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Send Noncompete Agreements Back to the Middle Ages

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Re: Send Noncompete Agreements Back to the Middle Ages

#41
post #34

Earlier quoted context omitted.

> Make them fair, not unenforceable. Nice idea. How do you do that in practice? How does the judicial system decide what NCA is "fair"? The cost of the NCA to the employee can be heavy. How do you "fairly" value it? In reality you'll get what you have right now, where entire industries (and certainly entire companies) simply mandate NCAs in all their contracts and there's no way to remove it or get compensated for it…

Full pay for the length of the non-compete + insurance to cover the company going insolvent. Otherwise it's illegal to even put it in the contract

Real question: if the company one has an NCA with goes insolvent, does the NCA matter? Who would enforce it? Presumably, if somebody picks up the employees in a buyout, those would now be said company's employees and the company would be on the hook for the "Pay for the length of the non-compete" bit.

Re: Send Noncompete Agreements Back to the Middle Ages

#42

If I work for an employer based outside of CA but work out of a CA-satellite office, am I still subject to any non-compete?

California startup lawyer here, but not your lawyer. This is not legal advice. There's some misinformation here, so I'll clarify:

- California won't enforce noncompetes, except for a very limited set of circumstances (i.e. selling your business and then starting a competing business).[1]

- If you live and work in California, then you get the benefits of California law (including the noncompete law above), no matter what your employment agreement says. UNLESS you were represented by a lawyer during negotiations and you agreed to a different state's laws. NOTE: This section only applies to employment agreements entered into AFTER Jan 1, 2017.[2]

If your employer tries to pull a fast one and says you are subject to another state's laws, then you can invalidate that clause, and you can get your attorney's fees paid by the employer if you have to litigate it. [2]

[1] CA Business & Professions Code Section 16600-16602.5 Link here: https://leginfo.legislature.ca.gov/faces/codes_displaySectio.... Note: once you get to get to Section 16603, there are some super weird laws prohibiting bundling horror comic books. Aren't laws fun?

[2] CA Labor Code Section 925. https://leginfo.legislature.ca.gov/faces/codes_displaySectio....

Re: Send Noncompete Agreements Back to the Middle Ages

#43

Thank god the german law requires a NC clause to have a compensation directly mentioned in the contract that is not allowed to be less than 60% the person earned in the company in the last year she worked there. If the compensation is missing or too low, the NC is against the law. In other words: if a company wants me to not compete, they need to pay me for the time the NC is active. Its also limited to a maximum of…

60%? Forget that. Why should anyone give up their right to work for a little over half of their market value?

There is no excuse for allowing less than 100% compensation, and that should include not just salary, but projected bonuses.

Re: Send Noncompete Agreements Back to the Middle Ages

#44

Earlier quoted context omitted.

Full pay for the length of the non-compete + insurance to cover the company going insolvent. Otherwise it's illegal to even put it in the contract

Real question: if the company one has an NCA with goes insolvent, does the NCA matter? Who would enforce it? Presumably, if somebody picks up the employees in a buyout, those would now be said company's employees and the company would be on the hook for the "Pay for the length of the non-compete" bit.

> Real question: if the company one has an NCA with goes insolvent, does the NCA matter?

Yes, an insolvent company still exists.

If it is dissolved and it's interest in the NCA wasn't transferred (either because noone wanted it or it wasn't legally transferrable), then it doesn't matter, but mere insolvency isn't the same (in fact, if it can collect money for violations, insolvency may lead it to be more aggressive.)

> Who would enforce it?

The insolvent firm itself, which may be effectively run by (or for the benefit of) its creditors.

Re: Send Noncompete Agreements Back to the Middle Ages

#45
post #38

Earlier quoted context omitted.

Full pay for the length of the non-compete + insurance to cover the company going insolvent. Otherwise it's illegal to even put it in the contract

Not a bad attempt, but what's "full pay"? For most senior engineers, the base salary is just a part of the compensation package. What about bonus? Also, most employees move for a better opportunity, which often means a much better base comp + potential for much higher bonus. If I'm not going to be compensated for that, how is that "fair"? Finally, my resume and likely my skillset will take a hit for sitting 1-2 years…

Full pay would be your tax return saying what the full amount of compensation you got from the employer. Stock rewards, bonuses, etc are all reported from specific employers. Your highest year in your previous years of employment with the employer is the year I would chose. And add other benefits like health insurance and such. Basically your still 'employed' on garden leave with the company until the non-compete period runs out.

