a
war zone).

~~~
VladRussian
>I agree that they are unfair,

i think it depends. The hairdresser in the article may have moved to the salon
next block - there is obviously an element of competition here, her regular
clients may follow her, etc... - it seems valid for me to enforce non-compete
in such a case. On the other side if her new job is sufficiently distant from
the old one that no actual competition between businesses exists - then no-
compete is satisfied by the virtue of the absent competition.

The same in the software - my previous non-compete was clear and very specific
about same clients (existing or engaged in some degree), products, etc... and
while my new employer does have similarly looking product - they are in
different market segments, and i made sure to have nothing to do with this
product (to avoid any violations of confidential agreement as well).

Like any good contract, the non-compete should be specific and fair - this
also in the interests of the old employer as enforcing a specific and fair
agreement in case of clear violation is much easier than vague "i never be a
programmer again"

~~~
jimbokun
"The hairdresser in the article may have moved to the salon next block - there
is obviously an element of competition here, her regular clients may follow
her, etc... - it seems valid for me to enforce non-compete in such a case."

Why are you against competition?

~~~
VladRussian
>Why are you against competition?

you made a very far reaching conclusion.

Taking your clients (that old employer invested in bringing in) is obviously
unfair competition. I feel ok toward enforcing non-competes where otherwise
would be situation of unfair competition.

~~~
danssig
>Taking your clients (that old employer invested in bringing in) is obviously
unfair competition.

No it isn't, it's normal practice. In a customer facing profession _you_ are
the product being sold. If you have a developed a big client base from your
skill I see no problem with you taking them with you [1]. If the company wants
to keep you then they have relatively easy means of doing so. If some other
place is willing to offer you a larger percentage on the value you're creating
then you should be able to take it. The company loses for not paying you your
market price. As it should be.

[1] Do you realize that this is common practice in various industries? This is
also how a lot of consultancies and other kinds of businesses (even hedge
funds!) get started. It's bad enough that if I make something that nets the
company 1 million annually I will never see any of that.

------
angdis
It is _really_ hard for someone straight out of college (as Angela was) to say
"no" to a pile of legal boilerplate that probably will never be enforced.
Practically everyone does it. Not doing it "marks" one as somebody who might
make trouble, even if the employer isn't mean/persnickety enough to ever try
to enforce the non-compete.

At least the company doing the suing is getting some negative publicity for
it. What a jerk.

~~~
mchanson
I disagree that it marks someone who might be trouble. If you are respectful
and explain yourself the negotiating employment terms can be a very positive,
but stressful, experience.

I agree it can be hard in the first job (I didn't do it then), but I don't
think it gets you labeled as a trouble maker. It actually could get you
labeled as a thoughtful and aggressive person. This can actually help quite a
bit for your relationship with the new company.

Just be sure you are negotiating with your new boss and NOT HR. Make it light
and playful if you can. Explain yourself as best you can. Read up on
negotiation (there are a number of great books on it) so that you don't do it
in a way that is bad for the relationship.

~~~
gwillen
I don't think you realize that, at large companies, you don't necessarily
_get_ to negotiate with your new boss. Large companies like standardization,
and generally everything goes through HR, and everything is boilerplate. If a
large company makes you an offer with a non-compete clause, your only remedy
is typically to walk away.

~~~
mchanson
It really depends on the situation. If all you can negotiate with is HR; talk
to them. Learn how to do soft touch negotiation and get the HR person on your
side if you can. Just assuming is non-negotiable is a way to lose your freedom
before you even start.

Also employees of all stripes would do well to get over thinking that offers
are take it or leave it. It is rarely the case. Most people talk themselves
out of negotiating or never think its an option.

Hiring is really hard (IMHO) and when you find someone you want to hire you
are going to want to make the deal happen.

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mchanson
I work in the Boston area. I said yes to my first job's non-compete. In each
job after that (I'm on my third) I have said no. I've negotiated it as part of
my employment.

First job was a big company; second two have been with smaller firms. If an
employer wants you I think refusing to sign one is unlikely to get in the way.

I've also, without a lawyers help, modified my employment agreement for my
current and last job. I've hired a number of folks over the years and not had
them negotiate these types of things.

Always negotiate; you can get a lot of what you need/want.

