
To Compete Better, States Are Trying to Curb Noncompete Pacts - dnetesn
http://www.nytimes.com/2016/06/29/technology/to-compete-better-states-are-trying-to-curb-noncompete-pacts.html?ref=technology
======
rdl
I've been thinking of a mutual defense society for startups in Washington who
in good faith hire someone and the employee is then threatened by Amazon or
Microsoft, as a former employer, on non compete grounds.

I suspect if you were willing to completely go to war over a hire, you could
ultimately get noncompetes invalidated. The problem is the chilling effect on
marginal hires -- it usually isn't worth going all the way on hiring someone
when you have other options, and even when it is, it makes sense to settle and
move on (for both sides).

(From what I've heard, Amazon is particularly egregious in enforcing
noncompetes. I believe they are an unconscionable and unconstitutional
restraint on individual liberty, and believe the federal courts would agree,
as well as the court of public opinion.)

~~~
tacostakohashi
Perhaps the main thing such a society could do is maintain a website with data
about employers that have non-compete clauses in their employment contracts,
and the extent to which they try to enforce them (like Chilling Effects, but
for employers).

If prospective hires for such companies knew that they would be seen as
damaged goods on the employment market as a result of working for a certain
company, it would influence their choice of employers, especially in the
common scenario of having a few offers to choose between and not having much
else to separate them with.

~~~
HarryHirsch
Sounds nice in theory, but in practice the greater part of offers at the high-
end employers, like Amazon, Google, Facebook, is made through referrals or
internships. Everyone who signs up has the full picture already. I just can't
see this work.

~~~
pm24601
A lot of times employers say "This is industry standard." or "Everyone else
has the same sort of agreement."

If such a website listed companies that good/no non-compete clauses, it gives
ammunition for prospective employees. Esp people with multiple offers, during
the negotiation, the candidate can point to a competing offer from a company
with no non-compete clause.

~~~
brandonbloom
I absolutely love the idea. Kinda like a
[https://tldrlegal.com/](https://tldrlegal.com/) for employment agreements.
Somebody should build that.

~~~
crdoconnor
...and also cross reference it against companies that have at any point
complained of a lack of affordable talent.

------
jt2190

        *** MASSACHUSETTS TECHIES: THIS IS ABOUT YOU ***
    
        * Read the article
        * Contact your State Representative [1] and urge 
          them to support the bill [2]
    

[1]
[https://malegislature.gov/People/Search](https://malegislature.gov/People/Search)
[2] I think this is the bill text:
[https://malegislature.gov/Bills/189/House/H4434](https://malegislature.gov/Bills/189/House/H4434)

------
tdicola
I've been fortunate enough to have an employer with no non-compete, but in the
past with my first job out of college I just signed everything and was under
one for a year after leaving. My thought process now is that a non-compete is
just another thing to negotiate during the hiring process. I'm happy to sign
one but I will absolutely require that I'm compensated at least for a year of
salary, benefits, etc. while under the non-compete. It's only fair that if
you're asking me not to work for a year that I can actually sustain myself and
my family. Employers are just coasting off the fact that people will sign
these things and ask for nothing in return--once people realize it's
negotiable (even if you just plain walk from that job opportunity to something
else) employers will have a much tougher time with them IMHO.

~~~
aetherson
Yeah, so it would in a lot of ways be ideal if people could reasonably read,
understand, and negotiate the contracts they sign, and then be reasonably
bound by those contracts. So each person could say something like, "Sure, I'll
sign a non-compete. For an extra $15,000 per year." And then the company could
decide if that's worth it to them.

In practice, people just sign what's in front of them, and indeed even if they
want to read and understand everything, they can't without a fair amount of
training -- and the existence of lots of other people who will just sign
what's in front them means that it's hard to negotiate based on what you're
signing even if you do read and understand it.

(Digression: I bought a house. The amount of paperwork that I signed without
reading was probably around 100 pages. This is a crazy way to live.)

