
Be careful before you sign a non-compete agreement - weatherlight
http://www.alternet.org/labor/seemingly-harmless-paper-you-signed-when-you-were-hired-can-bite-you-ass
======
johngalt
I don't have an inherent problem with non-competes. I could understand why
certain industries would need restrictions along those lines.

The problem is when businesses expect the non-compete agreement when it is not
a negotiated item during the hiring process. I recall one instance where I
given an offer by a company and we went through the usual salary/benefits/role
negotiation process. I accepted the offer and put in notice at current
employer. During the new hire paperwork they added an extremely onerous non-
compete agreement. Of course I refused to sign it.

The most insulting part was how baffled they acted. Like they just assumed
they could add demands like that without any additional consideration. This
attitude of 'well we need to protect ourselves, and we can ask for this
legally'. Well yes you can ask for anything, but it's _not what we agreed as
the terms of employment_.

~~~
Terr_
"What we get is valuable, but what you give up is worthless."

It's true that the world isn't zero-sum, but it's offensive for them to just
assume that means you're going to surrender something for nothing.

~~~
johngalt
That they would just demand it without even negotiating it during the hiring
process. Just assuming that I would cripple my career for years to minimize
their risk without any compensation in exchange.

"I understand that your feel your business is at risk for poaching/trade
secrets etc... But what I don't understand is why you assumed that I would
aborb the costs of your risk."

------
jhspaybar
I worked at AWS in Seattle and signed a non-compete that stated what was laid
out in the article. Given the things I'd done for Amazon, when it was time to
move jobs, it was insinuated that going to Microsoft and working on similar
things might be enough to trigger action on the non-compete. While I wasn't
interested in going to MS, it was clear that this non-compete was holding my
wages down as the company recognized I couldn't easily go elsewhere in the
local area. Who knows if it was a bluff or not, but I'm in California now and
I don't plan to ever sign a non-compete again.

~~~
jsprogrammer
Yep, the script should go:

 _hearty laugh_

I will not sign a non-compete agreement.

Show me the money.

~~~
abawany
In my case, at a "startup" (it isn't) I was offered the non-compete, with
extremely nasty and broad language that unfortunately is enforceable in Texas,
3 months after I had been working there. You can imagine the coercive effect
of that one: sign this or look like you got fired at 3 months. I was able to
negotiate some changes to the broad clauses, which by their own admission were
cut-and-pasted from somewhere else, but it made for an appalling experience.

~~~
st3v3r
Which is why businesses in Texas aren't able to attract talent an investment
to the level that those in Silicon Valley are.

~~~
hwstar
Which may explain why the unemployment rate is so low in Texas. Anybody who
already lives there is employed if they want to be, and are employable. Texas
has trouble attracting talent from outside of the state for the reason you
mentioned, and the backward labor laws in the state.

------
mcbrown
One simple solution would be to require employers to pay at least the workers'
prior base salary for the duration they wish to enforce the non-compete. I've
held senior positions where non-competes are to be expected, and that is
always a standard term. Of course, the only reason it became a standard term
is because people like me are represented by expensive lawyers who
consistently demand it, and an Amazon warehouse worker isn't in the position
to follow our lead. So the warehouse worker should be given the same
protection by statute: if the employer wants to enforce a non-compete, they
must do so affirmatively by paying the worker's salary (i.e. if they elect not
to pay then the non-compete is automatically null and void).

Of course the odds of something like that making its way through the
dysfunctional legislatures of 48 states is vanishingly low. But we can hope.

~~~
pdq
Right, the standard contract term is called 'consideration', meaning that for
a contract to be valid and enforceable, each side must be giving up something
of value as part of the transaction.

There's a pretty good summary here:

[http://www.wolfbaldwin.com/Employment-Articles/Non-
Compete-C...](http://www.wolfbaldwin.com/Employment-Articles/Non-Compete-
Covenants.shtml)

~~~
falcolas
Worth noting that continued employment is considered sufficient consideration
for many such contract changes, in "at will" employment states.

~~~
hwstar
This is simply not true. It has nothing to do with at-will employment. It is
state law. Some states require consideration separate from salary, some say
continued employment is sufficient consideration. 49 out of 50 states
recognize the doctrine of at-will employment. Only Montana uses just-cause
instead (just like the rest of the developed world coincidentally).

------
Animats
One of the reasons Silicon Valley is so successful is that California not only
prohibits non-compete contracts, it prohibits employment contracts which claim
that the employer owns technology the employee develops on their own time.
Most wannabe competitors of Silicon Valley aren't willing to put that into
law.