~~~
onemoreact
I can't agree more with the negotiate bit. I met someone that ended up sighing
a fairly draconian non-compete that said they would pay his old salary for as
long as they wanted to keep it in force. It was something along the lines of
they got to make that choice at the time of his departure.

~~~
dsr_
That's really the only fair way to do it: if you don't want me working for
someone else, pay me for that [non-]work.

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yock
The article states that NCAs are contracts, but doesn't contract law stipulate
that there must be some amount of equity between the consideration offered by
the parties involved? Could a company _really_ quantify the benefit of
employment at that company, on a non-pro-rata basis (since you're held to the
NCA whether you work there for an hour or a decade), to be worth an entire
year's salary? That seems a tough bite to swallow.

~~~
wccrawford
It's not a year's salary. It's a year you can't work for a competitor. You can
work for anyone else, just not a competitor.

~~~
learc83
Depending on what you do, it can be rather hard to work for a company that
isn't a competitor. For instance, the hair dresser mentioned in the article.
He couldn't work for a competing salon. Short of relocation, where can a
hairdresser work that's not a competitor.

~~~
wccrawford
That's one of the cases that the non-compete makes no sense. A hairdresser
that doesn't know any business secrets has no other skills. You can't prevent
them from using their only skill. A hairdresser that DOES know business
secrets isn't really a hairdresser... They're a (something) that does
hairdressing on the side.

In that case, a non-compete is ridiculous. The hairdresser should never have
signed it, and the employer should never have asked for it.

~~~
danssig
I'd like to see _any_ case where a non-compete makes sense. And if you can
find one, also show how a confidentiality agreement wouldn't make _more_
sense.

As far as the hairdresser shouldn't sign, what if _all_ his/her potential
employers have such agreements? There should be _laws_ against this sort of
thing.

~~~
Woost
From an employee's or an employer's point of view? A non-compete makes
complete sense from an employer's point of view for an employee filling a
critical function. If you're running a business and hire a CTO, having them
sign a non-compete makes sense, since it limits their options and makes it
harder to jump ship. A confidentiality agreement does not provide the same
limitations -- it doesn't prevent the employee from quitting and getting a new
job.

Note: I'm purposefully NOT discussing whether or not it is ethically correct,
or if it's the right thing to do, or if it will create a more motivated
employee, or anything of the sort.

Also, I understand that employers can't give that justification or the
agreement would be ruled invalid. But as you said, what other point is there
that's not served equally well by other means?

~~~
danssig
>since it limits their options and makes it harder to jump ship. A
confidentiality agreement does not provide the same limitations -- it doesn't
prevent the employee from quitting and getting a new job.

Exactly. It's purely a mechanism for interfering with the natural function of
the job market to artificially keep wages down. I should have said "makes
legitimate/ethical sense". This kind of behavior is not legitimate, it should
not be legal to make these agreements a condition of employment anymore then
making being white can be.

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sp332
This is what regulation is for. Banning non-competes means companies don't
have to feel like they're at a disadvantage for doing the right thing.

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mahyarm
Make it that non-competes are enforced only if the employer is willing to pay
the employee's lost wages & benefits in full until the expiry date. If the
employer does not want to enforce it, then they don't have to pay.

A confidentiality agreement is completely separate from this.

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donaldc
The most interesting part of this article is that the CEO of the company
enforcing the non-compete says that the Massachusetts economy would be better
off if they were non-enforceable. (He just doesn't want to "disarm
unilaterally".)

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nighthawk
this is definitely one thing that california's got right.

"Non-compete agreements are automatically void as a matter of law in
California, except for a small set of specific situations expressly authorized
by statute. They were outlawed by the original California Civil Code in 1872."

<http://en.wikipedia.org/wiki/Non-compete_clause>

~~~
kristopolous
IANAL but I think the clause totally flies in the face of free-agency.
Existing IP protections already should cover a former employers concerns; if I
rip off a trade secret for a competitor from a former employer, then I am
already breaking an existing law and can be taken to court regardless of a no-
compete clause. The no compete clause is an onerous restriction placed on all
parties; innocence regardless.