This feels like a problem that is getting amenable to a technological
solution. It's pretty easy to imagine a digital assistant that could
understand common contract phrasing and even do things like say to a person,
"This offer includes a non-compete clause. Based on your demographics and the
position, signing a non-compete clause will cost you approximately $X per
year. Would you like to negotiate for +$X per year? Y/N" The problem, it seems
to me, would be to get buy-in to the idea that such digital assistants should
exist and that companies would have to accommodate such assistants.

~~~
CaptSpify
I signed mine with my new hire paperwork. I had just flown across the country
to take the job. Am I supposed to say no when my family had just spent a ton
of money to move?

Shady when companies do this, IMO

~~~
tdicola
Bring it up in the interview process, particularly when talking to HR, etc.
You don't have to make a stand right there but at least find out what's
typically in an employment contract (a very reasonable question to ask even in
an early interview). Then later on when they're trying to close the deal make
it a negotiable thing just like salary, etc.

~~~
wyldfire
I asked about something similar at the offer stage: invention disclosure and
assignment. I asked several times and the recruiting team told me that
"everything I needed was on the website [where the job offer and the related
terms were]." I even asked "No, I mean the forms you'd ask me to sign upon
accepting the offer when I'm hired." Still nothing.

Sure enough, as soon as I accept the offer I'm presented with exactly what I
was looking for on that very same website.

Somehow I think "never attribute to malice ..." doesn't apply to corporations.

~~~
crusso
Why didn't you tell them that you wouldn't take the job if they couldn't
present you with the paperwork that they would be requiring you to sign?

And if they presented extra paperwork later, why wouldn't you hold them to
that?

~~~
Bartweiss
I can't speak for this case, but the answer is often "you found out after you
travelled across the country and turned down other job offers, and may be
waiting for repayment of moving expenses".

Yes, a person could try to get this sort of thing in writing and sue for
damages incurred, but they'd still be unemployed and loaded with expenses in
the meantime. There's a lot of freedom to push this kind of thing because
there's too much legal overhead to fight it.

------
morgante
It seems particularly egregious that non-competes apply even in the case of
layoffs or firing.

It's one thing to keep employees from running off to a competitor for a
slightly higher salary.

It's unconscionable to fire someone and then prevent them from finding a new
job in their field. That's egregious.

~~~
harry8
You can fire someone to go to their competitor for a lower salary, eg off-
shoring. That's just fine. Surely it has to work both ways. You must be able
to quit to go to a higher salary unencumbered or it's just pure regulatory
capture by employers to screw employees.

~~~
st3v3r
You're under the impression that employers want things to be fair.

------
chollida1
It's nice for some anonymous internet person to say "Non compete clause? just
don't sign them" but if you are ever lucky enough to get high up in a company
this often just sometimes isn't an option.

So if you do have to sign one then the below is the advice I've been given by
the employment lawyer's I've spoken to over the years.

1) make sure it says you are compensated for the time you can't work. ie if it
says you cant' work for a competitor for a year then you should be getting a
salary for the same duration. Some companies will try to give you a signing
bonus and include language that the signing bonus is consideration for you
waiving this compensation. I mean it's nice to get $50,000 in stock vested
over 3 years just for signing, but it won't feel that way if your former
employer also views this as compensation for you not working for a year.

I've had 3 or 4 employment lawyers go over this with me, both as an employee
and as an employer and they've all repeated this, if the company doesn't' pay
your salary during the non compete period then you just cant' sign it. Now
they also stressed that this means the non compete is probably not enforceable
but that won't be much consolation if they drag you to court.

2) Be very clear as to what "salary" means. So if you are a Google engineer
and you have a salary of say $125,000 and then a bonus of say $100,000 worth
of restricted shares vesting over 3 years and maybe a signing bonus of $50,000
worth of shares vesting over 3 years, you might brag that you just got paid
$275,000, but the company will probably argue that they only need to pay you
the pro rated amount of your salary over the waiting period.

Finance especially gets burned by this, as small salary and huge bonuses are
how many hedge funds compensate their key employees, also known as the "you
eat what you kill" compensation package.

3) Be very wary of telling your former employer of where you are going to
work. There just is no real upside to it.

I've also been told not to hire former employee's in the first year you leave
for a competitor. It's one thing for a company to loose you, but if you leave
and take an entire team with you then even though you've probably done nothing
wrong, it own't be very comforting when you are out of pocket $10,000's of
dollars in lawyer fees and stress.

As always, IANAL, I've just happen to work in the most incestuous industry
around, finance, and I've seen and heard too many horror stories of people
leaving for another firm and bringing their team with them and then being in
court for years.