~~~
abawany
Which unfortunately gives California the label "business unfriendly". I hope
for California's continued growth because of its frequent ability to tell most
"job creators" where they can take their pre-Depression-era worker
preferences.

~~~
st3v3r
I've never been able to take anyone who talks about things being "business
friendly" seriously, because it almost always is a policy that makes things
worse for everyone else.

------
awakeasleep
There are some posters on here who take offense to the term 'poaching'

This is the first article where I really understood that. Saying a non-compete
defends a big corporation from "poaching" (by ensuring a low level employee
can't work in the same industry after quitting) shows an almost depraved pro-
business bias.

~~~
Spivak
You being too nice even calling the stance 'pro-business'. It's not even pro-
business since labor can't flow to the place where they are the most valued.

The non-compete situation is one of those prisoner's dilemma problems. If
you're the only one with non-competes then you're better off because you can
retain employees for less than their market rate, and if everyone except you
uses non-competes then you lose your best talent and can't attract more. Thus
the short-sighted decision is to use non-competes.

But if everyone uses non-competes then labor doesn't flow at all, businesses
can't attract talent, and then everyone is worse off.

~~~
theseatoms
Good point. "Pro-capital" is often a more accurate and precise term than "pro-
business."

~~~
protomyth
Well its certainly not pro-capitalism as it inhibits a fair market. I just put
it under cronyism. Entrenched interests are always a problem unless checked by
laws or new technology.

~~~
rodgerd
> Well its certainly not pro-capitalism as it inhibits a fair market.

Of all the delusions about economic system, the one that capitalism loves free
markets is the most hilarious.

~~~
protomyth
Of all the delusions about economic system, the one that capitalism is about
anything but free markets is the most hilarious

You can mock it, but that's the whole point

~~~
rodgerd
The point of capitalism is return on capital. The ultimate return will be
generated by monopolies, duopolies, or cartels. Capitalism is fundamentally
antagonistic to free markets.

~~~
protomyth
you seem to be talking about what theseatoms mentioned, because capitalism is
nicely summarized by Wikipedia as:

 _Capitalism is an economic system based on private ownership of the means of
production and their operation for profit. Characteristics central to
capitalism include private property, capital accumulation, wage labor,
voluntary exchange, a price system, and competitive markets. In a capitalist
market economy, decision-making and investment is determined by the owners of
the factors of production in financial and capital markets, and prices and the
distribution of goods are mainly determined by competition in the market._

------
zekevermillion
The specific issue with the author of this article is that she did not
disclose her prior noncompete to the new employer. Of course the new employer
did not sign the noncompete with the former employer, so there is no
contractual privity and thus no direct basis for the former employer to sue
the new one for breach of contract. The only way the former employer can mess
with them is to argue that they intentionally interfered with the contract by
encouraging the journalist to violate it. The SOP for employers targeted by
such claims is to put the employee in question on leave, or on alternative
duty if something's available that is unrelated to her prior job and does not
risk violation of her covenants. To terminate the employee altogether is a
rather extreme move. It's a solid damage mitigation strategy, but I think
conveys a total lack of spine, particularly for a journalistic organization.
The right thing to do would have been to put her on leave, while attempting to
get dismissed from the lawsuit -- which should have been easy enough to do
since the new employer apparently had no knowledge of the prior contract.

~~~
ghaff
Much as I'm against non-competes under most circumstances...

>The specific issue with the author of this article is that she did not
disclose her prior noncompete to the new employer.

In fact, according to the original WSJ article, "In applying for the job at
the Reuters newswire, she checked a box saying she wasn’t subject to any
noncompete agreement. Her termination letter from Reuters, which was reviewed
by the Journal, said that mistake cost her the job."

I get that she had supposedly forgotten she had signed one but it puts Reuters
in a tough situation.

~~~
zekevermillion
It actually puts Reuters in a great situation! Because they have a piece of
evidence that says they had no knowledge of the restrictive covenants. Sure,
it's not an accurate disclosure on the part of the employee. But that
inaccuracy only strengthens Reuters position in this case.

You could say "ah, but Reuters never would've hired her if the noncompete had
been disclosed." Not sure about that, because a fair reading of the noncompete
is that under New York law it cannot prevent the employee from practicing her
trade of journalism. If I were Reuters HR, and I saw the noncompete, I might
not have considered it a problem (aside from the industry practice of filing
meritless lawsuits).

~~~
srussellkraft
I agree with you that the box-checking cost me my job, and the decision was
easy for Reuters. But the company now has a blanket policy in place not to
hire from my former employer because of the non-compete. So other employees
are now prevented from moving there.

~~~
zekevermillion
Well, it was cited as the reason from what I read. But they could have stood
by you without increasing their legal exposure. I would hope to see the AG's
office take some action against publishers who use overly broad noncompetes to
depress the labor market.