When I walk out the door, I would assume the contract is over and I'm at
liberty to use my freedom of contract to go elsewhere.

~~~
danssig
Ah, I think people are downvoting you because they thought you meant CA's
clause flies in the face of free-agency. You actually meant no-compete clauses
do, right? If so, yes, that's the point of them.

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wccrawford
Part of the problem is that people don't -think- about what they're signing.
If they did, there would be a lot less crap that goes on.

But non-competes are one of the few things I don't disagree with. It's only a
year, and it's only that 1 industry. And it's designed to prevent people from
giving away business secrets to the new company. The kind of person who would
accidentally give away business secrets is the very same kind that doesn't pay
attention to what they're signing.

I have both signed non-competes, and refused to sign them, when the situations
were acceptable and unacceptable respectively. If, in her situation, she
didn't think she would be privy to business secrets, she should not have
signed a non-compete.

And finally, it's not like she can't get a job elsewhere. That she chose to
stay in the same industry was her fault. If she wasn't privy to any business
secrets, she doesn't have any more experience in that industry than any other.

~~~
yardie
Oh please. You jump through all the hoops during the interview process to get
the job and then it comes down to the final part where you have to sign a
contract as condition for employment.

This is where the thinking comes in. I've had these contracts before. Fresh
out of school, my choices were sign this and take a position in the career I
want and studied for or continue bussing tables. The employer loads the
contract with enough ominous legal mumbo-jumbo that it can be dangerous for
you but not so dangerous that a court would take one look at it and toss it
for being very one-sided.

Most people aren't rockstars, they take a job because they need it and it
might be the only offer they've received in weeks if not months. There is a
huge world of difference between your typical entry level job and your typical
C-level, Mark Papermaster type of position. Most people don't have a company
like Apple going to bat for them over NCAs.

Like you I've also questioned NCAs and you can make small adjustments if you
need to. And if the company wants you bad enough they can strip entire
sections. But your typical job just wants a warm body in a world of
interchangable warm bodies, make too many waves and they might think it's
better to replace you with another warm body.

~~~
xiaoma
I absolutely agree. For that reason, I've made non-competes and claims of IP I
create on my own time with my own resources one of the _first_ things I ask
about. Invariably, the bosses I've had have reassured me that the scope of
either would be narrow and only what's necessary to protect the core business
interests of the company. Invariably, I've been presented with a thick pile of
papers full of absolutely ridiculous claims over IP, restrictions on what I
can do on my time and non-competes that would make me unemployable.

However, by asking long before ever being offered a job of time it puts me in
a much stronger negotiating position when the time comes. Thus far, I've
refused every single contract preventing me from working in my field and/or
preventing hobby projects related to my work. Unfortunately, that sometimes
means leaving promising companies.

~~~
yardie
I wish I had thought of that. Usually, the only time I even think of NCAs is
when they send me the employment packet. Then it becomes an awkward dance of
asking questions, them asking their lawyer, and you trying not to ask for so
much that they might change their mind and go with candidate B.

------
nasmorn
The argument that non-competes increases hiring is like saying debt slavery
increases credit. Probably true but society pays for it in the end.

That said instead of outlawing the practice the law should demand sevetance
based on salary for each month of non-compete. Even 50% is probably enough to
quench interest for it in junior positions.

