
Hawaii Bans Non-Compete and Non-Solicit Clauses in High-Tech Employment - lutesfuentes
https://casetext.com/posts/hawaii-bans-non-compete-and-non-solicit-clauses-in-high-tech-employment
======
jacobheller
A really good book to read on the subject is AnnaLee Saxenian's Regional
Advantage: Culture and Competition in Silicon Valley and Route 128
([http://www.amazon.com/Regional-Advantage-Culture-
Competition...](http://www.amazon.com/Regional-Advantage-Culture-Competition-
Silicon/dp/0674753402)). It discusses why Route 128 failed while Silicon
Valley flourished. A major part is that under California law, non-competes are
not enforceable in California. As people moved freely between competing
companies, their ideas, information, and best practices traveled with them.
The diffusion of good ideas gave the region as a whole a competitive edge.

~~~
mathattack
Yes - this is an instance where a law can help an ecosystem at the expense of
individual players. In aggregate though, it's net neutral for most companies,
since they benefit from being able to hire from competitors. The companies
doing interesting things probably benefit, while the ones doing boring things
get a little hurt.

The (largely untrained) economist in me says that mobility of labor is very
important for growth and economic efficiency, as systems work best when the
best people flock to the most important well funded ideas.

~~~
srean
Thanks. You touch upon one of my pet peeves. A huge amount of legislative
energy is spent to ensure that capital can move around unfettered. On the
contrary, movement of skill and intellectual property seems purposefully
hindered. Implicitly it says that capital is much more important than the
others, I simply disagree.

~~~
dredmorbius
It's less that capital is _more important_ and more that it's inherently _more
concentrated_ , and hence, _more capable of expressing its political will_.

A dynamic pointed out quite explicitly by Adam Smith in _Wealth of Nations_.

~~~
mathattack
There's an economics term for this, though I'm spacing on the name. It's the
same reason the taxi lobby is so strong - it's a subset of 1 issue voters with
concentrated financial support of key issues. It's also behind why tax
loopholes are so hard to close - a small subset cares a lot, but the masses
less so.

~~~
dredmorbius
There are several. Smith noted Hobbes's truism: wealth is power. You might be
thinking of the logic of collective action, Mancur Olsen.

~~~
mathattack
Yes - Mancur Olson it is. Thanks! It's more subtle than just Wealth is Power,
as it also explains some counterintuitive results.

[https://en.wikipedia.org/wiki/The_Logic_of_Collective_Action](https://en.wikipedia.org/wiki/The_Logic_of_Collective_Action)

~~~
dredmorbius
Quite. A personal fave.

------
josefdlange
Excellent.

If you want your employees to stay, and to contribute their ideas to you
instead of running off to your competitors or starting their own companies,
it's so so so much better to just treat your employees better than the bind
them legally.

~~~
themartorana
I always found it weird when employers wanted to start a relationship entirely
adversarially. I also found it weird when businesses identified employees as a
significant and therefore negative cost center.

Employees are life blood. If they aren't, get rid of them and get new life
blood - but being so standoffish and adversarial is the antithesis of what an
employer/employee relationship should be.

~~~
sillygeese
> _I also found it weird when businesses identified employees as a significant
> and therefore negative cost center_

But they _are_ pretty much the biggest cost center for any employer? I'm not
saying employees should not be valued and treated well, but salaries add up to
a lot of money.

~~~
mcv
Yes, employees are expensive, but they're also the companies biggest assets.
It's worth treating them well. Without them, you're nothing.

If a company wants loyalty from their employees, they have to demonstrate
their own loyalty towards their employees first.

Edit: maybe calling employees assets is wrong, because you don't own or
control them. The _relationships_ with your employees (and those with your
customers) are your biggest assets. Ruin those relationships, and you squander
your biggest sources of expertise and revenue.

~~~
sillygeese
> _It 's worth treating them well._

Again, I agree.

> _Without them, you 're nothing._

Plenty of lifestyle business owners would beg to differ.

> _If a company wants loyalty from their employees, they have to demonstrate
> their own loyalty towards their employees first._

How? What's loyalty in this context anyway? Working your ass off for your
employer? Or perhaps not firing someone even though he's holding your business
back? I would recommend neither.

