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U.S. moves to bar noncompete agreements in labor contracts

nytimes.com

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Re: U.S. moves to bar noncompete agreements in labor contracts

#391

Post by mcv »

asveikau wrote: post #261
ecshafer wrote: post #21

Non-Competes being legal is only acceptable I think if the worker will continued being paid for the period of the non-compete. I can see reasons that non-competes exist, but those reasons don't really make sense in a world where patents and trademarks also exist. The fact that they are essentially illegal in California, and California's economy works shows that they are unnecessary and also don't hinder technological…

One of the biggest problems I see with non competes is that "competition" can be subjective, especially in a world of large employers with extremely diversified business interests. Eg. If you move from one big tech co to another, you may be technically moving to a competitor, but the subject matter of your work could be unrelated. This is probably true of other industries too.

My current client had a non-compete in their contract specifying I would not be allowed to work for one of their customers, or something like that. This client is one of the big four accountancy firms; their customers can really include everyone, and I have no way to tell who is or isn't their customer.

And my work doesn't even include any contact with their customers! What they really wanted was that I wouldn't do for, or even share with, the other big accountancy firms what I was going to do for them, because it's something unusual that's their idea and they think it gives them an advantage. That's completely fine of course. The original reading was ridiculous.

I don't think they changed it in the contract, but they did explain it by email.

Re: U.S. moves to bar noncompete agreements in labor contracts

#392

Post by Sohcahtoa82 »

kevstev wrote: post #249
legitster wrote: post #157

My understanding is that most non-competes in the US are not enforceable in the first place. So while I think there are situations where non-competes are valid, I think it would be pretty safe to make a rule that says, "if you are not prepared to actually take an employee to court to enforce non-compete, you should be willing to go to court to defend it."

The problem is that the threat of litigation is enough to make them essentially enforced. Sure you could go to a lawyer that says this isn't worth the paper its printed on, but either you, or maybe your employer, is now going to have to fight this out in court. This is not theoretical. A few years back, my wife, who is in ad sales, had very deep relationships with certain companies. These people had become her friend…

> A few years back [...] She took a job at AOL

That's gotta be more than "a few years".

Re: U.S. moves to bar noncompete agreements in labor contracts

#393

Post by gen220 »

mnehring wrote: post #290
gen220 wrote: post #253

I think we're all pretty familiar with the arguments against non-competes. Does anybody have a compelling argument for them, as practiced in 2023 in the US? While we're at it, does anybody have a compelling justification for allowing non-poach agreements, too? From my perspective, they both seem like a non-durable benefit to $current_employer at the expense of a compounding opportunity cost to the greater economy (in…

So, here are a couple of arguments for: 1. I have a relative who is an MD. He was recruited cross-country at great expense. (Average cost to recruit an MD can be about $250K). So, if his comp was $200K/year and it cost $250K to recruit, a neighboring practice could monitor for new incoming docs, and make an offer of $220K/year in salary to the newly hired doc. If that happened, it would be in the best interest of the…

1. I think the end-game here is salary-parity, no? If Practice A learns that Practice B is taking their employees for a marginal salary difference, that forces Practice A to improve their compensation package.

But I don't think I fully understand this example. Why does it cost $250k to hire an MD? Why does Practice B not need to pay this cost, is it because they can skip the vetting process since A has already performed it?

2. If it's an acui-hire, the only way it can be successful (in real terms, not just fake "retention" terms) is if the acquired team is consenting to the acquisition and partnership. If the acquirer can't create a deal (involving stock options, work lifestyle guarantees, whatever) that's successful in the eyes of their prospective future employees, non-competes and non-poaches simply delay the inevitable. This is to the detriment of "we the people", because we want good people to be productively working on important things.

In my not incredibly informed opinion, NCs for acquihires smell lazy and inefficient, because they optimize for the wrong metrics (employee retention vs value creation + satisfaction). If there's uncertainty about the long-term success of the merger, it can be factored into the acquisition price.

To me, this implies that outlawing NCs would lead to fewer acquihires, on the margin. This seems like it would probably be a good thing.

3. I think there's some "basement" of trade secrets that we just need to accept are going to spread around. As a company, you have to understand that this bottom 20% of ideas are going to osmosis their way out with every departing employee, and there's nothing you can do about it other than work to retain employees and innovate new ideas.

Similarly to the acquihire issue, NCs simply delay the inevitable here, and don't seem to provide much benefit "we the people" (or protection to "we the entrepreneurs").

Re: U.S. moves to bar noncompete agreements in labor contracts

#394

Post by andirk »

chadash wrote: post #275
monksy wrote: post #252

Earlier quoted context omitted.

Non-competes do not protect an organization against IP theft or trade sceret dismenination. Those are portected by NDAs, confidentiality agreements, copyrights, patents, etc. Non-competes limit where your staff can go to. Without proper compensation for the time period in which they apply for, they're a very one sided (and in some cases illegal [NCs are legal in IL unless they assert an economic hardship]) way to pre…

> Those are protected by NDAs, confidentiality agreements, copyrights, patents, etc. This gets thrown around HN a lot but I don't think it matches reality. Say I work in machine learning algorithms for show recommendations at Netflix. Amazon hires me to work on their machine learning algorithm recommender on Prime Video. Sure, I might have NDAs to protect what I learned at Netflix, but how does Netflix realistically…

The legality, and even the exact definition, of IP is not black and white and comes up all the time in copyright discussions. If we want to say that the NDA states that your brain while at this company is ours and must be wiped if you leave, uh what? I think the spirit of an NDA is more that you don't release private information about the company.