------
dctoedt
The piece's subtitle/tag line is interesting: "If we’re going to pretend we
operate in a free market, we need to at least give labor a fighting chance of
flowing as freely as capital does."

------
trjordan
Call me crazy, but there's a huge difference between non-competes in startup-
land and non-competes in corporate america.

In a startup, the whole endeavor rides on secrets. The company doesn't more
money, talent, or employees than big companies. This applies to a pretty broad
definition of startups that includes unicorn and high-growth public companies.
The only things that matter to those companies are what they're doing and how
they're doing it, and in many startups, every employee has specific knowledge
that would be valuable to a bigger company or competitor. [Ironically, the
state with most of these companies (CA) doesn't allow non-competes, so it's
obviously not death, probably because trying to replicate a startup's success
means starting after they've become successful, so it may not matter. The
point is, non-competes make sense in a world where knowledge is core to the
business.]

In a large company, execution dominates. You can go all the way to factory
worker, but anything that looks like "use your trade skills to make this
thing" obviously shouldn't be protected by non-compete. Trade skills should
cut across companies.

There's ways to argue that, say, developers for CA startups could go either
way. React / Ember / Angular / etc. is certainly a trade skill. I'm going to
hire somebody eventually to help with munging our data set, plugging into more
APIs, and figuring out how to make sense of the data that comes back. If that
person went to work for another marketing analytics company, I wouldn't be too
happy, because to some extent, our specific mix of APIs to integrate with and
what we got from them is proprietary. If an engineer I'd worked with and
developed that knowledge with went to somebody trying to solve the same
problem as me, I'd be kind of pissed. Analytics the way we do it isn't a trade
skill, and I expect an informal agreement that you're not going to go work for
one of the ~5 companies in the world doing something really similar.

~~~
prdonahue
Not even sure where to start on this comment, but I'll try:

> In a startup, the whole endeavor rides on secrets. ... In a large company,
> execution dominates.

Have you ever worked for a startup? Most likely at least 10 other companies
have had the same idea. And 100 people outside those companies. Your ability
to (out) execute is all that matters -- regardless of the size company. See
also: talk is cheap. And yes, there are trade secrets that can be hugely
important, but these are handled by NDAs and other Confidential Information
agreements, not non-competes. If those are stolen, you sue under those
agreements, not your non-compete.

> If that person went to work for another marketing analytics company, I
> wouldn't be too happy, because to some extent, our specific mix of APIs to
> integrate with and what we got from them is proprietary. ... If an engineer
> I'd worked with and developed that knowledge with went to somebody trying to
> solve the same problem as me, I'd be kind of pissed.

Then you should give them a reason (ideally, several) to stay. Your employment
agreement trades some form of compensation -- typically cash and equity -- for
their output. You're getting value, they're getting value. If you don't treat
them properly, you don't deserve to keep them, regardless if you "wouldn't be
too happy" about it.

~~~
trjordan
I have. Last company I was the first the join, was acquired by a bigger
startup, and left at 120 employees. I'm currently starting my own company.

Maybe idea is the wrong word. Vision? Strategic plan? Narrowly-focused
execution with an emphasis on coherence? Facebook and MySpace are the same
idea, but vastly different companies, no matter when you compared them.
Communicating all the things you do differently isn't something that you can
do with a website or a quick chat with a single employee. That structure of
shared ideas is important, and in small companies, it's basically all that
exists. Comparatively, the code and customer base replaceable.

