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The FTC plans to curtail the use of non-compete clauses

economist.com

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Re: The FTC plans to curtail the use of non-compete clauses

#51

Post by lostdog »

epicureanideal wrote: post #13

What changed to get the politicians on board with this?

The "radical left" finally got some power.

The head of the FTC is known to be someone who wants to enact progressive policies. For her and her staff, limiting noncompetes is driven by idealism that workers should have more rights.

I believe that these changes are echoes of Bernie and other progressives getting lots of votes since 2016. They are now insiders in the government rather than outsiders, so they advocate for progressives to lead departments.

Re: The FTC plans to curtail the use of non-compete clauses

#53

Post by MereInterest »

candiddevmike wrote: post #20
munk-a wrote: post #6

In the instance this change doesn't go through it is important to be aware that non-competes don't survive hardship tests. There is an extreme burden on the employer to prove that there are appropriate jobs available to the former employee that wouldn't violate the non-compete or (and this is much more common for "serious" non-competes in the modern world) provide partial compensation to the employee for the term of…

I'm trying to think of why the powers that be want this too, and the only thing I can think of is to expand their hiring pool/make poaching legal. Maybe I'm too cynical.

Option 1: The labor pool is a free market. This means that companies are free to choose who to hire, and workers are free to choose who to work for. Non-compete agreements prevent the latter, and so the market becomes inefficient.

Option 2: The labor pool is a class struggle, in which employees exploit their workers. Non-compete agreements of a form of exploitation, tying a worker’s livelihood to a single employer.

Option 3: Employees belong to the company they work for. Non-compete agreements codify this natural relationship. Hiring a different company’s employee is a form of theft, and is called “poaching”.

Option 4: Any voluntary, informed contract is valid. Non-compete agreements are one such contract. Forbidding non-compete agreements is an unjust restriction.

Under options 1 or 2, non-compete agreements are clearly unethical. Option 3 requires accepting an unethical premise. Option 4 requires stretching the terms “voluntary” and “informed” to apply to Morton’s Fork.

I’d put the question another way: Given the negative effects of non-competes, why should they be allowed?

Re: The FTC plans to curtail the use of non-compete clauses

#55

Post by mattkrause »

Spivak wrote: post #36
andrewjf wrote: post #12

Earlier quoted context omitted.

> be on the hook for continued compensation at some proportion of the employee's former wage to actually exercise the privilege to deny the employee work in a specific field Yes. The proportion should be 100%, plus all benefits (401k, health, continued vesting of equity, etc). If you're being denied future employment then the employer can pay for it if it's that important to them. Possibly even more than 100% if they…

Which is why I think companies should have to “buy you out” in the event you get another job. If you get an offer and they want to exercise the non-compete they have to pay you total comp for that offer otherwise you can work there. I’m sure in a forum of devs you’ll will think of plenty obvious “hacks” which are just fraud and our courts are perfectly capable of sussing that out.

This seems unwieldy because people change jobs for reasons beyond their own immediate salary.

Maybe I want to make a lateral move because I'm unhappy with my boss or my commute. What if I'm moving because my partner found a new/better job elsewhere, or I want to be closer to my extended family?

You can try to put a monetary value on some of these (pay my commute?) but I don't think you could "buy me out" of moving for an ailing parent or sick kid.

Re: The FTC plans to curtail the use of non-compete clauses

#56

Post by leoc »

ghaff wrote: post #26
sozin wrote: post #21

Earlier quoted context omitted.

This is correct — very common practice in trading (I am currently sitting out one now!). Generally they are 3-12 months in duration, although recently we are seeing much longer ones (24 months) from firms such as Citadel. You generally draw full base salary, and healthcare comes from COBRA. US-wide ban of non competes is good for hiring firms (they get the talent immediately), bad (allegedly) for firms from whom the…

And you highlight how allowing non-competes with garden leave is a mixed bag. If someone's fine with taking a year or two off while getting some fraction of the total compensation they were getting previously, I suppose it can look like a good deal. But that would be pretty unsatisfactory for a lot of people mid-career with kids in college.

