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The case for banning non-competes

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Re: The case for banning non-competes

#101

Post by [deleted] »

Frost1x wrote: post #68
WaitWaitWha wrote: post #40

EDIT: I have completely went off on the wrong thought path. As noted, despite reading the article and comments, somehow my mind got latched onto NDAs instead of NCAs. Sorry. ---- I will be the contrarian. For those who insist on no NDA , what prevents ex-employees from spilling secrets to be hired at a competitor? I understand the concerns with NDAs. I was under one which limited my work in a radius, and within a ver…

It's interesting how we celebrate that capitalism instills competition that leads to global improvement for everyone, yet we like to hand-pick the segments of capitalism where we want competition and the segments we don't want competition. An NDA is one case of this, as are non-compete agreements, and many behaviors within cartels, say when Apple et al conspired to not hire each others labor. Usually, this hand-picki…

[deleted]

Re: The case for banning non-competes

#102

Post by j4yav »

tracyhenry wrote: post #86

A noob question: how can a small business get to keep the secret ingredient of their success if employees are allowed to jump ship as they wish? From the employee perspective banning non-competes are ofc the best thing. But this feels terrible if it means that secret sauces of small startups will get copied easily (potentially by bigger players).

Patents if they are really secret sauce. If your startup fails because someone finds out what you are working on then you are already doomed.

Re: The case for banning non-competes

#103

Post by cortesoft »

Uehreka wrote: post #61
cortesoft wrote: post #3

My feeling has always been that non-competes are ok as long as it is an entirely separate agreement from employment. For example, you can sign a contract for $100,000 that you won’t work in field x for 2 years. If you decide to work in the field, you give up that money. The unfair thing is making it just a part of the standard employment contract.

I have never heard of an employer detaching a noncompete from the terms of employment, much less offering anything like $100k as a carrot. If some employers do this, then cool, but I don’t find a lot of merit in arguing about whether it’s OK to do something that almost nobody does. Many many employers attach noncompetes to the terms of employment, won’t modify them for anyone and have the leverage to make even develo…

My point is that I think the law should only honor non-competes that are in that form.

This is how California's law actually works.... non-competes are only allowed if they are paid in this way.

Re: The case for banning non-competes

#104

Post by gumby »

mabbo wrote: post #23

There are two kinds of non-competes, and both have problems. First, there's the really nasty ones saying "If you ever work here, you can't work for any competitor for X years", and they're clearly abusing of employees, labor, etc. I hope there is a straight up ban on that. The second kind is "You can't compete with us while you work here". And that is a much more complex beast. Obviously, if I work as a developer mak…

I share your concern but modulate the concern with two factors (you may not agree):

1 - if you work at a company like that (faang, basically) you probably have a choice of working elsewhere and they are paying you handsomely to give up the ability to have almost any software or electronics side projects (my gf wants me to go work at one of them and I have decided it’s not worth the money, though I can understand why others can reasonably think otherwise).

The first section of the article talks about this: US labor law is pretty firmly rooted in freedom of contract doctrine even though for most people there’s such extreme asymmetry of power that any “freedom” in this area is illusory. But if you’re a FAANG developer you aren’t one of those people — you have a choice.

2 - every such agreement I have signed has had a “carve out” clause: you can list things you’ve been working on (which is vague, I have listed areas I’m interested in and have looked into and counted that as ”work”) and exclude the stuff listed there from the agreement. Of course the new employer can disagree with the choices (“ARM CPU designs? That’s what we’re hiring you to do!”) but again, if that were you, you pretty much would have freedom to negotiate. I think such an objection would be pretty fair for an employer to have in that situation.

Also if you decide later you want to write a stock app but hadn’t listed it, well, c’est la vie.

Re: The case for banning non-competes

#105

Post by wolverine876 »

austincheney wrote: post #80

I have never encountered a non-compete in my home state of Texas, so I looked this up: https://www.texasnoncompetelaw.com/articles/noncompete-agree... It appears in Texas non-competes are a thing, but only to restrict the direct transfer of business/market responsibility to a competing business, which I imagine generally applies to only senior executives and sales agents. It seems at one point almost all of the trave…

> it seems strange that any state would want to wound its own economy by restricting employee mobility

It seems strange that a state would make laws that serve the interests of the wealthy and powerful?

Re: The case for banning non-competes

#106

Post by rich_sasha »

tshaddox wrote: post #32
mabbo wrote: post #23

There are two kinds of non-competes, and both have problems. First, there's the really nasty ones saying "If you ever work here, you can't work for any competitor for X years", and they're clearly abusing of employees, labor, etc. I hope there is a straight up ban on that. The second kind is "You can't compete with us while you work here". And that is a much more complex beast. Obviously, if I work as a developer mak…

> Obviously, if I work as a developer making a stock trading app, I shouldn't be making a competing stock trading app after hours. Why is that obvious? If I work as a studio musician can I also be working on my own album after hours?