~~~
morgante
I think the key point isn't not to automatically sign or not sign non-
competes.

It's to realize they are a negotiable item (just like salary, stock, vacation,
severance, etc.) and to ask for appropriate compensation in return for signing
it. This can include a guarantee of salary during the time of its application.
You can also narrow the conditions under which they're invoked or the scope of
what's considered competition.

~~~
Shivetya
got to love employers who foist these on existing employees under threat of
termination if not signed in short order. they do happen to often

------
Animats
None of those states will catch up with California. The other states are
proposing weak limits on noncompetes - limited by industry, limited to
"unreasonable" terms, etc. California also doesn't let employers claim rights
in work you do on your own time. Both of those rights fuel California's
startup culture.

~~~
jbpetersen
Got details on employers not being allowed to claim rights on work done during
free time?

I heard from a Google employee that their contract prevented them from working
independently on personal projects.

~~~
NDizzle
I have worked part time at several different places while keeping a full time
thing going. (which doesn't pay much, but I choose my own adventure) Each one
has tried to make me sign paperwork involving them getting first right of
refusal on things I make. I have refused to sign those documents, three times
now, twice for one company, with no real recourse from their side. HR put on a
show but I didn't take the bait. Make a stand when it comes to things like
that. I own my spare time, nobody else.

~~~
st3v3r
That's great, but not everyone is in such a position to be able to do so.

------
etjossem
When an employer sends you their boilerplate agreement and you see "Employee
will not work for a competing business", you're not looking at the only
employment agreement they've ever signed. You're looking at the version most
favorable to them. Strike out the "for 2 years following employment" and
replace it with something reasonable like "while employed by the Company."

It's customary to ask for a ridiculous clause like this up front, because no
candidate will walk away over the mere sight of it. They get one free chance
to screw you over, just like when you were talking about salary and they asked
what you made at your last job. But you have to do your part; politely bounce
it back.

You are a professional and this is a negotiation. No one will begrudge you
putting a reasonable counteroffer on the table.

~~~
jsprogrammer
Why would I want to work somewhere that I notice has just taken a free chance
to screw me over?

~~~
nsxwolf
That's getting to emotional. The definition of "screwing you" is you taking
their first offer, no matter what it is. Both sides should be trying to get as
much as they can in a negotiation.

~~~
greglindahl
This is not true at all. Getting too high of a salary may increase your chance
of getting canned (performance or RIF.) And offering too low of a salary to a
new employee may cause problems if the new employee finds out they're paid
less than their peers.

~~~
nsxwolf
You're never going to convince an employer to give you "too much" money. And
employers have no problem low balling you - they really don't think you're
going to find out what all your peers make, which is why they discourage the
practice of sharing salary information so heavily.

~~~
greglindahl
I've seen both of these things happen in real life, and have worked at
companies that had an explicit policy against low-ball salaries.

Startup valuations can also be "too high" \-- making it hard to raise the next
round.

------
harry8
It's really simple. If you want to enforce a non-compete you have to pay* the
employee gardening leave for its duration.

Enforcing a non-compete when you've laid someone off is utterly indefensible
and anyone who does this deserves to go bankrupt fast. Usually when forced to
pay employers discover ruining an employees career isn't actually worth
anything much to them and don't enforce. But if it's free it's a great lesson
to current employees - we'll go after you if you want to leave so no you're
not getting a raise.

*pay the maximum of the employees salary including any bonuses vs market rate, where the market rate calculation has to be defended by the employer in court and can be retrospectively re-applied. With the usual obvious basis of "the employee had offers for $x" etc.

------
angersock
I'm curious if there has ever been a case where an employee going into
competition with their former employer has been a net negative for society at
large.

Most of the tech we enjoy today probably would've been prematurely killed if
the creators were under modern non-compete and NDA paperwork.

