FTC cracks down on companies that impose harmful noncompete restrictions(ftc.gov)
ftc.gov
FTC cracks down on companies that impose harmful noncompete restrictions
https://www.ftc.gov/news-events/news/press-releases/2023/01/ftc-cracks-down-companies-impose-harmful-noncompete-restrictions-thousands-workers
188 comments
It was sad to see WA leaders kowtow to Amazon and Microsoft and limit the non compete ban to those paid under $100k per year. Should have been copy pasted from California law.
They didn't have a new contract for you with the local provisions when you got raises, etc? That's how companies I've worked for have forced new things in.
It depends on the base contract.
I’ve had both cases, with one company coming up with contract “additions” every now and then with super specific terms, including monetary amounts etc. The other companies usually had one single broad contract mentioning that any other provisions would be explicited in the company’s general HR policies. The HR policies get regularily revised, and employees didn’t need to sign every single change.
IMO it probably comes down to transparency. The company going the super granular route had many specific clauses negociated at an individual level, and stuff they wouldn’t want to have in a semi-public document any other employees could look at.
I’ve had both cases, with one company coming up with contract “additions” every now and then with super specific terms, including monetary amounts etc. The other companies usually had one single broad contract mentioning that any other provisions would be explicited in the company’s general HR policies. The HR policies get regularily revised, and employees didn’t need to sign every single change.
IMO it probably comes down to transparency. The company going the super granular route had many specific clauses negociated at an individual level, and stuff they wouldn’t want to have in a semi-public document any other employees could look at.
I've never been asked to sign an updated contract for a job.
I've had to sign sort of sub-contracts, e.g., during option awards. I think my main employment contract might have been updated once, when the employer I worked for was acquired, but it was a while ago so I could be mistaken.
I had an employer tie a forced arbitration clause to a stock option refresh.
I have only ever signed a new contract when I changed entities entirely. Within orgs I haven’t had to do so. I’ve changed salary or role 4x in the past year internally and it might as well be updating a db record.
Incidentally, part of making an updated employment agreement binding is consideration (such as a raise). Just telling you to sign something out else you're fired is harder to enforce.
Courts in general require consideration for a contract to be valid, but there is no requirement for that consideration to be proportionate. The company can offer you any new perk, like a free pen, and it counts.
They did not. Raises and promotions happened as usual. The two contracts were mostly the same, with the non-compete section added in the WA version.
I don't think that HR really understood my question, but I sure wasn't going to clarify things for them!
I don't think that HR really understood my question, but I sure wasn't going to clarify things for them!
Most states have separate employment agreements depending on their peculiar regs. Remote workers have made this more "fun" for legal to keep up with. I had to have state-specific lawyers review the overall employment agreement and the specifics of the IP clauses around side-ventures and open-source.
Workers should be free to employed wherever or start a business that's not lifting IP.
These sort of regs needs to harmonized like UCC. California's model is mostly the right one.
Workers should be free to employed wherever or start a business that's not lifting IP.
These sort of regs needs to harmonized like UCC. California's model is mostly the right one.
What about remote workers crossing country boundaries? Stuff is a lot of fun already, especially in Europe.
We are a fully remote 10 people startup. Everyone is in a different country, mostly in Europe. The only option to make it work is to have everyone as a contractor, because setting up legal entities that can do employment around the globe is not feasible for SMEs.
Also there are some companies selling full employment and payroll option, reporting. They might work for large enterprises, but for us it is just easier to limit the talent pool for those who are willing to work as a contractor and pay then more for taking that risk. Global talent pool is larger than any local talent pool, so you find more staff, more talented staff and staff willing to go for more competitive compensation.
Also there are some companies selling full employment and payroll option, reporting. They might work for large enterprises, but for us it is just easier to limit the talent pool for those who are willing to work as a contractor and pay then more for taking that risk. Global talent pool is larger than any local talent pool, so you find more staff, more talented staff and staff willing to go for more competitive compensation.
Then, there are countries with regulations against fictitious self-employment. They’ll happily decide that your foreign contractor has been a full time employee, with all the protections of their local law. They’ll also hand you an invoice for all the missing social security and whatever other payments, plus a fine for misreporting.
Payroll companies are, sadly, the way to go here.
Payroll companies are, sadly, the way to go here.
I’m impressed that you could locate that email after a decade!