IIUC we're generally talking about full base salary in the case of financial-industry "garden leave", though obviously missing out on the possibility of bonus payments could really sting for many in that business. And obviously being "out of the game" for a significant amount of time can hurt, especially if you're in an area where things are changing quickly.

Re: The FTC plans to curtail the use of non-compete clauses

#57

Post by neilv »

iancmceachern wrote: post #35
ghaff wrote: post #15

Earlier quoted context omitted.

While I'm all for making non-competes for employees unenforceable in general, I think their role is overplayed notwithstanding your anecdote. Otherwise you'd have a tech industry in Oklahoma and wouldn't have one in Massachusetts, which until fairly recently fully allowed for non-competes. (EMC in particular fought against legislative change but there's now a somewhat weak garden leave requirement--but it at least ma…

The tech industry in Mass us there because of the universities. It doesn't have to do with non competition agreements. Also, the tech industry in California is an order of magnitude larger than that in Mass.

I don't know whether it's true, but I've often heard the theory that California's no-noncompetes is what made it so startup-friendly originally.

Once the dotcom boom started, people were saying go to the SF Bay Area for startups, because that's where the investors are.

MIT graduates with computer-y degrees seemed to be fleeing Cambridge/Boston as soon as they could.

Re: The FTC plans to curtail the use of non-compete clauses

#58

Post by mattkrause »

AlotOfReading wrote: post #33
sozin wrote: post #21

Earlier quoted context omitted.

This is correct — very common practice in trading (I am currently sitting out one now!). Generally they are 3-12 months in duration, although recently we are seeing much longer ones (24 months) from firms such as Citadel. You generally draw full base salary, and healthcare comes from COBRA. US-wide ban of non competes is good for hiring firms (they get the talent immediately), bad (allegedly) for firms from whom the…

Long-term garden leave is still unequal as you forfeit things like bonus (which can be a significant percentage of TC) and you can't practice the skills of your employment for months or years. Imagine going on leave from the financial sector in 2007 and coming back in 24 months later, for example.

New CV item: "Zero losses during the global financial crisis" :-)

Re: The FTC plans to curtail the use of non-compete clauses

#59

Post by ghaff »

iancmceachern wrote: post #35
ghaff wrote: post #15

Earlier quoted context omitted.

While I'm all for making non-competes for employees unenforceable in general, I think their role is overplayed notwithstanding your anecdote. Otherwise you'd have a tech industry in Oklahoma and wouldn't have one in Massachusetts, which until fairly recently fully allowed for non-competes. (EMC in particular fought against legislative change but there's now a somewhat weak garden leave requirement--but it at least ma…

The tech industry in Mass us there because of the universities. It doesn't have to do with non competition agreements. Also, the tech industry in California is an order of magnitude larger than that in Mass.

>The tech industry in Mass us there because of the universities. It doesn't have to do with non competition agreements.

That's pretty much my point. The presence of non-competes did not prevent the development of a tech industry in MA. And, while VC funding is about 20% of CA's, MA+NY+CA have far more VC than any other states--and NY and MA together have more than half of CAs funding.

Those two states collectively also have a lot of different kinds of "tech" that are far less represented in CA such as fintech and biotech/pharma.

Re: The FTC plans to curtail the use of non-compete clauses

#60

Post by wpietri »

blendergeek wrote: post #3

The headline here is deceptive. Nothing in the article mentions any plans by "America's trustbusters to curtail the use of non-compete clauses". Rather, this is a short essay about non-competes, explaining why they are a bad idea. The article ends with a call-to-action: > California, the global hq of disruptive innovation, goes a step further and bans non-competes altogether. The FTC should do the same, on the ground…

This is a "leader", which is the British name for an opinion piece. Its job is not to explain the news to you. As with most newspaper opinion pieces, it's a reaction to something in the news that you are expected to know about, or at least be able to look up.

As a subscriber, I think this is how it should be. There have been a zillion articles about this FTC action going back at least to June. Part of what I value about The Economist is its pithy, punchy writing and its assumption of a competent, numerically literate audience. Having to spoon-feed the basics in every leader would be tedious both for them and for its subscribers.

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