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New Washington state law bans noncompete agreements

seattletimes.com

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Re: New Washington state law bans noncompete agreements

#41

Post by cowsandmilk »

josephg wrote: post #31
jeffreyrogers wrote: post #14

The only time I see non-competes as reasonable is when someone sells a business. It seems fair to put a territory restriction on a seller so the new owner doesn't have to immediately start competing against the person they bought out.

Why? They started one successful business. It seems good for society if they go on to start another.

Often an acquisition of a company is for the set of customers. If I sell my lawn care business and then turn around and email all my former clients offering them lawn care via my new company, I’ve just undercut what I just sold.

Noncompete shouldn’t be so broad that I couldn’t move to another city and start a lawn care business there, but I shouldn’t be able to compete directly with the business I just sold using my insider information of that business.

Re: New Washington state law bans noncompete agreements

#42

Post by Klonoar »

josephg wrote: post #31
jeffreyrogers wrote: post #14

The only time I see non-competes as reasonable is when someone sells a business. It seems fair to put a territory restriction on a seller so the new owner doesn't have to immediately start competing against the person they bought out.

Why? They started one successful business. It seems good for society if they go on to start another.

That is not even remotely the point OP is arguing.

Re: New Washington state law bans noncompete agreements

#44

Post by jkingsbery »

remarkEon wrote: post #34
Analemma_ wrote: post #5

It always baffles me how much resistance there is to banning noncompetes every time this is proposed, and how that resistance lives right alongside “we want to be the next Silicon Valley”, even though pretty much every analysis of “what’s Silicon Valley’s secret sauce” cites the unenforceability of noncompetes as one of the most important factors. But maybe the ship is turning very slowly.

What's the actual steel man argument for why noncompetes are good? I've never really encountered one, just seen the corporate advocacy that they don't want to deal with high employee turnover. Best I can do: Non-competes are (possibly) unenforceable anyway, so signing one maybe acts as a value signal for the employee? "I'd have to violate my non-compete, so in order to do that and permanently burn the bridge with my…

I am glad most places are getting rid of non-competes. But here is the best argument I've heard for them:

For many companies, a lot of their value is in their intellectual property. Non-competes exist not because the company will enforce it against employees (they might, but they usually don't), but more as a fig-leaf to potential investors down the line asking about the value of the intellectual property. The argument goes, if someone could easily leave the company with the knowledge earned and go to a competitor, then the investment wouldn't be as valuable.

Re: New Washington state law bans noncompete agreements

#45

Post by colechristensen »

hodgesrm wrote: post #39
jeffreyrogers wrote: post #14

The only time I see non-competes as reasonable is when someone sells a business. It seems fair to put a territory restriction on a seller so the new owner doesn't have to immediately start competing against the person they bought out.

That's how it works in California. I had a 3 year non-compete with VMware after we sold a business to them. It was restricted to the specific market and technology our business covered but didn't limit activities in other areas. It seemed completely fair to me. Besides, competing would have meant doing exactly the same thing over again. What's the fun in that?

>Besides, competing would have meant doing exactly the same thing over again. What's the fun in that?

All of the baggage and tech debt gone! THIS TIME WE'LL DO IT RIGHT

Re: New Washington state law bans noncompete agreements

#46

Post by matthest »

jkingsbery wrote: post #36
matthest wrote: post #28

A win for Adam Smith capitalism.

Not sure if this is meant sarcastically or not, but it is - it helps reduce transaction costs of changing employers. Anyone who has ever signed a contract with wide non-competes knows that it is hard for an individual to negotiate against it on an individual basis, but they are rarely enforced in practice, which leaves open individuals to worries about "maybe I'm one of the unlucky few?" These clauses then primarily…

Not sarcastic. Anything that helps keep markets optimally competitive is good for capitalism.

Re: New Washington state law bans noncompete agreements

#47

Post by SilverElfin »

WA has bigger problems like crazy overspending at the state level and many cities, leading to a spiral of new taxes, even if they are unconstitutional (at the state level). This new noncompete law won’t be enough to make the state more attractive to workers and businesses. It has nothing to really offer above California.

Re: New Washington state law bans noncompete agreements

#48

Post by dismalaf »

remarkEon wrote: post #34
Analemma_ wrote: post #5

It always baffles me how much resistance there is to banning noncompetes every time this is proposed, and how that resistance lives right alongside “we want to be the next Silicon Valley”, even though pretty much every analysis of “what’s Silicon Valley’s secret sauce” cites the unenforceability of noncompetes as one of the most important factors. But maybe the ship is turning very slowly.

What's the actual steel man argument for why noncompetes are good? I've never really encountered one, just seen the corporate advocacy that they don't want to deal with high employee turnover. Best I can do: Non-competes are (possibly) unenforceable anyway, so signing one maybe acts as a value signal for the employee? "I'd have to violate my non-compete, so in order to do that and permanently burn the bridge with my…

> What's the actual steel man argument for why noncompetes are good?

It makes it possible to confidently buy a business that's mostly or all goodwill. Otherwise the previous owner can simply poach all the clients.

Also lots of jurisdictions allow non-competes as long as the employee is paid for the duration of the non-compete clause. Obvious win there: paid vacation or double up your salary by working for a non-competing firm.

Non-competes on employees without compensation are obviously bad.

Re: New Washington state law bans noncompete agreements

#49

Post by hedgehog »

cowsandmilk wrote: post #41
josephg wrote: post #31

Earlier quoted context omitted.

Why? They started one successful business. It seems good for society if they go on to start another.

Often an acquisition of a company is for the set of customers. If I sell my lawn care business and then turn around and email all my former clients offering them lawn care via my new company, I’ve just undercut what I just sold. Noncompete shouldn’t be so broad that I couldn’t move to another city and start a lawn care business there, but I shouldn’t be able to compete directly with the business I just sold using my…

There's also a big difference between starting a competing business like your example, and being barred from say working on "cloud infrastructure" because your previous employer also worked on "cloud infrastructure". It can be blurry for executives, but in general noncompetes seem to be used to push pay down more than for any legitimate business purpose.

Re: New Washington state law bans noncompete agreements

#50

Post by tzs »

The article covers this, but probably worth having it mentioned here too: Washington already had partially banned noncompete agreements.

They were banned for employees who made less the $127k/year or contractors who made less than $317k. Those numbers were adjusted annually for inflation.

Edit: less/more mixup fixed

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