~~~
mcv
You seem to have a very limited view of employer-employee relationships. Work
is a big part of our life, but not all of it. We don't live to work, but work
to live. Just acknowledging that would go a long way. Give employees the room
they need to get their lives in order if they need it. Don't work them til
they drop, but give them a healthy amount of vacation time, and only ask them
to work overtime in extreme cases. Make sure they're happy. Invest in their
training. Don't screw them over. Don't treat them as expendable resources. And
when someone is holding your business back, maybe figure out why that is,
before you blindly fire him.

~~~
sillygeese
What exactly prompted you to give me that advice?

I'm planning to treat my employees very well, if I ever have some.

~~~
mcv
Did you miss that I responded to you? You asked, I answered the question. That
prompted me.

It's great that you intend to treat your employees well. I hope every company
does that.

~~~
sillygeese
Nope, I just didn't see how you reached the conclusion that I needed to be
told to treat my employees well.

I still don't :p

But nevermind.

~~~
mcv
You asked: "What's loyalty in this context anyway? Working your ass off for
your employer? Or perhaps not firing someone even though he's holding your
business back? I would recommend neither."

I consider those very short-sighted interpretations of loyalty, so I gave some
better examples. If you don't want them, then don't ask for them.

I'm completely baffled by your reaction to receiving an answer to your
question.

------
gtrubetskoy
As I understand it, non-competes are very hard to enforce and are more of an
intimidation tactic than anything else. You cannot be prevented from earning a
living the only way you know how given the demand for your skills. If you're
bound by a non-compete and the only (or the best) job available is with the
competition, you shouldn't be afraid to take it, and the courts will side with
you if someone goes after you (well, unless you're in Hawaii according to the
article!).

An agreement is not enforceable if it is unreasonable, and denying someone the
opportunity to make a living is pretty much unreasonable out of the box. Of
course it's not true in every case, but it is mostly true for "techie jobs".

(I am not a laywer, the above is not legal advice).

~~~
sib
Washington and Massachusetts (states with significant high-tech employee
bases) are also very friendly to employers in enforcing non-competes. (IANAL)

~~~
robot22
I can't speak for Massachussetts, but in Washington state non-competes have to
be narrowly tailored resulting in them being relatively hard to enforce.

~~~
muP
Didn't Microsoft choose to sue Google in Washington, when Google hired Kai-Fu
Lee? [http://www.nytimes.com/2005/07/20/technology/microsoft-
sues-...](http://www.nytimes.com/2005/07/20/technology/microsoft-sues-over-
googles-hiring-of-a-former-executive.html?_r=0)

------
benjohnson
As an employer, I'm quite fine with this - as the law still allows for an
agreement to be made about soliciting clients.

If relationship with an employee and my company sours, all I really care about
is that poor relationship not transferring to the relationship between my
company and my clients.

Artificially locking ourselves into to a bad employer/employee relationship
does nobody any good.

~~~
crimsonalucard
Your problem is when someone you have a good relationship with is seduced by
something hotter and sexier.

~~~
benjohnson
I can see why's that would be frustrating, but my employees are not "mine" \-
so they are free to go at any time and hence, I need to treat them well.

If an employee is seduced by an offer that doesn't work out - they can (and
have) come back and can bring back what they learned.

One of the thing that I learned from such exits an re-entryies is that money
is not always the best motivator - I used to run really lean to have a high
payroll. Now I run lean to provide a good work environment - I can now fire
bad companies that don't respect my employees.

~~~
rodgerd
> I can see why's that would be frustrating, but my employees are not "mine"
> \- so they are free to go at any time and hence, I need to treat them well.

It's great to hear someone articulating that point on HN. There is too often a
constant stream of suggestions to the effect employees are a form of chattel.

------
tibbon
A company I worked for recently had non-competes and non-solicit clauses. A
new employees was negotiating their contract, and I told them to push back
against the NC/CS clauses.