I look forward to the day I can add inventions to that one field that asks for them upon being hired!

Re: U.S. moves to bar noncompete agreements in labor contracts

#395

Post by mcv »

sebzim4500 wrote: post #116
ericbarrett wrote: post #98

Earlier quoted context omitted.

My understanding is that this arrangement is common in finance. However the worker is not given benefits or bonuses during this time. Since private health insurance is massively expensive and bonus comp can be a significant fraction of one's pay in the field, it can still be onerous.

>it can still be onerous Sure you get paid less than you are used to but you are still getting more than 95% of the population to do literally nothing.

Sounds to me like a great time to start working on your own project. Maybe even start your own company.

Re: U.S. moves to bar noncompete agreements in labor contracts

#396

Post by mcv »

dagw wrote: post #111
Alex3917 wrote: post #61

Earlier quoted context omitted.

> The fact that they are essentially illegal in California, and California's economy works shows that they are unnecessary and also don't hinder technological development. The general rules that most states use for deciding when non-competes are enforceable aren't that bad. E.g. if you work at a bakery, you're not going to be allowed to open your own bakery two blocks away within a year, but it's fine if you do it a…

if you work at a bakery, you're not going to be allowed to open your own bakery two blocks away within a year What if you work at Starbucks and want to open your own coffee shop. Is it reasonable that you should not be able to open a coffee shop within two blocks of any existing Starbucks?

And if Starbucks closes a shop because of unionisation, can the employees reopen it as a co-op? I certainly think that should be possible, and encouraged.

Re: U.S. moves to bar noncompete agreements in labor contracts

#397

Post by gen220 »

DannyBee wrote: post #334
gen220 wrote: post #253

I think we're all pretty familiar with the arguments against non-competes. Does anybody have a compelling argument for them, as practiced in 2023 in the US? While we're at it, does anybody have a compelling justification for allowing non-poach agreements, too? From my perspective, they both seem like a non-durable benefit to $current_employer at the expense of a compounding opportunity cost to the greater economy (in…

It depends entirely on your target goal. If your target goal is something like "maximization of worker pay",for example (really, i'm not suggesting that's what you want, it's just a convenient example), then no, there will never be a compelling argument for non-competes, because they always stand in the way of that particular goal. This is because costs by employers can always be expressed without non-competes someho…

I think my goal would be "maximization of [responsible] production of useful things".

Constant job-hopping requires an employer who wants to hire you. If you're a "constant-job-hopper", you'll find few people who want to hire you.

NCs are not only a meaningful barrier to fair compensation, they also seem to be a barrier to the allocation of labor to more productive businesses that, by virtue of their productivity, can afford to pay higher compensation.

Re: U.S. moves to bar noncompete agreements in labor contracts

#398

Post by mcherm »

chadash wrote: post #275
monksy wrote: post #252

Earlier quoted context omitted.

Non-competes do not protect an organization against IP theft or trade sceret dismenination. Those are portected by NDAs, confidentiality agreements, copyrights, patents, etc. Non-competes limit where your staff can go to. Without proper compensation for the time period in which they apply for, they're a very one sided (and in some cases illegal [NCs are legal in IL unless they assert an economic hardship]) way to pre…

> Those are protected by NDAs, confidentiality agreements, copyrights, patents, etc. This gets thrown around HN a lot but I don't think it matches reality. Say I work in machine learning algorithms for show recommendations at Netflix. Amazon hires me to work on their machine learning algorithm recommender on Prime Video. Sure, I might have NDAs to protect what I learned at Netflix, but how does Netflix realistically…

> It's not like they can just ask to see Amazon's code to see if the knowledge has been ported over to there.

If they can get enough evidence to make it through the pleading stage of a lawsuit, then they can ask exactly that during discovery.

Re: U.S. moves to bar noncompete agreements in labor contracts

#399

Post by foobiekr »

endisneigh wrote: post #95

I disagree with banning noncompetes. The issue IMO isn't noncompetes, it's the fact that an employer doesn't have to pay. The rule should be that they can make you not compete, but you must be compensated monthly at your salary level prior to departure. A non compete without having to pay is having your cake and eating it to so to speak.

Be careful what you wish for, there are significant non-salary benefits (stock ESPP and RSUs, healthcare subsidy, etc.) that matter a lot. These employers would just restructure compensation to effectively recreate low-cost non-competes.

Re: U.S. moves to bar noncompete agreements in labor contracts

#400

Post by rubyfan »

steelframe wrote: post #332

When I was interviewing last year, I cut off an interview loop with a company primarily because I don't reside in California and their NDA was, "Anything you say, anything we say, forever." Since I was also interviewing with one of their direct competitors that I really preferred, I didn't want to put myself anywhere near a legal situation where they might try to mess things up for my career. They freaked out when I…

This is probably a sign that other things outside of NDAs would ultimately be problematic there.
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