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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

#81

Post by neilv »

ghaff wrote: post #63
neilv wrote: post #57

Earlier quoted context omitted.

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.

As someone who was there at the time, the reasons were complicated. The Route 128 computer industry was in pretty significant decline and nothing had really come in to replace them. And the metro itself saw an outflow of population until the late nineties. When Teradyne moved out of Boston that was probably the last significant tech company in the city proper at the time. And the whole biotech and pharma boom in Kend…

At the time of Web boom, I didn't understand some of the foot-dragging by West Coast tech companies, on setting up offices Cambridge/Boston, to get more of the talent fresh out of the universities, and the research university partnerships. But maybe they (correctly) thought that most of new grads would come to them.

In the case of Google, I thought there might also have been a Stanford-vs.-MIT factor. MIT was known as very strong-minded and self-assured. (And Stanford and California have their own stereotypes.) Were I trying to craft a particular culture, starting either around Stanford or MIT, there's no way I'd open a major office on the other coast until the HQ culture had really gelled, and I thought I could get the distant people to meet us more than halfway (rather than them carbon-copying what they already know from MIT or California).

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

#82

Post by baron816 »

MAGZine wrote: post #69
baron816 wrote: post #32

When I first tried to transition into tech, I had a really hard time getting someone to hire me. I had a lot of potential, but no one wanted to take a risk on someone without experience. I still needed some training, and no one wanted to train me, just to see me leave in a few years. That seems to be an argument for keeping non-compete clauses--allow firms to hire people on the condition that they'll stay a few years…

or, maybe if a company is scared of losing an employee, they should pay them market value. holding a grudge over them because you trained them and are trying to recoup your costs is idiotic and doesn't work. asking the government to subsidize corporate training is a non-starter. it is a corporation's job to both DEVELOP and RETAIN talent. Both. Companies would like very much to do neither--but putting in the effort i…

You say this like "this is the moral and right thing to do". If I could snap my fingers and make it happen, then I would. That's not how the world works though. Companies have a profit incentive. And that's a good thing. We want them to train employees in ways that will be productive and end up having them output something that is valuable. But that training can be expensive.

What happens if everyone concludes that they'd be better off waiting for a competitor to incur the cost of training someone, then hiring them away? We'd get into a situation where no one wants to train anyone.

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

#83

Post by isthisthingon99 »

Simon_O_Rourke wrote: post #80

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 Link…

There is a website that employers are using to verify background which includes current employers. I believe it's run by idp.

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

#84

Post by baron816 »

Pulcinella wrote: post #67
baron816 wrote: post #32

When I first tried to transition into tech, I had a really hard time getting someone to hire me. I had a lot of potential, but no one wanted to take a risk on someone without experience. I still needed some training, and no one wanted to train me, just to see me leave in a few years. That seems to be an argument for keeping non-compete clauses--allow firms to hire people on the condition that they'll stay a few years…

What you want is literally just contract employment (not the same thing as being a "contractor"). It's common in the world of teaching (though these days it's generally just for the school year. In the past 3 year contracts were more normal). It's not very common in the world of business and instead employment is generally at-will (which is another reason why non-competes are BS. At-Will employment lets the company f…

What? Can you please read my whole comment?

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

#85

Post by baron816 »

neilv wrote: post #40
baron816 wrote: post #32

When I first tried to transition into tech, I had a really hard time getting someone to hire me. I had a lot of potential, but no one wanted to take a risk on someone without experience. I still needed some training, and no one wanted to train me, just to see me leave in a few years. That seems to be an argument for keeping non-compete clauses--allow firms to hire people on the condition that they'll stay a few years…

> allow firms to hire people on the condition that they'll stay a few years once they've be trained and can at least recoup the cost of training I favor training, loyalty, seeing a system through a lifecycle (rather than job-hopping before you see both cause and effect), etc., but... Requiring an employee to stay at a company, especially in our current not-very-scrupulous business culture, sounds like a recipe for in…

Read my last paragraph. I'm suggesting a way that would allow employees to leave whenever they want, but to derisk training for companies so that they still have an incentive to hire and train untested people.

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

#86

Post by baron816 »

ghaff wrote: post #49
baron816 wrote: post #32

When I first tried to transition into tech, I had a really hard time getting someone to hire me. I had a lot of potential, but no one wanted to take a risk on someone without experience. I still needed some training, and no one wanted to train me, just to see me leave in a few years. That seems to be an argument for keeping non-compete clauses--allow firms to hire people on the condition that they'll stay a few years…

That seems close to arguing for indentured servitude. What companies probably can do in general (not an employment lawyer) is have a contract requiring the repayment of outside training if you leave on your own volition before some period of time--which seems reasonable.

Please read my whole comment. That's not anywhere close to what I'm arguing for.

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

#87

Post by etothepii »

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.

Though employees that typically receive such tend to have substantial variable elements to their compensation.

100%+ annual bonus for performance are not unusual and typically they are not paid during a period of garden leave.

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

#88

Post by tcmart14 »

idopmstuff wrote: post #42
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…

> In the instance this change doesn't go through it is important to be aware that non-competes don't survive hardship tests. This may be true in theory, but more often that not for the most vulnerable people it's not true in practice. The problem is that people have to be both aware that they can challenge a noncompete and willing to do so. That is, at a minimum, very time consuming, and if you're working a low-wage…

Thats my understanding of non-competes. It is really for the company to win in a court case. Its a threat to scare people in complying because most people don't have the war chest to fight it out. For most people, you can fight it, but your gonna go bankrupt. So it is often better to just cave in. The company will just drag it out so it costs you the entire time. Its more of a competition of who has the bigger war chest and the employer is usually the one with it.

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

#89

Post by kibwen »

Simon_O_Rourke wrote: post #80

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 Link…

> who's to say where you currently work except what you may reveal in LinkedIn or on social media

Companies sell this information to credit bureaus and background check agencies, who then sell it back to other companies. It's not secret.

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

#90

Post by Buttons840 »

granzymes wrote: post #75
wpietri wrote: post #70

Earlier quoted context omitted.

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.

Presumably those 9 words mean something though. The FTC clearly has the power to prohibit deceptive acts that effect commerce, this is spelled out in the law. If that power doesn't apply to making changes that interfere with state rights, then I would ask what does that power apply to? In practice, does it apply to anything at all?

(One conclusion I can imagine for this debate is that laws are not coherent, they are self contradictory in some cases, and this might be one of those cases.)

However this turns out, I'm glad more people are talking about this issue, because I think 95% of the people agree non-competes are unfair, which is enough that maybe things will change.

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