I spoke with the management and asked why they needed them, "to prevent
problems" they said. I pointed out that they didn't have the non-competes for
their employees in California and asked if they had problems there. They
weren't aware of any problems in California, yet they thought it perfectly
logical and needed to ask for them elsewhere.

~~~
vinhboy
because lawyers...

~~~
lordnacho
Not just funny, but true. When you invite a lawyer into a discussion, what is
most straightforward way for them to show they are contributing? More clauses.

My firm's done negotiations with banks, and they all do the same vanilla
business. Some have lawyers very close to the process, and some keep them at a
distance. Of course there's always more back-and-forth when the lawyers are
there, even though the business is the same for everyone. They try to sneak in
ridiculous clauses and fight you on everything.

~~~
yourapostasy
In my personal experience, that "wtf clause" embedding is because lawyers are
at the coalface of dealing with the assholes of the business world. When it
comes to rules-based systems like law, the assholes of the world are the ones
that drive fractal-like complexity in the rulesets, with their continuous
seeking of edge cases to externalize costs upon everyone else they can
possibly unload to while profiting from finding said edge cases, and the
subsequent response by the body of law or by a law instrument to counter that
behavior. In other words, the assholes work the contract instead of the actual
relationship.

We need something like Iain Banks' envisioned "slap drone" for the assholes,
but in the meantime, I'll settle for discreetly negotiated relationships that
create exceptions for my company. Law also needs to evolve more formalisms
around invocation of privacy and other personal space / personal resource
(time, especially) concepts that are currently not well defined at the moment,
but are rife with predation by the assholes.

I have found company counsel to always be willing to strike clauses for me if
I negotiate with them amicably and agreeably, and preemptively provide them a
"trust but verify" action they can perform that absolutely cannot be faked by
an asshole participant. Clauses ranging from "all your bases are belong to us"
IP seizures, sky-high insurance requirements, invasive financial reporting,
you name it I've probably seen it, have all be negotiated away in this manner.

------
wheaties
Wish NY did the same. In NY they get to own all your ideas both at work and
"off the clock."

~~~
tracker1
I cross/line out any portion of employment agreements that say such things...
I've never had any push back about it.

~~~
throwaway91231
I did cross out a bunch of non-compete and some ridiculous post-employment IP
claim provisions and refused to take an offer from a midsize NYC hedge fund
which constantly self-proclaims as "technology company applying talents to the
domain of finance". Their contract was pure evil by California (and reasonable
people) standards and I realized I wouldn't be able to negotiate my way out of
those clauses (even though they seemed to have liked me enough in negotiating
the salary). I made it clear to them that this is not a tech company's
behavior. It was a hard decision for me to make considering my situation at
the time and the offer's $$$ compared to SV big cos, but I eventually realized
that _someone_ should take a stance against this form of slavery and we are
responsible for not letting this crap perpetuate. If more people pay the cost
of saying no, they'll have to cave eventually.

(throwaway because I don't like admitting I interviewed at a hedgefund
publicly on the internet.)

------
skarap
This is good development!

I'm not sure how effective the law will be though. As others mentioned, those
agreements are hard/impossible to enforce in court, part of the reason of
which is that they are completely one-sided, vague and almost enslaving (we
own whatever you create also in your own time, can't compete
directly/indirectly for 10 years after leaving, can't use anything your
learned while working for us...). But what stops the ex-employer accusing the
ex-employee of stealing trade secrets and keep them in courts for ~3 years
(and forcing to spend hundreds of thousands)? Cause, you know, it's hard to
litigate with someone who has a few orders of magnitude more resources than
you do.

As for non-solicit - I have a different opinion. Have seen companies breaking
apart because some of the middle-managers/team leads decided to leave the
company and take their team and the clients (with whom they had direct
contact) with them. E.g. that's how Lycos Armenia's history ended.

~~~
dia80
This only possible because companies want to be able to fire their employees
quickly so that means the employees can leave quickly. I know of one place (in
the UK) with a one year notice term. You can't leave quickly so their business
is secure but you are secure too as they have to give 12 months notice before
letting you go.

~~~
skarap
12 months for both sides? So if an employee wants to leave the employer can
make them stay for one more year? Doesn't sound like a good thing to me.

