The article states that NCAs are contracts, but doesn't contract law stipulate that there must be some amount of equity between the consideration offered by the parties involved? Could a company really quantify the benefit of employment at that company, on a non-pro-rata basis (since you're held to the NCA whether you work there for an hour or a decade), to be worth an entire year's salary? That seems a tough bite to swallow.
Depending on what you do, it can be rather hard to work for a company that isn't a competitor. For instance, the hair dresser mentioned in the article. He couldn't work for a competing salon. Short of relocation, where can a hairdresser work that's not a competitor.
That's one of the cases that the non-compete makes no sense. A hairdresser that doesn't know any business secrets has no other skills. You can't prevent them from using their only skill. A hairdresser that DOES know business secrets isn't really a hairdresser... They're a (something) that does hairdressing on the side.
In that case, a non-compete is ridiculous. The hairdresser should never have signed it, and the employer should never have asked for it.
I'd like to see any case where a non-compete makes sense. And if you can find one, also show how a confidentiality agreement wouldn't make more sense.
As far as the hairdresser shouldn't sign, what if all his/her potential employers have such agreements? There should be laws against this sort of thing.
From an employee's or an employer's point of view? A non-compete makes complete sense from an employer's point of view for an employee filling a critical function. If you're running a business and hire a CTO, having them sign a non-compete makes sense, since it limits their options and makes it harder to jump ship. A confidentiality agreement does not provide the same limitations -- it doesn't prevent the employee from quitting and getting a new job.
Note: I'm purposefully NOT discussing whether or not it is ethically correct, or if it's the right thing to do, or if it will create a more motivated employee, or anything of the sort.
Also, I understand that employers can't give that justification or the agreement would be ruled invalid. But as you said, what other point is there that's not served equally well by other means?
>since it limits their options and makes it harder to jump ship. A confidentiality agreement does not provide the same limitations -- it doesn't prevent the employee from quitting and getting a new job.
Exactly. It's purely a mechanism for interfering with the natural function of the job market to artificially keep wages down. I should have said "makes legitimate/ethical sense". This kind of behavior is not legitimate, it should not be legal to make these agreements a condition of employment anymore then making being white can be.
Company A and Company B have FooBars servers. Company A comes up with a revolutionary new way to serve FooBar that cuts cost in half.
Company B would love to know this secret. So they hire one of the workers in Company A that knows the secret. Legally and ethically Worker X cannot tell the secret. But they can hint, and work towards that secret without telling anyone. They may even let it slip by accident.
Non-competes are designed to prevent Worker X from revealing this secret, even by accident.
>But they can hint, and work towards that secret without telling anyone. They may even let it slip by accident.
>Non-competes are designed to prevent Worker X from revealing this secret, even by accident.
If the person is willing to break one law, why wouldn't they be willing to break another? Non-competes have nothing to do with this. It's just another technique businesses use to try and disrupt proper market forces in the job market. It should not be legal to use a non-compete contract unless you are going to pay the person's salary while they're under the agreement. Why should tax payers be footing that bill?
I recently left a job working for a large corporation that has its hands in everything (think Sony, Microsoft, etc). The non-compete in that case makes no sense - I was involved in, naturally, a very small corner of the company, but I was barred from touching anything that my former employer engaged in.
So, even if I was working on word processing apps, the fact that the company has a hand in cloud computing makes me unable to take a job that field also.
As corporations get larger, these issues will become more prevalent.