You have a good idea for improving the product at 10 am. You think about it between 10 am and 4 pm. At 4 pm you discard the idea, not gonna work or sth. At 6 pm you type it into your app at home.

Of course most people wouldn’t, but this is one narrow area where I think it is reasonable to limit employees.

Re: The case for banning non-competes

#107

Post by johnrbent »

> The main idea of the non-compete agreement is that employers want to stop people from walking off the job and taking trade secrets to rival companies. If companies weren’t able to secure those protections, they’d need to pay lower salaries, and we’d all be worse off.

Anyone else confused by this statement? How do you make the leap from non-competes to higher salaries, or conversely, that a ban on non-competes would result in lower salaries?

I mean I think I can see the author's intent (that the company would need to divert funds from wages to somewhere else to protect their IP), but it seems like the rest of the article disagrees; namely, linking the Californian ban on NCAs to the innovative success in that state (and high salaries) would suggest that banning NCAs might foster higher wages. Intuitively, it feels like, in absence of a non-compete, a higher salary is the biggest deterrent to losing trade-secrets to other companies via poaching.

Re: The case for banning non-competes

#108

Post by blippage »

mabbo wrote: post #23

There are two kinds of non-competes, and both have problems. First, there's the really nasty ones saying "If you ever work here, you can't work for any competitor for X years", and they're clearly abusing of employees, labor, etc. I hope there is a straight up ban on that. The second kind is "You can't compete with us while you work here". And that is a much more complex beast. Obviously, if I work as a developer mak…

In the UK, there's Unfair Contracts.The US is the same, I would imagine. Here's what https://www.lawdepot.co.uk/contracts/non-compete-agreement/ says: "Employers can create a Non-Compete Agreement for as long as they wish. Having said that, if a Non-Compete Agreement limits a former employee for too long, it’s unlikely that a court will enforce the document.

Judges will likely consider a period of six months to a year to be a reasonable amount of time. The time period you choose should reasonably protect your company and make sense in your industry. As a result, there isn’t a standard time period for a Non-Compete Agreement."

So, tricky, but anything longer than a year is likely to be deemed unreasonable. There may be exceptions, such as when a business owner sells a business, and the sale contains a non-compete. In that case, a non-compete is likely to hold up.

The article goes on: "Courts may not enforce a non-compete clause in the UK if:

* The effect could be harmful to the public (if it restricts commerce and depresses the local economy) * The scope is broader than necessary to protect the employer * The restriction would cause undue hardship on the employee (too difficult for the employee to find a new job) * The agreement has unreasonable time or geographic restrictions"

In late 2020, the UK gov't sought feedback on "Measures to reform post-termination non-compete clauses in contracts of employment " here: https://www.gov.uk/government/consultations/measures-to-refo... The outcome has not yet been published.

"The purpose of the consultation is to seek views on:

* proposals to make non-compete clauses enforceable only when the employer provides compensation during the term of the clause, and whether this could be complemented by additional transparency measures and statutory limits on the length of non-compete clauses

* an alternative proposal to make post-termination, non-compete clauses in contracts of employment unenforceable"

This seems to be heading in the right direction. I am against non-competes in general.

Re: The case for banning non-competes

#109

Post by ryukafalz »

rovr138 wrote: post #84
Scarblac wrote: post #72

Earlier quoted context omitted.

> And it would be tough to argue that your at-home trading app code is completely uninfluenced by ideas you have at work. And that your at-work trading app code would be influenced by ideas you have at home. You're a craftsman making trading apps, some for an employer, some for yourself, it's what you do. It's strange for an employer to be allowed to force you to stop doing the others without compensating you for it.

>And that your at-work trading app code would be influenced by ideas you have at home. Which is an issue legally. Who owns the code? Who needs the license to use it?

This being an issue seems weird. Surely your employment contract could include an extremely permissive license grant to your employer for any code you've written that you use at work, regardless of whether you own it or they do. That's much less intrusive than a noncompete.

Re: The case for banning non-competes

#110

Post by zatertip »

lupire wrote: post #47
cortesoft wrote: post #3

My feeling has always been that non-competes are ok as long as it is an entirely separate agreement from employment. For example, you can sign a contract for $100,000 that you won’t work in field x for 2 years. If you decide to work in the field, you give up that money. The unfair thing is making it just a part of the standard employment contract.

I'd like to over you a job. It pays $50K/yr with an optional $100K/yr for a noncompete agreement. My competitor is offering $140K/yr.

I'll take that combo. Quit on the first day, live on Bali for 2 years.
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