~~~
mcv
12 months is extreme. But it's extreme for both sides.

~~~
Lawtonfogle
If the company goes under, good luck getting a year of pay from them.

It is better than many deals, but still seems to favor the employer for the
reason most laws do, which is that when a deal is between a person and a
company, the law never treats them the same and the company gets what I always
see to be the favorable treatment (for example, company can't go to jail).

~~~
skarap
It's not always true, at least not everywhere. E.g. in my country (Armenia)
the employee can leave whenever they like with just a two week's notice
(except in situations when they have some central/important role in the
organization - in that cases it's 1 month). The employer on the other hand has
almost no way to fire someone if he doesn't have very good reasons for that
(e.g. lost trust in employee). Mass layoffs are allowed if there is some
global change (technology, economy, ..). In that cases the notice period in 3
months.

I guess we inherited this from the USSR (where corporate interest was not a
thing) and just didn't have time to change yet.

------
Sukotto
If your employee is going to leave anyway, your best course of action is to
encourage them.

Perhaps something along the lines of: "We're really going to miss you, but
it's clear that this is a great opportunity for you. When it's time for you to
move on from that role give me a call... I'd love to chat with you about roles
back here that would be a good fit with that additional experience under your
belt"

------
drawkbox
Non-competes are the most anti-American, anti-business, and anti-innovation
devices ever created. They are protectionism. They need to end everywhere.

Employment will only be more fruitful with freedom to create and innovate. It
encourages companies to pay people with skills in their field. As the country
moves to project/entrepreneur based contractual employment this is actually a
big issue.

------
IvyMike
There are companies out there that simultaneously proclaim the need for strict
non-compete laws while also stating how difficult it is for them to hire
qualified candidates, never seeing the conflict.

------
colanderman
"The law clearly violates corporate equal protection under the 14th Amendment
and I am just waiting for a client to ask me to challenge the law."

Couldn't have picked a more biased source ;)

~~~
tracker1
I think we need to establish a constitutional amendment that explicitly states
that non-living entities (companies, corporations, etc) are not legally
allowed to express opinions in so far as they donate to PACs or directly to
campaigns. Also, that the congress or the states may limit the rights that
non-living entities have beyond what an individual who works for or owns a
non-living entity has.

"Corporate Personhood" is such a horrible idea that it just doesn't make any
sense at all.

EDIT: for clarification, the 14th amendment refers to Person(s)/People, not
corporations specifically... which is where my statement was coming from. It
may not be a popular subject, but the fact is that corporation rights exceed
that of people at this point.

~~~
bmelton
On the contrary, if corporations didn't have personhood, we could not sue them
when they did wrong, or enter into contracts with them.

Personhood has its own challenges for sure, but it originates more to protect
people than it does to advantage corporations.

~~~
elevenfist
The point that's being missed in this discussion is that corporations are
abstract entities defined by the state and society, ideally for society's
benefit (otherwise why the hell would or should they exist, and also the
original corp was for public benefit). These abstract entities can be given
attributes, rights, relationships, etc. as needed, but they do not have any
inherent properties in and of themselves.

Corporate personhood is an analogy, and a poor one at that. Many of the
properties we assign to personhood are not suitable for corporations.

~~~
bmelton
I dunno what gives you the impression that I've missed that point, really, but
the scope of your message, which comes across to me as "perhaps we could
slightly restructure the rights and responsibilities of corporations to better
fit what we see as their role in society" is dramatically different from
"Corporate Personhood is such a horrible idea that it just doesn't make any
sense at all."

Both statements are equally true, as is my rebuttal. We perhaps could reframe
the rights of corporations, but abolishing personhood would likely make the
situation far worse than it makes anything better, as we then lose the ability
to enter contracts with or sue corporations.

