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...). 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.
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.
And in response, California firms repeatedly engaged in (illegal) noncompete and anti-poaching collusion to both drive down wages and limit labour mobility.
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.
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.
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).
They're hard to enforce, but I can tell you from experience (current) that it doesn't matter - their existence and enforceability in ANY way in a given state is harmful in a big way. California has basically done the right thing and decided to ignore them, but my home state only has rendered them ALMOST entirely unenforceable. That almost leaves a lot of room for the casual observer to judge - and it stings.
1 - I lost a job in nyc when counsel at the new company decided my old company was too close because they both did internet advertising
2 - intimidation works quite well up to your ability to front giant legal expenses. While stuff may or may not be unreasonable, most of us aren't in a position to front tens of thousands of dollars that you probably won't get back.
Yet if you hire someone under a non compete in many states the court battle will cost you 50-100k. Until they're blatantly not legal they're still a huge pain.
And is very dependent on jurisdiction and changes over time in any given jurisdiction.
Illinois for instance went from "non-compete's were basically not worth the paper they were printed on" to "hmm, might need a judgement to figure it out, is it worth it?"
Non-competes aren't there to be enforced, but to make the person stinky to future employers. A decent company will cover legal expenses and, in the extreme outlier case, judgments-- and an indecent one will fire you, but you probably won't get sued in either case. The effect of a non-compete on a star hire is relatively small, but if you're an entry-level engineer, the difference between $85,000 per year and $85,000 per year plus theoretically unbounded legal risk is huge.
Non-competes, non-solicits, and (except in a severance) non-disparagement clauses are shitty practices that deserve to die in a taint fire.
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.
I think the reason some employers want them is because they don't want to put the effort into building up an employees skills just to have them move to a different company right when they become useful.
When you are an employee under these laws, you tend to put a lot more thought into choosing a company you would be willing to stay with as long as you are interested in that section of the industry.
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.
I always wondered how clauses like this work for married people. After all, the law considers everything created within marriage to be property of both spouses. So, technically, should employers be asking both the employee and their spouse for an intellectual property assignment agreement?
Note the post is about non-compete ("I won't go work for a company in the same market for X time") and non-solicit ("I won't convince my coworkers to come with me") clauses. IP assignment is separate.
It's simple. Don't sign a contract with ridiculous clauses like that. Demand for good engineers is high enough that it won't prevent you from finding a job.
The company I recently joined had such a license, but then had a rider specific to Washington state that basically limited the scope to the particular industry and/or using company resources, which I find to be far more reasonable.
How the hell can that be legal? That would be the legal equivalent to a person working in a factory and doing the same stuff as hobby at home not owning the products he made at home.
Doesn’t this infringe at least a few universal human rights? o.O
As I understand it, this just means they're allowed to require you to sign a contract saying that they own your "off the clock" work, not that they own it by default. Or is it different in NY?
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.
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.
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"
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.
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.
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.
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.
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.
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.)
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.
But "unreasonable" varies by jurisdiction, and as the (blatantly) pro-noncompete author of the blog post notes, Hawaii has previously legally found even three-year noncompetes not unreasonable.
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.
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.
[+] [-] jacobheller|10 years ago|reply
[+] [-] mathattack|10 years ago|reply
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.
[+] [-] dredmorbius|10 years ago|reply
[+] [-] josefdlange|10 years ago|reply
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|10 years ago|reply
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.
[+] [-] gtrubetskoy|10 years ago|reply
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).
[+] [-] tomasien|10 years ago|reply
[+] [-] sib|10 years ago|reply
[+] [-] x0x0|10 years ago|reply
2 - intimidation works quite well up to your ability to front giant legal expenses. While stuff may or may not be unreasonable, most of us aren't in a position to front tens of thousands of dollars that you probably won't get back.
[+] [-] austenallred|10 years ago|reply
[+] [-] SilasX|10 years ago|reply
[+] [-] kasey_junk|10 years ago|reply
Illinois for instance went from "non-compete's were basically not worth the paper they were printed on" to "hmm, might need a judgement to figure it out, is it worth it?"
[+] [-] michaelochurch|10 years ago|reply
Non-competes, non-solicits, and (except in a severance) non-disparagement clauses are shitty practices that deserve to die in a taint fire.
[+] [-] benjohnson|10 years ago|reply
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.
[+] [-] hueving|10 years ago|reply
When you are an employee under these laws, you tend to put a lot more thought into choosing a company you would be willing to stay with as long as you are interested in that section of the industry.
[+] [-] crimsonalucard|10 years ago|reply
[+] [-] tibbon|10 years ago|reply
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|10 years ago|reply
[+] [-] wheaties|10 years ago|reply
[+] [-] tracker1|10 years ago|reply
[+] [-] tomp|10 years ago|reply
[+] [-] lfowles|10 years ago|reply
https://www.ieeeusa.org/members/IPandtheengineer.pdf
[+] [-] driverdan|10 years ago|reply
[+] [-] ergothus|10 years ago|reply
[+] [-] kuschku|10 years ago|reply
Doesn’t this infringe at least a few universal human rights? o.O
[+] [-] littletimmy|10 years ago|reply
That sounds like working on a plantation. Everything you pick is your master's.
[+] [-] alexnking|10 years ago|reply
[+] [-] skarap|10 years ago|reply
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|10 years ago|reply
[+] [-] Sukotto|10 years ago|reply
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|10 years ago|reply
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|10 years ago|reply
[+] [-] colanderman|10 years ago|reply
Couldn't have picked a more biased source ;)
[+] [-] tracker1|10 years ago|reply
"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.
[+] [-] renownedmedia|10 years ago|reply
[+] [-] hueving|10 years ago|reply
[+] [-] re_todd|10 years ago|reply
[+] [-] mathattack|10 years ago|reply
[+] [-] monksy|10 years ago|reply
[+] [-] lgleason|10 years ago|reply
[+] [-] colanderman|10 years ago|reply
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.
[+] [-] ErikRogneby|10 years ago|reply
[+] [-] CognitiveLens|10 years ago|reply
[+] [-] colanderman|10 years ago|reply
[+] [-] fulafel|10 years ago|reply
[+] [-] lsllc|10 years ago|reply
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|10 years ago|reply