~~~
zerohp
It's hard to imagine that we would be even close to where we are now if non-
compete agreements, that are common in other states, had existed in California
in the 1950's and 1960's.

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

~~~
pinewurst
Certainly Shockley would've used them and sued if he could.

------
shermozle
In Australia it's quite simple. If you want an enforceable non-compete, you
have to pay the person their salary for the duration. I'm personally quite
happy to sit on the beach on full pay for a year or two if you guys think it's
important!

~~~
NetTechM
I'd be on board with this idea. Australia seems to have a very worker
supportive law system though.

------
mancerayder
In New York State, the company has to demonstrate damage to it in order to win
a lawsuit, and non competes are usually tied to some sort of previous granting
of something, like stock options which can be lost. In practice judges rarely
enforce them more than a year although the contracts stipulate longer periods.

Now, the above is just my understanding, I'm not a lawyer and new to this
awful world of non competes.

Just the threat of a lawsuit can steer behavior since defense against one can
be costly.

~~~
x0x0
a mere threat of a threat (counsel at new company saying yes his noncompete
covers us) lost me a job offer in nyc

~~~
ghaff
I worked for a small company for a number of years. We wouldn't even look at
anyone who had a non-compete that could even conceivably have triggered legal
action.

------
anonymousDan
Wait, so in some states you can be prevented from working in your field, and
the company doesn't even have to compensate you? That's insane! Why would you
agree to that?

~~~
st3v3r
"Why would you agree to that?"

Wrong question. The proper question is, "Why is that allowed?"

~~~
forgetsusername
> _Wrong question. The proper question is, "Why is that allowed?"_

Because people should be able to put whatever ridiculous terms they want into
a contract. It's up to you to agree in the first place, and in the second, a
court to determine if the term is enforceable.

There _are_ a few valid reasons for a non-compete, after all.

~~~
st3v3r
"Because people should be able to put whatever ridiculous terms they want into
a contract"

No, they shouldn't.

"There are a few valid reasons for a non-compete, after all."

No, there aren't.

~~~
forgetsusername
> _No, they shouldn 't._

No, you're right. Someone like, say, you, should get to decide, preemptively,
what a contract between two parties should or should not be allowed to
include. Because you know better than the parties _actually_ doing the
negotiation, right? Why should we trust that the relevant parties know what's
in their own interests?

> _No, there aren 't._

Yes, there are.

~~~
st3v3r
"No, you're right. Someone like, say, you, should get to decide, preemptively,
what a contract between two parties should or should not be allowed to
include. Because you know better than the parties actually doing the
negotiation, right? Why should we trust that the relevant parties know what's
in their own interests?"

When one party has far more power than the other, and the clause in question
is only there to screw the worker over and prevent them from working in their
chosen field? Yes. There is absolutely no reason why a worker would want one
of these clauses. They get railroaded into them only because they need a job
and don't have negotiating power.

Stop pretending that everyone has the same negotiating power.

"Yes, there are."

No, there aren't. A company is not entitled to make money. Especially not at
the expense of someone being able to feed their family.

------
DannyBee
The old boogeyman that used to get trotted out by companies was the "they'll
steal trade secrets and run away to other companies".

With the federal defense of trade secrets act now a thing, can someone tell me
exactly what purpose _at all_ non-competes still have that makes any sense?

(If it's "we spend time and money training people or signing bonuses or
whatever", great, make them pay back the money if they leave too quickly)

~~~
morgante
Non-competes can make sense in client-facing roles.

You don't want to pay a lot of money for someone to come in, develop
relationships with clients, and then walk out the door with all their clients
when someone else offers more money. It makes some sense to have non-competes
for sales, lawyers, and similar positions.

~~~
DannyBee
Errr, that's not a non-compete. That is a "no-solicitation-of-clients"
agreement, and that is common in the legal industry, for example.

There is no reason, as a lawyer, i should not be able to go to a competing
firm just because they compete with you for the same client base. Full stop.

If you want me to not solicit your clients, that's fine. But again, that's not
"non-competition", it's "non-solicitation".

So while i don't disagree with you, that isn't what these agreements cover :P

~~~
morgante
You're right. Non-solicitation agreements and non-compete agreements serve
slightly different and overlapping purposes.