Much of the abilities of corporations that stem from personhood are
commensurate with their other roles. I personally don't see a problem with
corporations having representation, as those same corporations are otherwise
bound by the laws of the land. Despite the "Wal-Mart is not a person"
rhetoric, it's worth noting that many corporations are sole proprietorships,
or, rephrased, people, and if they have the responsibility of obeying the
whimsy of the legislature in the myriad regulations they are responsible to
perform (worth noting, corporate responsibilities are typically far more
burdensome than personal responsibilities) that they have the right to speak
out against that whimsy where they wish.

That isn't to suggest that my word is definite, and there's definitely wiggle
room to restructure, but as it stands, corporations have burdens, and knee
jerk responses neither obviate nor necessarily better the proportionality of
their rights in response to those burdens. Ut totum, abolishing personhood is,
I think, as horrible an idea as mandatory mediation.

------
renownedmedia
Let's pack up all the Silicon Valley engineers and move to Hawaii ;)

~~~
hueving
Sadly it's a much cheaper place to live.

~~~
jegutman
Housing maybe, although not the stuff I have imagined in my head. Everything
else is really expensive in hawaii though because of shipping costs and lack
of scale.

~~~
hueving
Cost of stuff is only important if you spend all of your money on stuff. With
a tech salary, the cost of food going up 15% should be nothing compared to the
rent you will save.

~~~
tracker1
You think the cost of food is only 15% more? That's funny.. still not enough
to offset the cost of housing in SF though. Been looking at moving out to San
Jose (to work in Los Gatos, that's expensive to live in), and need to make
about 75% more to offset the cost of housing and taxes than I do in Phoenix.

I totally understand why some large companies would put their IT hubs in Texas
or Arizona now. Relative to the cost of living, we have it pretty good here..
I don't want to be outside in June, July or August though.

~~~
hueving
What are you talking about? I was pointing out how expensive SF is and how you
might hit a 15% higher food cost in Hawaii than SF. But that will be offset by
the massive amount you will save in rent.

~~~
jegutman
Okay, but if you're only talking about SF then that's pretty silly. Because
there are parts of the bay area that are much cheaper although I get that even
they are expensive. But if you're paying to live in SF proper or Palo Alto
proper you're paying a premium for either a low commute or to be around other
tech people or both. You can find places that are affordable in plenty of
parts of the east bay.

------
re_todd
I wish there were a Presidential candidate that would make come out strongly
against these things. Left or right, I'd vote for him/her. Unfortunately, most
Americans probably are not affected and thus do not care.

------
mathattack
The question I have is "Why limit this to High Tech"?

------
monksy
Lets see Illinois do this as well!

------
vacri
Why is this limited to just the high-tech industry?

~~~
j_b_f
The individual citizen (!) who lobbied tirelessly for this bill tried to get a
broader version passed in the previous session. Unfortunately as bbanyc45
points out there was too much opposition from entrenched interests for that to
pass. So he tried again (which is pretty admirable), this time using narrower
language.

------
lgleason
Good for Hawaii! Georgia went the other way. My advice to anybody is to not
sign them if you are asked to. They are bad for everybody.

~~~
colanderman
Doesn't work in my experience. I started not too long ago at a startup whose
founder actively publicly campaigns _against_ non-competes. Yet there was
still a non-compete in my employment contract, and they wouldn't let me strike
it, presumably due to pressure from their lawyers regarding potential
investors.

They have laudably since removed the clause, even retroactively from current
employees' contracts, but it just goes to show how little bargaining power
employees have in the arena of employment contracts.

~~~
hwstar
Investors and banks are the root of the problem when it comes to non-competes.
They insist that companies include these in all employee agreements.

If you live in a state where non-competes are legal, and if you are a job
candidate and they refuse to let you strike the non-compete, then push back
with the following: If employment is terminated by them and not you, ask them
to pay you 100% of your salary during the non-compete duration so you can go
on "Gardening leave". If they refuse to do this, then decline the job offer.

Oh, and make sure you state that you need to see everything up-front I will
need to sign in the next 6 months as an employee in the offer documentation
package. Some ethically-challenged companies wait until you have accepted the
offer and hit you with the non-compete and invention agreements on your first
day of employment with a "sign or be fired" requirement.

------
ErikRogneby
My understanding is that if non-compete clauses are unreasonable then they
they are generally unenforceable. As in if they put undue hardship on you
finding employment elsewhere. It seems the exception is usually up at the
senior leadership and C-level where strategic intelligence comes in to play.
(joe/jane-coder not so much.)

