
Noncompete Clauses Increasingly Pop Up in Array of Jobs - GabrielF00
http://www.nytimes.com/2014/06/09/business/noncompete-clauses-increasingly-pop-up-in-array-of-jobs.html?hpw&rref=business
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austinz
Noncompete clauses are bullshit.

We already have an extensive infrastructure in place to protect the
intellectual property and trade secrets of companies, including NDAs and those
clauses assigning ownership of anything you produce to your employer. But the
idea that companies can overstep this bound and place restrictions on how you
can use your brain and your general knowledge to produce new, creative work
that has only a secondary or tertiary relation to their IP is utterly vile.

If the technology existed to erase memories from brains, would these employers
insist in their employment clauses that employees who resign must have any
professional knowledge acquired on the job erased from existence? This is
almost the same thing. If you are an engineer in a niche field, in particular,
being barred from that field for a year or more is tantamount to rendering
your professional knowledge obsolete.

~~~
tzs
> If you are an engineer in a niche field, in particular, being barred from
> that field for a year or more is tantamount to rendering your professional
> knowledge obsolete.

What if it was the employer that taught you the niche field? They hired you,
and then sent you through six months of training to learn the field. During
this time, you are producing very little of value, but you are being paid.

Then, when you finish the training and are ready to be productive with your
new niche knowledge, you get poached by their competitor--a competitor who can
pay higher wages because it isn't spending tens of thousands of dollars on
training for new employees.

It seems to me that there should be some way for the employer to protect
against the above scenario. What would be acceptable instead of a noncompete?

Some ideas:

1\. A noncompete that runs from the START of employment instead of from the
END of employment. If training takes six months, the noncompete would say you
cannot work for a competitor for 18 months after start of employment.

2\. Charge for training, with payment due in monthly installments starting at
the end of training. The company waives payment for each month that the
employee continues working for them. The employee can leave for a competitor
at any time, but will then be responsible for making the remaining payments
for his training.

~~~
_delirium
I'd be okay with provisions restricting (or penalizing) quitting early in
those kinds of situations _if_ they are approximately symmetric. For example a
2-year minimum employment period in which there are penalties for either side
abrogating the contract early (the employee leaving before two years, or the
company laying the employee off before two years, maybe with exceptions for
serious misconduct on either side).

~~~
tptacek
It's not clear to me why the employer investing in training has somehow
shouldered some additional obligation to the employee.

~~~
_delirium
It's the employer modifying the at-will employment arrangement and attempting
to restrict the employee's freedom to choose jobs at will, which should result
in a symmetric obligation. The default situation in most U.S. states is at-
will employment: either side may terminate the employment relationship at any
time, for any or no reason, with any notice they choose to give or none.

If a more durable arrangement is desired, so the employee cannot leave
tomorrow with no notice (thereby giving up the normal freedom to work only
_willingly_ for employers, and leave when it is no longer willing), then IMO
it should be set out in advance and honored by both sides, e.g. by using a
fixed-term or minimum-term contract, with penalties for early termination by
either side. That way both sides can plan on the stability of the relationship
(barring serious misconduct).

For example in my current job, either my employer or myself can terminate the
employment with four months notice, after the first six months. This gives us
both some guarantee that we will be able to plan for major changes— they will
have time to find a replacement if I give notice, and I'll have time to find
another job if they give notice.

~~~
tptacek
The employer is not "modifying the at-will arrangement". The employer is doing
the same thing employers do with signing bonuses: "here is a benefit you can
have, but if you leave before 12 months is up, you have to give it back".

Obviously, training benefits can be abused. "Here is a 'benefit' that is not
really a 'benefit' but instead a job requirement for which we have assigned a
nearly arbitrary value; if you leave within 12 months, you must pay us this
random number back." But as long as "training" has some value assigned by the
market with a reference price not controlled by the employer, what's the
problem?

~~~
tehwebguy
Of course, it is all about consideration. I just can't think of an example
where training would be enough consideration for a non-compete.

Employers always have to pay for experience. You either pay more for an
experienced employee or pay for training.

With an experienced employee you can include actual benefits, like you
mentioned, or you can pay to train someone who will take a lower salary.

~~~
tptacek
I'm not suggesting that training should be adequate consideration for a
noncompete.

------
stephencanon
There's a simple solution, of course (besides outright banning of such
clauses): require that the employer continue to pay the employee's salary
until they are released from the clause. See how many summer camps continue to
ask for or enforce such clauses then.

~~~
TheCowboy
I do agree with the general point that at least they should pay the employee
bound by such agreements, so as to eliminate frivolous use. If it's really
economically important to a firm, they are more likely to demonstrate that by
paying a cost.

But, is there really any reason not to outright ban them? Specifically, are
there any strong economic arguments for allowing these?