Technically, non-solicitation agreements only prevent solicitation. So they
can bar me from hopping to a competitor and calling up all my old clients to
bring them over. They don't prevent me from joining a competitor, having all
my old clients find out, and having them then decide to join me.

Thus, a non-compete is often simply a stronger form of non-solicitation.
That's also why you sometimes see non-compete agreements which apply to a
geographic area.

They're also often regulated in tandem. AFAIK, both are unenforceable in
California.

For what it's worth, I think the harms done by non-competes far outweigh this
limited argument. But you can't argue that there isn't an argument.

~~~
DannyBee
"They don't prevent me from joining a competitor, having all my old clients
find out, and having them then decide to join me."

That's on your clients though, and their call. You have done literally nothing
to make that happen, and it's unrelated to you leaving or not. If the other
firm hires a superstar lawyer, they may do the same thing.

This is essentially "not an evil we should prevent" :)

" But you can't argue that there isn't an argument."

I think there are good arguments for non-solicits. I don't still don't see any
for non-competes. That is because I don't think "try and indirectly prevent
people unrelated from employee from doing things" is a valid argument for
_directly_ restricting employee movement, instead of directly dealing with the
behavior at hand. If having clients move is really just that harmful, make it
part of the contract with the clients. They sign retainer and other
agreements, require they not move for x number of days upon their current
contact leaving the firm, or else they pay you damages for jumping ship.

(i'm a lawyer, so i'm aware this would run afoul of most states ethics rules,
i'm just pointing out there are valid ways to deal with this that make sense,
all things being equal. )

~~~
morgante
> You have done literally nothing to make that happen, and it's unrelated to
> you leaving or not.

It's obviously not unrelated. The lawyer they had been working with leaves the
firm. They (obviously) find out and this causes them to decide to re-evaluate
their choice of firm. They find out where you jumped ship to and go there.
Thus their move is a direct result of you moving firms without requiring
solicitation.

Like I said, I don't think it's a sufficiently good argument to justify non-
competes. But it's absolutely an argument that people make.

Restricting the client is of course another avenue. It's certainly a major
contribution to discounts for long-term contracts.

------
ProAm
I thought it was illegal to prevent someone from earning a living?

~~~
kiba
If you're a felon, then you're essentially prevented from earning a living.

~~~
sokoloff
How so? They're prohibited from possessing firearms, so they're not suited for
armed security, but there's nothing structural preventing them from earning a
living. Plenty of companies will hire felons, just not all of them.

~~~
astrodust
In practice "plenty" translates to "almost none" and those that do tend to
abuse their employees since there's very few repercussions.

Simply being unemployed for an extended period of time is enough to exclude
you from many jobs. Being a felon and having done jail time excludes you even
more severely.

~~~
tracker1
"I was operating a sole-proprietorship business from 1998 to 2012."

~~~
astrodust
That can work for a case of simple unemployment if you can make it sound
plausible, but if you can't come up with a single client reference from that
period of time you could be pooched.

This is also complicated by the fact that you may have no option to admit that
you're a felon and served time since they may have your police report on their
desk.

We're living in an era where having nothing more than an _arrest record_ ,
even if no charges were ever filed, is grounds for suspicion. It doesn't even
matter if you were someone walking their dog and rounded up by the police in
some kind of illegal kettling, you have a record.

------
CyberDildonics
I had a non compete clause crossed out of a contract once. I was told they
didn't usually change contracts, but they did.

I was also told 'it isn't usually enforced, there are plenty of people that
have taken jobs at <only competition in the city>'. I said 'then it shouldn't
be in there'.

Everything worked out for me but people need to remember a few things:

1\. A contract is a negotiation/conversation/two way agreement. It is never a
take or leave it offer in my experience.

2\. Get the contract EARLY. Companies try to build momentum and act like a
contract is a formality. Then they hand you something that takes away as much
power from you as possible. They have lawyers, bargaining power, choice, time,
experience, and a global view of salary that you might not. There is a huge
imbalance of information.

3\. If it is worth signing, it is probably worth having a lawyer take a look
at it. A lawyer might bill at $250/hr. It might take 30-45 minutes to look
through a contract and that can be a very worthwhile investment.

4\. And of course, take the contract seriously. Don't sign something thinking
the scenarios where it comes into play are too rare for you to care.