And anybody can leave, at any time, in the same way that I'm allowed to fire
anybody or sell the company with a provision to devalue the equity. There's a
million ways for us all to screw each other. There needs to be trust in the
company, because if you're just after short term cash, there's way better ways
to find it than startups.

~~~
prdonahue
If all you have are (shared) ideas, you have nothing. Think about it this way:
even if you took everything you've planned to do with your NewCo and published
it for the world to see, and then encouraged people to copy your plan, you'd
have a hell of a hard time convincing anyone to do so. It's also one snapshot
in time, for something that evolves rapidly -- if not by the hour then at
least by the day.

As an example, even if Facebook published their detailed road map years ago,
do you think MySpace would have been able to mimic their success? Of course
not. The team you assemble and your ability to lead them through execution is
what matters. That's 95% of it, if not more.

> There needs to be trust in the company, because if you're just after short
> term cash, there's way better ways to find it than startups.

Huh? What point are you trying to make here? Do you have employees joining
your startup for short-term cash? If so, they're idiots and should go work for
a larger company. I think the word you're looking for is "loyalty" and yes, of
course you want to create an institution that promotes mutual loyalty. But you
don't get it just by giving someone a job. You get it by valuing their skills,
rewarding them for their efforts, and selling them on the idea that _you_ as a
leader will make it worth their sacrifice.

------
ghaff
There are pretty draconian non-competes in the vein of you can't do a similar
job for anyone else for 2 years and there are ones that are less draconian.

When a company I was with was acquired, we were all given non-competes to sign
and it was pretty clear we could sign them or leave. I left not much later for
other reasons but I did sign the non-compete. Its terms were such that they
seemed unlikely to affect me. (Basically they enjoined me from taking a senior
executive position in a fairly narrow slice of the market for a limited period
of time.) So, yes, under those specific circumstances, continuing to get paid
seemed a reasonable decision.

[Edit: This was intended to be a reply to the comment asking why one would
ever sign a non-compete.]

------
thedevil
I've noticed the same trend in using non-competes on low-level grunts. Every
job I've taken in the last decade required one. Only one of those jobs had a
legitimate competitive reason for it.

------
mikeash
The current HN title is "Be careful before you sign a non-compete agreement."

Is there any time when I should _ever_ sign one? OK, perhaps if my family was
literally starving and this was the only job I could get. Aside from extreme
cases like that, are there any circumstances where a non-compete would be a
good idea for me? It seems like there's no point in "being careful," just
reject them out of hand. Sort of like you wouldn't say "be careful when
handling live wires while standing in a full bathtub."

~~~
asdfologist
Sure, like if the non-compete isn't that onerous for you (some are as short as
6 months, and some firms pay your salary for the duration of the non-compete),
and you get compensated for it (e.g. a large salary boost).

Also, many firms in finance enforce non-competes as well as many other
restrictions, e.g. mandatory approval for trading in personal accounts. So if
you want to work in this industry, it's not easy to avoid them without
compromising something else.

------
OhHeyItsE
Everybody loves the invisible hand of the free market... until they don't.

~~~
cmdrfred
I've seen this so many times. Pay someone low wages "Free Market", that same
low wage employee (Me for example, more times that I can count) leaves for a
better paying job "What about us? We're the CompanyName family!". It's amazing
how fast republican free-market types can become european socialists.

------
kough
Or, you know, you can sign them and not give a shit.

Unless you're working for SuperLargeCo (and according to this article, in most
cases even then) nothing bad will happen if you then work for a competitor. As
others have pointed out in this thread, there's no potential legal harm to
your new employer. And it is incredibly rare for prior employers to enforce
noncompetes.

How many of you have had issues with noncompetes? Is my experience totally
atypical? I've job hopped pretty frequently both in and out of California and
never had any issues.

~~~
thedevil
Some employers will not hire you if you have a non-compete that might impact
your work for them. It's never been an issue for me, I've only read stories
online. But I have been asked while applying for a job whether I have any non-
competes.

It's a risk for you. Even if unlikely, there's a non-zero chance that it could
screw up your career and hurt you badly. That risk has very real value
attached to it. Just like insurance and out-of-money options have real value
to them.

~~~
nitrogen
Long ago a company I worked for had to terminate development on an entire
product line because an inferior competitor decided to harass its former
employees across two different companies, rather than make a better product.
One target was a large corp (where I worked), the other was a highly
innovative startup. The aggressor had way more money than the startup and
killed them with legal fees and discovery costs.

------
paulddraper
Broad non-competes are very common for many jobs, and virtually never
enforced.

When you enforce one, you are basically trying to take someone's livelihood
away.

They're the EULA of of jobs. Sure, make a stand of you really want. But if you
don't, there's practically nothing to worry about.

(I feel bad saying that, but TBH I've signed a lot of EULAs.)

------
hwstar
A lot of the requirements for noncompetes at companies originate at the
insistance of the investors.

------
kevin_b_er
While this contract is currently viewed as unenforceable, it is only
enforceable by old conventions I think. We've already seen that it is possible
to lose basic inalienable rights by signing a contract you did not read, so
why not the ability to have a livelihood?

~~~
frandroid
It might be "unenforceable" in a court of law but the other company still
dropped her like a hot potato, so it's pretty practically enforceable.

~~~
srussellkraft
exactly - even the slightest threat of enforcement can have a chilling effect
on employees, who are usually not in a position of power (to negotiate, go to
court, risk their livelihood etc)

~~~
ghaff
That's the big thing. When I worked for a small company, if someone came along
who had even the most remotely relevant non-compete, the conversation was
pretty much over. It was one of the first things we asked before beginning any
serious discussion. Just too much potential for cost and risk.

Their were also firms in more or less the same industry who were known for
having non-competes that basically said, you couldn't do the same job for a
year with any competitor. I know at least one person who wanted to go out on
his own and he took a year off rather than trying to fight it.

