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The case for banning non-competes

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Re: The case for banning non-competes

#201

Post by ivanbakel »

tracyhenry wrote: post #178
ivanbakel wrote: post #115

Earlier quoted context omitted.

The fact is that "secret sauces" are basically worthless. Every successful business is 99% execution (& luck). A startup, especially in tech, will never be able to base its value on something simple enough for an employee to smuggle out legally (i.e. in their brain).

This is a very biased view IMO. Plenty of businesses are based on patented secret sauces. Even for the type of companies that rely on execution, there will be important lessons learned, which ultimately become the "secret sauces". And you don't fear a random employee who might fit your secrets in their brain. You fear a set of experienced employees who can replicate your businesses somewhere else if they want to.

>Plenty of businesses are based on patented secret sauces.

Secret sauces are, by definition, unpatented - if a business has patented an idea, it is no longer secret, and the success of that company is then partially enforced by the exclusivity of the patent. You don't need a non-compete if your employees have access to patented content, because they aren't legally allowed to reproduce it anyways.

>Even for the type of companies that rely on execution, there will be important lessons learned, which ultimately become the "secret sauces"

Can you give an example of this? I think it's unlikely that specific "lessons learned" could be so valuable. Sure, companies are afraid of losing their experienced employees - but all companies are afraid of that anyways. It has little to do with the idea of a "secret sauce", and everything to do with simple experience.

Re: The case for banning non-competes

#202

Post by dv_dt »

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 think not competing with any area in which the company works is a convenient test. But I suspect the ultimate legal test is actually more constrained. One more like: do not compete with an area for which you directly work in or are exposed to information about for the company.

Re: The case for banning non-competes

#204

Post by wombatpm »

jvreagan wrote: post #136
masklinn wrote: post #60

Earlier quoted context omitted.

Problematically though, in most of the US ridiculously broad NCCs are enforceable. The only place where you're safe is California, where the only way for an NCC to stick is related to business (co)-ownership (selling the business, dissolving a partnership, or dissolving an LLC). Out-of-state NCCs are also un-enforceable in California.

I would like to understand whether there are any states that even occasionally backs the employer in non-competes for the general layperson. In my experience, courts tend to side with someone who's willing to work over employers. This is why non-competes are a joke in the US. Courts aren't going to enforce them. Almost every state has an industry where moving between companies, or starting companies to compete with e…

I think that Massachusetts takes the anti-California approach. The medical and pharmaceutical industries have really pushed for string enforceable NCC

Re: The case for banning non-competes

#205

Post by Quanttek »

I don't get the following quote:

> 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.

If employers lack such "protections" (i.e. non-competes), wouldn't they need to pay a higher salary, so that their workers are not poached by rival companies?

Re: The case for banning non-competes

#206

Post by glenneroo »

seanhunter wrote: post #197

Had a fun one just happen to me in the last few days. I got contacted by an agent out of the blue. "Hey Sean we've got a role that you seem perfect for, just sign this NDA so we can talk." I look at the NDA and it includes a noncompete for the duration of the project + 12 months after. The nda is also not mutual so the noncompete and nondisclosure is only binding on me not the other party. In fact I don't even know w…

Well since you didn't sign the NDA... care to divulge who was making this preposterous "offer"? ;)

Re: The case for banning non-competes

#207

Post by HWR_14 »

ryukafalz wrote: post #109
rovr138 wrote: post #84

Earlier quoted context omitted.

>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.

That seems like a strange clause I would want to include. I have (?) lines of code, as well as other IP. Why would hiring me for a year give them access to free license of all my IP?

I saw something in Theranos's employee contract about granting a perpetual license to all the patents of the employees. I have no idea why that would be reasonable.

Re: The case for banning non-competes

#208

Post by gpderetta »

masklinn wrote: post #48
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…

> There are two kinds of non-competes, and both have problems. There are more kinds of non-competes. Neither of the kinds you're listing is blanket-legal anywhere in Europe, as far as I can tell, but there are still NCC/NCAs. Generally speaking, in Europe, NCC/NCAs must: * show a reasonable business interest, mere competition does not ever qualify * be geographically limited * be temporally limited (rarely more than…

Apparently in the UK non-compete are enforceable even when non remunerated, although your other points might stand: the non-compete must be in pursuit of a business need (i.e. not just a punishment because you left), and as should not extend in time and space more than required to fulfill that need (non-compete more than 6 months are rarely enforced).

Re: The case for banning non-competes

#209

Post by jfengel »

vineyardmike wrote: post #177
wolverine876 wrote: post #91

Earlier quoted context omitted.

> They implored me to trust that they had "never sued anyone" and "have no intentions to", and I think they honestly believe that. But then why have the non-compete at all? Exactly. 'That's great; we can resolve that issue easily. Let's just skip the non-compete - you're not using it anyway and I'm not comfortable with it.' EDIT: A non-lawyer's suggestion (talk to a lawyer before you do this): Skip signing or edit do…

My offer letter explicitly stated that starting work (and accepting the stated pay) constituted agreeing to all the docs sent over, unless explicitly agreed upon otherwise. I can't wait to have enough savings to quit and move to california where the employee protections are so much higher.

It's interesting to hear you say that, moments after coming from a thread where people were explaining why California is so terrible.

I feel like the symbol of the 2020s is Chesterton's Fence[1], people chafing against restrictions and then having to reinvent them. I'm sure that some people are indeed fleeing California, and will then immediately start reinventing it.

Not that that's necessarily a bad thing. The reinvention could be like a clean-sheet reimplementation that's better than maintaining a smelly old code base. But that only works if you know all of the reason those code smells are there, and don't simply re-start the same process to recreate the same bugs.

[1] https://wiki.lesswrong.com/wiki/Chesterton%27s_Fence

Re: The case for banning non-competes

#210

Post by filoleg »

fallingknife wrote: post #2

Should be a requirement that, to be enforceable, a non-compete must pay the agreeing employee his salary for the duration of the agreement.

That's how it usually works in finance/fintech with non-competes that extend beyond the period of employment (and not just for traders/analysts, it is the case for a good number of engineers and quants as well).

You might not be getting the annual bonus (which is a major chunk of pay in finance), but you still get the full salary for the duration of the non-compete (usually 12-18mo). They also usually have a clause that it applies only to jobs in the same industry, so if you go from a finance shop to a FAANG company or another tech startup, then the non-compete is void, and you are welcome to pursue that opportunity without any 12-18mo timeouts (but your non-compete pay stops).

That seems to be a reasonable compromise, because if you really want to continue working in finance, you are welcome to wait for 1-1.5 years while getting paid full salary (minus the annual bonus) for doing nothing. And if you want to start working again immediately, you are welcome to do so, as long as it is in an industry other than finance, and the non-compete pay stops (because non-compete at this point becomes void).

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