~~~
st3v3r
"1\. A contract is a negotiation/conversation/two way agreement. It is never a
take or leave it offer in my experience."

In your experience. In many others, it is. Especially if they're in an area
with not a lot of tech employers. Just because you find it easy to negotiate
doesn't mean everyone does, and that doesn't mean that those who can't should
be screwed over because of it.

~~~
CyberDildonics
Nothing I said contradicts what you've said.

~~~
st3v3r
No, this is a complete cop out. You're saying, "I can do it, so there's no
problem." Yet, most people aren't in the position to do it, so there is a
problem.

------
OliverJones
If you live in MA, please write to your state legislator and ask her or him to
move on this. We need noncompete reform here. This bill isn't perfect. But, as
a child I know might say, "EMC isn't the king of me."

[https://malegislature.gov/People/Search](https://malegislature.gov/People/Search)

Thanks.

------
JustSomeNobody
My favorite is when the company you work for is purchased and the new owners
come in and lay people off, then those who are left get 3 days to sign a non-
compete. I begrudgingly signed because I had nothing else lined up at the
time.

------
roflchoppa
Yeah when I was working retail, there was a cat that i met that needed some
help, (he was known by all the managers). I offered to help him on his
project, to which my mangers found out, and were talking about firing me over
it. I had no idea that that would violate my NonCompete clause that i signed
to when hired, being that it was not related to retail AT all, and there were
no transferable skills that I learned. Luckily my lead saved my ass, and told
the managers "theres no way he knew that."

~~~
bbcbasic
> there was a cat that

Sounds like an Alice in Wonderland story.

------
nfriedly
I have a friend who was "reminded" by his first employer that he had signed a
non-compete after he changed jobs to a second (competing) employer. He ended
up finding a third job at a company in a somewhat different field.

This was in Ohio where non-compets are enforceable, and the courts likely
would have sided with the first employer if it had gotten to that point.

I don't think he ever realized what he had signed until he was "reminded" of
it.

------
gwbas1c
I think requiring a high portion of a former salary during a non-compete is
fine. Otherwise, it's just not fair to enforce.

------
sitkack
I don't understand the companies that are going under, lay off employees and
then still except the non-compete to be binding. I would at least expect where
the company initiated the departure that the non-competes are no longer
binding. That, and that I get a small stipend for the duration of the non-
compete.

------
pc86
By "states" they mean Massachusetts. In many states they are all but entirely
unenforceable (CA) or only enforceable under very specific circumstances (PA).

------
ckdarby
Paywall. Why Does HN allow this stuff to be submitted?

------
pg_is_a_butt
uh... isn't the whole point of "States" because a larger controlling body is a
bad thing, and many groups want to make deals in their own ways? so then a
Company WANTS to make deals their own way "Noncompete Pact" deals, and now
you're telling them they can't do that... and you think by driving away these
companies by not letting them do what they want, that you will somehow compete
better? for what? the 50th spot on the economic rankings list?

idiots.

~~~
pyre
So your argument is that to achieve economic growth one just needs to pass a
law that says "companies can do anything and everything that they like, no
restrictions?"

------
zekevermillion
The article is seriously misinformed. It seems to imply that noncompetes can
restrict employees from working in their field. That is not the case in New
York. Post-employment restrictions are only enforceable to the extent they
protect a "legitimate business interest" of the former employer. That interest
does not extend to preventing former employees from practicing their trade.
Employers use noncompetes abusively all the time. The problem is not the state
of noncompete law. The problem is the nature of the legal system.

~~~
DerekL
How is it misinformed? So New York is different. The article clearly says that
the legality of noncompetes varies from state to state, and it doesn't mention
New York State at all.

~~~
zekevermillion
It is misinformed in that it misstates the law in most US jurisdictions,
including the one in which it is published.

