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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

#71

Post by usefulcat »

leoc wrote: post #11
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 not an expert, but IIUC the financial industry tends to pay full "garden leave" for employees serving out their noncompete terms https://en.wikipedia.org/wiki/Garden_leave , presumably partly for this reason.

In the most recent contract I saw from a trading firm, they would only do this if they let you go, and not for cause.

So for sure no "garden leave" if you quit, and also not if they can find a reason to fire you. And of course no bonus, which is often a majority of total comp.

Possibly this sort of thing may vary by state. There might also be some room to negotiate depending on how much they want you.

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

#72

Post by indymike »

Outside of trade secret level engineering, pharma and biotech, I've never seen a non-compete enforced because the employer was actually worried about real competitive advantage.

I have seen plenty where some Junior Vice President got angry at someone for quitting, and decided to sue to make that person's life hell. I've made several hires (sales, marketing, engineering, even executive) where the JRVP calls and tries to threaten my company with a lawsuit. My answer is, send over what it will cost to hypothetically settle, and we'll talk. Never once have I been given a number or sued. I assume this is because, A) they know the non-compete is unenforceable or B) the non-compete doesn't exist, or C) it's punitive with no real harm in the marketplace from the hire.

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

#73

Post by claytongulick »

lostdog wrote: post #51
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 fo…

You know, this is the exact reason why the "left" v "right" thing is do damned obnoxious.

Good ideas are good regardless of political party.

Barring several wedge issues that parties exploit to maximize outrage reaction in order to gain power, most people are pretty closely aligned on stuff like this.

I feel like if you polled the US population on this, 80+ percent of folks would be in favor of eliminating non-competes, regardless of political affiliation.

I agree with you though, that this is one of those good policy items that's historically been a casualty of tribalism and "campaign finance" aka bribes.

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

#74

Post by Supermancho »

indymike wrote: post #72

Outside of trade secret level engineering, pharma and biotech, I've never seen a non-compete enforced because the employer was actually worried about real competitive advantage. I have seen plenty where some Junior Vice President got angry at someone for quitting, and decided to sue to make that person's life hell. I've made several hires (sales, marketing, engineering, even executive) where the JRVP calls and tries…

I've both seen non-competes for software development and been sued in the last 10 years. I was partnered with someone who had signed one when we founded a company, which I immediately withdrew from. No need to get involved in a project that has legal problems before a revenue stream.

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

#75

Post by granzymes »

wpietri wrote: post #70
granzymes wrote: post #64

Earlier quoted context omitted.

The problem is not that the FTC has been silent on non-competes in the past. The problem is that the FTC has never used Section 5 this way before in any context. Courts are skeptical of agencies "discovering" new powers based on vague sections of their enabling statutes.

Courts are increasingly skeptical of regulatory powers at all. Which, gosh golly, might have something to do with the increasing funding by the super-rich of groups that push for judges that think that way.

I think courts will be rightly skeptical of unelected agency commissioners preempting the laws of 50 states based on 9 words that the FTC has never before relied upon. I also think that this is obvious and should not be controversial.

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

#76

Post by Supermancho »

granzymes wrote: post #31
Retric wrote: post #25

Earlier quoted context omitted.

Non competes have a direct impact on interstate commerce so the Federal government has a clear mandate from the constitution. Non competes are rarely enforceable as written, so the FTC has a clear mandate from both the unfair and deceptive standpoint.

Obviously the Federal government is constitutionally authorized to regulate non-competes. That's not my argument at all. And the FTC is not banning unenforceable non-competes, the proposed rule bans all non-competes. Regardless of which non-competes they choose to ban, however, the fact remains that this is the first time that the FTC is attempting to use Section 5 in this manner. It is very unclear that they have th…

> And the FTC is not banning unenforceable non-competes, the proposed rule bans all non-competes.

Conditional (the condition of every single one going to court) versus unconditional. I see no reason the power to ban would be limited to a specific interpretation, in this case.

What is the argument (not just reiterating the point of contention)?

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

#77

Post by bee_rider »

Spivak wrote: post #61
mattkrause wrote: post #55

Earlier quoted context omitted.

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 fo…

Huh? Why doesn’t this work? If you want to change jobs for any reason you can and if the employer wants to exercise the non-compete they have to pay you your best offer to not work , not to keep working for them.

Ehh, this seems like a hard deal to really get right, to the extent that it is sort of “fair” to the employee, the company could just offer that deal if they wanted.

Which is to say, nothing prevents a company from offering that deal as an alternative, rather than attempting to force it through with a non-compete. But, the employee would have to consider the cost to them of basically pausing their career development and letting their skills atrophy. That’s a pretty big cost! It seems unfair to force that cost on them through the contract (especially if we agree with the premise that non-competes are usually entered on a sort of unwilling basis).

Nothing prevents the company from offering this sort of deal currently. But I’d expect something higher than the offer, to take it. Companies don’t seem to offer this sort of deal currently, I guess because it seems like a pretty bad deal on their side too. Paying somebody to do nothing seems pretty expensive, I think you only do that for political favors.

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

#78

Post by ghaff »

MAGZine wrote: post #66
ghaff wrote: post #59

Earlier quoted context omitted.

>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 al…

i think the point GP is making is that Mass's tech sector might be actively hindered because of non-competes, and that without the universities, who knows if it would exist at all.

Oh, I think it's obvious that, absent a concentration of world-class research universities, MA would not have developed the sort of concentration of technology-oriented companies that it's had over the years.

I'll just add that I'm not sure how common non-competes actually were in the MA computer industry. I certainly never saw one until the company I was with was acquired by EMC in about 2000. What is true is that people tended to stay with companies a long time but I don't have any evidence that non-competes played a big role in that.

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

#80

Post by Simon_O_Rourke »

I had a non-compete and a host of other completely unenforceable (I thought at least) stipulations in a previous employer. They even tried to put in some three-month notice period, which I thought was way over the top, but ended up working for two months after I gave my notice and left it at that. My view was, they have absolutely tiny chances of finding out where I was joining next, unless I go publishing it on LinkedIn. So I left it at that. And I'm sure my former employer wasn't going to go to the trouble of tracking me down, so that was my decision made.

Here's the thing I wonder about (especially in tech) - who's to say where you currently work except what you may reveal in LinkedIn or on social media?

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