For all its faults, California really got this one right. In some ways, this goes to show just how remarkably harmful non-competes are to the economy. If you make non-competes unenforceable, you can put all kinds of barriers up and still have a thriving tech industry (a high concentration of research universities didn't hurt either).
FTC seems to be down right now, but The Archive has it already:
http://web.archive.org/web/20230104170101/https://www.ftc.go...
http://web.archive.org/web/20230104170101/https://www.ftc.go...
One paragraph halfway down has this information-dense summary:
> In its complaints, the FTC said the restrictions constituted an unfair method of competition under Section 5 of the FTC Act. In each case, the FTC has ordered the companies to cease enforcing, threatening to enforce, or imposing noncompete restrictions on relevant workers. They also are required to notify all affected employees that they are no longer bound by the noncompete restrictions.
> In its complaints, the FTC said the restrictions constituted an unfair method of competition under Section 5 of the FTC Act. In each case, the FTC has ordered the companies to cease enforcing, threatening to enforce, or imposing noncompete restrictions on relevant workers. They also are required to notify all affected employees that they are no longer bound by the noncompete restrictions.
Thank you
15 or so years ago I worked in a small company that specialized in wind predictions and was me and 10 meteorologists
I remember them saying Accuweather is close to the main campus of Penn State which has a large meteorology program. They were saying if you joined accuweather and quit you couldn't work in any weather related field for 5 years after leaving accuweather. Basically the NDA locked you in and you were a prisoner.
I remember them saying Accuweather is close to the main campus of Penn State which has a large meteorology program. They were saying if you joined accuweather and quit you couldn't work in any weather related field for 5 years after leaving accuweather. Basically the NDA locked you in and you were a prisoner.
Not surprising from them. See this for more on their history: https://www.bloomberg.com/news/features/2018-06-14/trump-s-p...
Seriously? That's disappointing. They've been my go-to for years since most other (non-weather hobbiest) weather sites have become basically unusable due to ads.
Noncompetes should 100% require full-paid gardening leave to be enforceable.
You don't want me ot work for a competitor for a year? Great. You get to pay me full pay and benefits for that year. Let's see how keen companies are to enforce a noncompete then.
Even then they should be limited in scope but without paid gardening leave they should be utterly unenforceable.
You don't want me ot work for a competitor for a year? Great. You get to pay me full pay and benefits for that year. Let's see how keen companies are to enforce a noncompete then.
Even then they should be limited in scope but without paid gardening leave they should be utterly unenforceable.
Paid noncompete (gardening leave) is pretty common on Wall Street. It has gotten much more prevalent in the last 5-10 years, with companies ratcheting up the length and enforcing it on lower and lower level employees. Think - IC software engineers working on some random UI with no idea of current positions or trading strategies, making like $300k total being put on a 12 month leave.
The problem even with paid noncompetes is that you are only getting your salary, not bonus and in the roles it is enforced, salary kind of caps out and bonus ends up being 25%.. 50%.. 75%+ of your income.
Some firms have started to enforce garden leaves long enough that you are guaranteed to miss at least one, if not two bonus cycles.
Additionally, your health care coverage is revoked at most of these companies during your gardening leave so you have to decide whether to go without, take COBRA, or hope you are on your spouses plan already.
Finally, the terms of the contract are generally asymmetric. Your employer has the right to waive the garden leave, but you do not. So you don't know if you are getting a few months paid time off until the day you resign. For legal reasons most companies won't make an offer deal with you and give you a deal like "if you can get out of your garden leave at old job and start here earlier, we'll let you take a month off paid by us before you start" as it is solicitation.
That said - 3 month garden leave over the summer is awesome.
The problem even with paid noncompetes is that you are only getting your salary, not bonus and in the roles it is enforced, salary kind of caps out and bonus ends up being 25%.. 50%.. 75%+ of your income.
Some firms have started to enforce garden leaves long enough that you are guaranteed to miss at least one, if not two bonus cycles.
Additionally, your health care coverage is revoked at most of these companies during your gardening leave so you have to decide whether to go without, take COBRA, or hope you are on your spouses plan already.
Finally, the terms of the contract are generally asymmetric. Your employer has the right to waive the garden leave, but you do not. So you don't know if you are getting a few months paid time off until the day you resign. For legal reasons most companies won't make an offer deal with you and give you a deal like "if you can get out of your garden leave at old job and start here earlier, we'll let you take a month off paid by us before you start" as it is solicitation.
That said - 3 month garden leave over the summer is awesome.