It seems like everyone is worse off in an economy when talent has to sit on
ice because these contracts, even if they still collect a salary they are no
longer contributing to the wealth engine of society. It discourages more
efficient uses of labor when people are effectively married to a company. It
also seems like an inherently unfair practice with at-will employment being
the rule.

This sounds like one of those ideas people hold up as protecting small
businesses or start-ups from big corporations, but really doesn't end up being
an advantage.

~~~
rmc
> Specifically, are there any strong economic arguments for allowing these?

They benefit the employer, since it limits the job prospects of the employee.

------
kareemm
> “Noncompetes reduce the potential for poaching,” said Mr. Hazen, whose
> company makes scratch lottery tickets and special packaging. “We consider
> them an important way to protect our business. As an entrepreneur who
> invests a lot of money in equipment, in intellectual property and in people,
> I’m worried about losing these people we’ve invested in.”

Then do everything you can to keep them (pay them well, create a workplace
where autonomy, mastery, and purpose are the norm, etc). Spending that $$ on
your people instead of lawyering up to take away a former employee's
livelihood when they find a better opportunity is a terrible way to run your
business.

~~~
gedrap
That would be true in an ideal world, with no greed and where every employee
loves his company.

But in our world, dealing this way might get nasty with some people. "Pay me
$$$ or I am leaving for XYZ tomorrow". Wouldn't call that kind of employees
toxic or something. Just everyone has a different number.

It's especially true for niche businesses, like scratch tickets. I guess
finding a technologist (or whatever) for such a company is a bit harder than
finding a jQuery or Rails guy :)

~~~
jjoonathan
> But in our world, dealing this way might get nasty with some people. "Pay me
> $$$ or I am leaving for XYZ tomorrow".

I wouldn't call that greed, I'd call that "the employee demanding their true
market value." Employers get the right to fire people and replace them with
cheap labor overseas (for example), it's only fair that laborers retain the
right to leverage competing employers off of one another.

> finding a technologist (or whatever) for such a company is a bit harder than
> finding a jQuery or Rails guy

Then the market demands that they be payed accordingly.

> [Anticipated words I'm putting into your mouth:] "You seem awfully focused
> on the market for someone arguing in favor of regulation."

I like markets, but they have many well-known pathologies, and I see nothing
wrong with addressing those with regulation. In this case, the issue is that
the market can remain irrational longer than someone at the bottom can remain
solvent. Sure, in some sense you could say that people who don't read their
contracts and demand better terms deserve to be punished. But the market
doesn't just punish them, it punishes the people who try to negotiate for
better terms. Who would hire a smart worker when a dumb worker can be tricked
into doing the same job for less?

This is why we ban contracts involving slavery and indentured servitude. If
they were allowed, 1/4 of the population would unwittingly walk into the trap-
contracts. Even if they were perfectly rational, the next 1/4 would be forced
to sign similar contracts by the fact that they had to compete with the
irrational 1/4 on price (otherwise they starve). Regulations against this kind
of thing don't just protect people from themselves (which is arguably
something government shouldn't do), they protect rational workers from
irrational workers. The market needs them to function (for any reasonable
definition of "function"), and that makes them a good thing.

------
diafygi
Honest question: would a union help protect workers here?

I know many people here don't like unions in practice (corruption, stagnation,
etc.), but isn't this kind of thing exactly what unions are for? It seems like
employers are adding these because the feel they have more negotiating power.

~~~
anonymousDan
I'd prefer if they were just banned like in California. I struggle to believe
the fact that California is the only place where non-competes are much harder
to enforce isn't a major contributor to the success of the tech (Silicon
Valley) & film (Hollywood) industries. Even here in the UK, companies offering
zero-hours contracts have started to try and impose non-competes.

~~~
gnopgnip
What is a zero hours contract?

~~~
patio11
An employment relationship with an hourly employee which, unlike more typical
employment relationships with hourly employees in the UK, does not guarantee a
certain minimum number of hours of work available/assigned per week/month.

------
nostromo
I generally think that people should be free to make whatever agreements they
want.

But noncompetes should be banned for the same reason we have anti-trust laws.
They are in effect an agreement between companies to not compete for
employees. It's anti-competitive.

~~~
cpwright
The agreement is between the employee and the employer, and is a term of
negotiation just like salary. The two non-compete agreements I've entered into
both include provisions to be paid if the company chooses to enforce it.

When I worked at IBM and received a stock grant, they included non-
solicitation of employees and customers as a term of the grant (though no non-
compete).

If the non-compete agreement includes reasonable consideration, I think
banning them would be wrong.

------
greenwalls
Someone I know recently started a lower level tech support job and he asked me
about a non-compete he had to sign. I couldn't believe it! People just
starting out in lower level positions have no bargaining power so they have no
choice but to sign these or they won't get the job.

These companies are just screwing themselves because once these new non-
competes begin to harm lower level employees then the laws will be changed so
these agreements are invalid.

------
cordite
I am currently in Wisconsin under a non compete clause, I couldn't find many
laws that help support inventors or software developers.

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bediger4000
This seems like an extension of the growing trend towards believing that ideas
are property. Given that ideas can be developed independently, ideas are _not_
property in any real sense, and therefore require state support to enforce.

But anyway, this is a bad, bad trend.