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Woost
How does the US unemployment office look at someone declining a job offer due
to a refusal to sign non-compete (or other part of the employment contract)?

Is it the same as if the person got a valid job offer and refused (so they
lose unemployment), or are there exceptions?

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wizzard
I don't understand how she is able to collect unemployment benefits... it says
in the article she left her previous jobs on her own.

We can't really guess from this article how much proprietary information was
involved in her line of work, but the other examples in the article
(gymnastics instructor and hairdresser) made me sick. Non-competes are
supposed to be used to protect intellectual property, not to take away
someone's entire living.

~~~
ebiester
She was laid off from the company who just hired her.

~~~
wizzard
You can't collect unemployment based on two weeks of work. Try again.

~~~
pvodsevhcm
It varies by state. She has a track record of employment, and her most recent
termination was involuntary and not for cause, which is generally enough to
qualify.

------
wslh
Is non compete a kind of cartelization?

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dreamdu5t
How is this legal? What kind of twisted legal logic is used to justify this?

How does contract law work if you can sign a contract preventing other
contracts from being signed?

~~~
danssig
Exactly. To be honest I've always just assumed these clauses were invalid and
signed them. It isn't logical that one can sign away their rights _beyond_
their employment.

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WingForward
I have little sympathy for Angela.

In this story, you had a 21 year-old work for a company for three years. That
company invested time in a green worker. After three months, maybe after two
years, she actually started producing for the company.

After she is trained and producing for her company, she quits and gets another
job in the same field (but not a direct competitor).

She quits that and tried to work for a competitor of her original employer and
is let go.

She is collecting unemployment (possibly at the combined expense of employers
1, 2, & 3 and the people of Massachusetts).

I don't see what the inequity here is.

------
WingForward
Outlawing non-competes would make employers less likely to hire because
they're not just about trade secrets.

They're about encouraging employers to make the investment in a new employee,
knowing the time and effort put into that person isn't going to be easily
transferred to a competitor.

That said, you can negotiate a non-compete, either doing away with it
completely, or changing the terms.

Non-competes generally have at least three limiting features: industry, time,
and region.

You can negotiate on the industry side: from "same industry" to "company's
direct competitors".

You can negotiate on the region:"the Northeast" to "New England" to "metro
Boston".

And you can negotiate on the time: twelve months, to six, to three.

I've just thought of this, but I think it would be fair it limit the non-
competes based on the time worked in a position in a company. Less than one
month and more than five years in a position, the non-compete clause goes
away. Or the terms change.

~~~
danssig
wtf? Are you posting from the 70's or something? Companies of today are not
remotely loyal. Why should employees be? Years ago companies had to actually
pay to train employees in whatever programming language they use. Now they get
_us_ to pay for that ourselves in college (this is why so many universities
switched to Java).

In my whole career I've always gotten my best salary increases by moving. If
companies want to keep me around the way to do it is not with a modern form of
slavery but rather by keeping me happy. If they have some stupid rule that
says the max raise per year is 3% and I can get 8% somewhere else then fuck
them.

~~~
WingForward
Oh, you know how to program? Ok, great, that's the minimum you need to get a
job. I hope you can read too.

But what do you know about the clients? Who at Company B needs to be handled
with kid gloves? Who likes it when you're pushy? How much can you negotiate
with Company C on the timeline? What are the strengths of the other developers
both in house and at other firms?

That's the stuff you can only learn by working in the industry. That's what
makes an employee valuable. That's the real skills, the stuff you won't learn
in school.

~~~
wanorris
Sort of. Programming is justifiably considered a profession, like engineering,
medicine, and the law -- as distinguished from other careers like sales and
customer support. The distinction is a large body of background knowledge and
skills that have to be acquired as a baseline for doing a job.

In a profession, learning things like clients' preferences can be vital to
performing a job effectively, but it's overly reductionist to call them "the
real skills", even if that might be true in, say, a sales position.