> The problem even with paid noncompetes is that you are only getting your salary, not bonus and in the roles it is enforced, salary kind of caps out and bonus ends up being 25%.. 50%.. 75%+ of your income.
Which is why they should be required to pay your TC+xx%, including any costs you may incur for things like health insurance, not just your salary.
Which is why they should be required to pay your TC+xx%, including any costs you may incur for things like health insurance, not just your salary.
Right, some sort of total compensation weighted average with more recent years weighted more heavily.
I forgot the other fun thing is that any of your deferred compensation is zero-d out as soon as you resign, even though you might be on garden leave for 12 (and now some cases, 18) months.
I forgot the other fun thing is that any of your deferred compensation is zero-d out as soon as you resign, even though you might be on garden leave for 12 (and now some cases, 18) months.
> Your employer has the right to waive the garden leave, but you do not.
How is this not an illusory contract?
How is this not an illusory contract?
I'd love that so much. I get paid a noncompete and can go on to work for someone else and how are they going to find out?
The Work Number, an Equifax service that a shockingly large number of employers provide data to. If your new employer is one of these, and it probably would be unless it's a startup or a small family business, your old employer can see that you're now employed and who with.
Giving employee data to Equifax sounds actionable.
A lot of the high paying industries with non-competes are small and insular. If you violate your non-compete and are found out you will go to arbitration, probably get fired from your new job and have expensive legal fees (half the cost of arbitration + your lawyer). That's before the results of the arbitration.
I wish federal law would just abolish non-competes completely.
When I gave advanced notice to Tudor Investment that I would be quitting they threatened to fire me with cause so that they could still enforce the non-compete without paying me in accordance with NY state law.
And they followed through with their threat, sending me a letter telling me I was being terminated with cause the day I officially quit.
To make their shitty shenanigans worse, they made the unpaid non-compete just short enough so that it wouldn't be worth it to sue. The NY Department of Labor also doesn't handle complaints if you're salaried above a certain threshold.
Don't ever work for Tudor Investment, they're two-faced assholes, but I shouldn't be telling you that when the government should.
When I gave advanced notice to Tudor Investment that I would be quitting they threatened to fire me with cause so that they could still enforce the non-compete without paying me in accordance with NY state law.
And they followed through with their threat, sending me a letter telling me I was being terminated with cause the day I officially quit.
To make their shitty shenanigans worse, they made the unpaid non-compete just short enough so that it wouldn't be worth it to sue. The NY Department of Labor also doesn't handle complaints if you're salaried above a certain threshold.
Don't ever work for Tudor Investment, they're two-faced assholes, but I shouldn't be telling you that when the government should.
My spouse's previous employer humiliated them at their job repeatedly, and then went for blood and sued under the non-compete when they took a job elsewhere to stop the abuse. It was totally vindictive and there was really nothing we could do, as they were a multi-billion dollar company and signaled they'd be happy to just keep spending money, even if they were losing, until they bankrupted us. $30,000 in legal fees later (which didn't even get us to discovery), we had to settle, giving them basically everything they wanted, including not allowing my spouse to work at all for three months, and then complete veto power over any job they took for the next year (including even flipping burgers). Seemed completely illegal for them to do that, but they just said, "fine, lets keep the lawsuit going then." We tried calling the state to see if there was anything they could do and were met with, "Huh, that sounds sucky. Bye."
I'd love to shame the company as you're doing, but we're legally bound by the settlement not to say anything about them but how great and wonderful they are as a company.
I'd love to shame the company as you're doing, but we're legally bound by the settlement not to say anything about them but how great and wonderful they are as a company.
It seems a first step is to not tell your current employer where you're going next. If they push, just quit on the spot and cut-off communication. Maybe go a month or two without work; by then the old employer is less likely to care, you're old news by then. Be as boring and unmemorable as possible once you've decided to leave, aim so that nobody will even remember your name in 3 weeks (except for trusted friends and coworkers).
None of this is fool proof and requires savings, and I'm sorry if it seems like I'm victim blaming. As you point out, our legal system wont even reach discovery for $30,000, it's not a system of justice, it's a system of power, so do consider utilizing the power you have to keep quiet. "I'm quitting, I don't have another job lined up, but I might look around; oh yes, of course I'll follow the contract, but I'll seek my own counsel to advise me on how best to do so; goodbye". It's hard to imagine this could end up any worse than what you already experienced.