~~~
CognitiveLens
Unfortunately "unreasonable" is something that generally requires a court to
define. That's a big burden for a worker to bear even in the most justified
cases.

~~~
hueving
especially when said worker that bothers to sue is unemployed.

------
fulafel
How does it work out in the US wrt what you can bring with you to a new
employer, where non-compete agreements are outlawed? Is all information then
free game? European countries tend to have it in national legislation that you
can't disclose important trade secrets.

------
wahsd
Are there any clear and concise sources regarding non-compete and non-
solicitation clauses and their enforceability in various states? Basically,
some kind of primer on the topic?

------
lsllc
Good for Hawaii!

MA has tried to do this recently but sadly the big corporate interests were
able to bribe the pols; not a surprise really since MA politics are completely
corrupt.

------
omouse
I wish this would happen in Ontario; I know a judge struck down a non-
compete/non-solicit clause in one case but employers still stick that shit in.

------
jon-wood
Sadly the most important ideas are rarely the best funded. For example Zynga
has vastly more funds at their disposal than Wikipedia, and I'd challenge
anyone to argue that's the right way round.

~~~
javert
Of course it's the right way around. Wikipedia has, basically, what it needs.
I don't see how throwing more money at Wikipedia is going to accomplish
anything.

~~~
fapjacks
Oh? And Zynga "needs" something? Or is going to accomplish anything nearly as
worthwhile as Wikipedia? Or... ?

~~~
javert
People enjoy the games, they pay for them, those payments accure to employees
of the company and eventually investors who make it all possible. So the whole
goal of the business is literally creating happiness.

The investors, having produced value, can then invest in something else.

The people playing the games are also producing value, because they earned
their paychecks doing something productive for somebody.

Of course, all of this is true of every productive company and is readily
evident in everyday life (unless you live under communism). You need to take
an econ 101 course. Or maybe just pay attention.

~~~
fapjacks
I feel sorry for you, needing to resort to those kinds of statements. Whatever
made you that way, please know that life gets better, and it's possible to
draw inspiration for positive change from many different things around you.
It'll get better, buddy, I promise.

~~~
mjcohen
Until our civilization collapses. Then it will get better for all except
humanity.

------
MrTonyD
I think there needs to be some middle ground. What is completely ignored by
such an "all or nothing" law is the trade-offs required in order to create a
high quality of life for individuals while also thinking of our society
overall.

It is in society's interest for some industries to be protected - in order to
avoid low-cost competitors and worse employers. We are over-reacting.

~~~
GeneralMayhem
Middle ground in inherently non-equal relationships (employer-employee,
landlord-tenant, etc) doesn't usually work because the areas close to the line
need courts to sort them out, and courts cost money, which one side of the
relationship doesn't have, so what happens instead is that the line inches
slowly but surely in favor of the powerful side of the relationship because no
individual can afford to challenge it.

There are some ways to combat those effects - for instance, large statutory
damages make the reward larger, and unionization makes the individual risk
lower - but by far the simplest and most direct is to sacrifice nuance to at
least avoid a worst-case option.

------
CognitiveLens
In unrelated news, Hawaii's High-Tech industry collapses.

I think this policy is awesome and should be universal, but it seems a little
crazy to enact it unilaterally - if a company can choose which state to
operate in, Hawaii is going to lose out to all the others that allow unfair
(IMO) employer protections.

~~~
WilliamSt
Aren't non-compete clauses banned in California?

~~~
ridgeguy
Pretty much, as long as you're an employee.

There may be exceptions if you're the owner of a business that you sell, or a
member of a partnership that's dissolved, or part of an LLC that's being
dissolved.

Useful info on US noncompete laws:

[https://en.wikipedia.org/wiki/Non-
compete_clause#Exceptions_...](https://en.wikipedia.org/wiki/Non-
compete_clause#Exceptions_-_valid_non-compete_agreements_in_California)