~~~
chrismcb
This has nothing to do with ideas. Some of it is the belief that you've spent
time and money training someone, you don't want that person to work for a
competitor.

~~~
eli_gottlieb
Or in other words, you believe you own your employees' experience, implying
you partly own your employees.

Turns out capitalism eats even its own "I OWN MYSELF!!!111" axiom.

------
Natsu
I think they should be enforceable only as long as the company is paying you.
So they can either keep paying you and keep you from competitors, or they can
waive the non-compete, but they can't keep you out of the job market for free.

------
nkozyra
You'd be surprised how easy it is to negotiate around this, assuming you're in
such a position.

In either case, always make sure you review the terms and really think about
where you'll be if you're let go or quit in the next 2-3 years.

~~~
zachlipton
There may be some room to negotiate as an engineer. As a hair stylist or a
summer camp counselor, the terms usually tend to be closer to the take it or
leave it variety.

~~~
nkozyra
Absolutely, but if a company is going to hire you, then you have _some_
leverage.

------
mcovey
I've already had to put my money where my mouth is and quit a job over a
noncompete clause once. I am fine signing agreements to never disclose
anything imaginable about a job, to return company property and destroy any
copies of documents/information that I have, to not solicit the company's
clients, etc. But to further agree not to work in the same industry for any
period of time? Never, ever will I agree to such a thing.

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pm24601
And this is why I would not work in any state except for California.

(Actually one of many reasons - California has a lot of laws to protect the
employee)

------
zeruch
Noncompetes except in the most specific of cases is categorically stupid. And
even in those rare cases, still feels nasty. I do understand where its useful
in keeping a major dominant player/nigh monopolist from picking up key talent
from up and coming competitors, but thats about it.

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crapshoot101
This is interesting because in CA, a non-compete is almost pointless - its
illegal under state law, no matter what your term-sheet says. I think there's
an argument that in some cases it may make sense, but those situations are the
exceptions, not the rule.

~~~
sportanova
They apparently only really apply when 'trade secrets' are in play, and CA has
a pretty strict definition of 'trade secrets'.

------
lgleason
You don't want to sign a non-compete in Georgia. They went the direction of
Massachusetts a few years ago.
[http://www.noncompetetradesecretslaw.com/?cat=37](http://www.noncompetetradesecretslaw.com/?cat=37)

------
rememberlenny
As a developer, what can be done to protect against this if you are already
signed to one?

~~~
mmastrac
I think you can work in California regardless (IANAL, of course):

[http://en.wikipedia.org/wiki/Non-
compete_clause#California](http://en.wikipedia.org/wiki/Non-
compete_clause#California)

~~~
xur17
Even if you signed one in a different state?

~~~
danielweber
You could move to California, as the link says.

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jrs235
I strongly believe that basic law and legal issues (i.e. contracts and legal
rights) should be a required class and taught in all high schools.

------
tomasien
Sign the strictest non compete you can - if it's too strict in most states,
even the less strict clauses are voided immediately. Research first but that's
usually true.

~~~
JoshTriplett
Unlikely to be true; non-competes, like most other contracts, include clauses
that explicitly allow portions to be invalidated without invalidating the
whole. In any case, if you're in a position to have to worry about that,
you're likely already in court.

Consult a lawyer, and don't sign anything you're not prepared to abide by.

~~~
danielweber
I had one non-compete that said I couldn't work for a competitor 1) within 50
miles, 2) within 100 miles, 3) within the US, 4) within North America, 5) on
the Earth, 6) anywhere in the universe. And then was relying on the
severability clause to make it just as enforceable as it could be made.

~~~
ihnorton
> 6) anywhere in the universe.

Unless they were covertly testing your attention to detail and reading
comprehension, this last one seems like a prank by a bored intern or paralegal
:) Did you have a chance to discuss this, and if so, what did they say?

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tehwebguy
Good luck trying to find a judge that would enforce a non-compete for
basically any employee below a C-level title.

You can't sneak a non-compete _clause_ in with no compensation for it and
expect it to hold up in court.

~~~
asdfologist
From the article:

"Daniel McKinnon, who had been a hairstylist in Norwell, Mass., lost a court
battle with his former employer who claimed that Mr. McKinnon had violated the
terms of his agreement when he went to work at a nearby salon."

~~~
tehwebguy
My assumption was that they left significant details out since there was so
little on the case in the article. For instance some payment like severance in
exchange for the noncompete.

If there was no compensation then it's truly insane - I can't imagine a judge
possibly denying a person the right to work on the basis of a one-way
contract. The thought that his options are to learn a new profession or get
out of town, that's sort of insane.