By making table stakes very expensive, the likelihood of companies even putting them into contracts will reduce to a small minority. The problem with non-competes right now is they are free and easy to put into contracts, and in practice the vast majority of employees do not refuse employment over it due to power asymmetry. They further more create chilling effects for employees to switch companies and thus make employees cheaper to hire due to the liquidity reduction.

The other objections you bring up you can negotiate for yourself :) . If they were willing to put up the table stakes, you're probably an important hire to put that in for and thus probably have negotiation power.

Re: Send Noncompete Agreements Back to the Middle Ages

#46

Earlier quoted context omitted.

Full pay for the length of the non-compete + insurance to cover the company going insolvent. Otherwise it's illegal to even put it in the contract

Real question: if the company one has an NCA with goes insolvent, does the NCA matter? Who would enforce it? Presumably, if somebody picks up the employees in a buyout, those would now be said company's employees and the company would be on the hook for the "Pay for the length of the non-compete" bit.

You could put that too, the non-compete goes away if the firm goes insolvent / can't pay in liu of insurance.

Re: Send Noncompete Agreements Back to the Middle Ages

#47
post #16
post #10

One of the most insidious portions of non-competes IMO is that they are often non-enforceable. Depending on how wide or restricted the target of the non-compete is it can be ruled invalid. A lot of the more questioning people have probably discovered this but consider that there are probably janitors laid off by amazon who read their non-competes as the word of law and end up suffering hardships because of it. Also,…

From the perspective of any normal employee, "non-enforceable" doesn't matter. That I can eventually win in court doesn't matter if I can't afford the time, money, and stress to get that ruling. Exactly the goal, I'm sure, of the people writing up these agreements.

If its not justiciable you can just ignore them

Re: Send Noncompete Agreements Back to the Middle Ages

#48

Thank god the german law requires a NC clause to have a compensation directly mentioned in the contract that is not allowed to be less than 60% the person earned in the company in the last year she worked there. If the compensation is missing or too low, the NC is against the law. In other words: if a company wants me to not compete, they need to pay me for the time the NC is active. Its also limited to a maximum of…

60%? Forget that. Why should anyone give up their right to work for a little over half of their market value? There is no excuse for allowing less than 100% compensation, and that should include not just salary, but projected bonuses.

It's not like the specific job is the only thing you can do - there are other jobs that don't break the NC. 100% is too high, and 50% is too low. But the amount should be negotiable for each person.

Re: Send Noncompete Agreements Back to the Middle Ages

#49
Non-competes under U.S. law are neither all good nor all bad. They have their legitimate uses but these are the narrow cases and not the norm.

For example, you sell a business to someone who pays you a big premium for your goodwill value usually tied to the value of the customer base. It is entirely fair that, having taken the money in exchange for the sale of your goodwill interest, you not be able to turn around the day after the close and effectively steal it back from your buyer by setting up a competing business and conducting raids to get back your old customers. A reasonable restriction on your ability to compete in that case makes eminent sense and is not in any way unfair.

So too if you exit a professional practice and get bought out. Same principle. You get paid for the goodwill value and you should not be able to capitalize on the payment and simultaneously raid the goodwill of your former practice by competing against it. Fair and reasonable even though it restricts you in your livelihood.

Thus, even states like California, which basically ban the use of non-competes in an employment context, will fully enforce them in the situations noted above.

On the bad side, non-competes tend to operate unfairly and to burden ex-employees by preventing them from engaging in their normal livelihood even when they have been paid nothing for the privilege. Many jurisdictions do enforce them in that context and the only way to challenge them is to argue that they are unreasonably broad, which (if fought out) takes a tidy six-figure sum to prove in court.

So, yeah, all jurisdictions should adopt the California rule that largely bans non-competes in an employment context. But I don't see this happening anytime soon.

In the meantime, as an employee, you should try to avoid these if you can, negotiate to be paid for any non-compete if you have the leverage, or, if you have no choice, live with them as best you can until the law comes to a better place. As long as the law enforces them, you are sometimes just stuck.

Re: Send Noncompete Agreements Back to the Middle Ages

#50
post #16

Earlier quoted context omitted.

From the perspective of any normal employee, "non-enforceable" doesn't matter. That I can eventually win in court doesn't matter if I can't afford the time, money, and stress to get that ruling. Exactly the goal, I'm sure, of the people writing up these agreements.

If its not justiciable you can just ignore them

And they can just sue you anyway.
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