None of this is fool proof and requires savings, and I'm sorry if it seems like I'm victim blaming. As you point out, our legal system wont even reach discovery for $30,000, it's not a system of justice, it's a system of power, so do consider utilizing the power you have to keep quiet. "I'm quitting, I don't have another job lined up, but I might look around; oh yes, of course I'll follow the contract, but I'll seek my own counsel to advise me on how best to do so; goodbye". It's hard to imagine this could end up any worse than what you already experienced.
The employer was already way ahead of you. The original non-compete included a clause that you had 24 hours to inform the previous employer if you took another job at any company that could be seen as competing within a year of leaving. It's not a huge market, and they would have found out if we just didn't tell them. That would have probably gone even worse for us. Our best asset, though I guess not good enough, was that we hadn't been deceitful at all. The only other real choice we had was for my spouse to either not work for a year, or start a completely different career (giving up 30 years of experience in the field).
Thankfully now though, it's mostly all behind us. My spouse is in a new job in a company that the first employer gave the ok to, and in two more months a year has gone by, and they have no more hold over us at all.
The current employer doesn't actually know anything about the situations, as when my spouse took the job the lack of work for the previous three months was explained as, "I was unhappy at the previous job, and I took some time off and helped my aging parents get settled into a retirement home", which was all true. The new employer also wanted a non-compete signed and was a little confused why we pushed back so hard on it. They'd never seen anybody ask for changes in it. They agreed to some changes, but in the end really didn't want to make one that was compliant with state law. We settled for a written statement from their corporate council to our lawyer that said they understood it did not comply and was likely unenforceable.
Thankfully now though, it's mostly all behind us. My spouse is in a new job in a company that the first employer gave the ok to, and in two more months a year has gone by, and they have no more hold over us at all.
The current employer doesn't actually know anything about the situations, as when my spouse took the job the lack of work for the previous three months was explained as, "I was unhappy at the previous job, and I took some time off and helped my aging parents get settled into a retirement home", which was all true. The new employer also wanted a non-compete signed and was a little confused why we pushed back so hard on it. They'd never seen anybody ask for changes in it. They agreed to some changes, but in the end really didn't want to make one that was compliant with state law. We settled for a written statement from their corporate council to our lawyer that said they understood it did not comply and was likely unenforceable.
Would you please spontaneously opine on some great and wonderful companies?
Heh, would love to! But honestly, I was so shell-shocked by the whole thing that I won't even take the chance.
Nah, don’t abolish them. Just require them to continue to pay the ex-employee for the duration, including bonuses and the equivalent of any commission earned if applicable. Fair is fair.
> The NY Department of Labor also doesn't handle complaints if you're salaried above a certain threshold.
Source?
Source?
https://dol.ny.gov/system/files/documents/2021/03/ls223.2.pd...
Labor Standards cannot accept every claim. Labor Standards will not accept claims if you:
- Worked as an executive, administrative, or professional employee and earned over $900 per week
Labor Standards cannot accept every claim. Labor Standards will not accept claims if you:
- Worked as an executive, administrative, or professional employee and earned over $900 per week
Wait... Professional employee? So... Paid people need not apply? Or, is this some weird definition of professional that only applies to white collar jobs?
Oof. Thank you.
Wow that is some BS
It's similar in Washington. If you make less than $116k, no non-competes. Otherwise, get fucked.
https://lni.wa.gov/workers-rights/workplace-policies/non-com...
https://lni.wa.gov/workers-rights/workplace-policies/non-com...
How dare quants get paid $5m to sit on their couches for two years after leaving their firms! Congress must act!
Non-competes that pay you at or near your salary during garden leave are a different thing. The bog-standard non-compete in a normal SWE or IT position prohibits you from making a living at all.
The standard and legal minimum for WA employers is no compensation for the non-compete period. Also, the vast majority of workers that make more than $116k do not make $5 million annually, either before or after leaving their non-compete employer.
It would be 2.5 a year. Non competes are 2y across all of finance.
Gardening leave and non-competes are not the same. I doubt anyone feels any affronted by gardening leave.
> so that they could still enforce the non-compete without paying me in accordance with NY state law.
Could you elaborate on that part?
Could you elaborate on that part?
If you just ignore the non-compete, you can make them do the suing.
[deleted]
I worked for (and my wife still works for) a small company that provided a boutique set of engineering services. They had a non compete that was very narrowly tailored and called out by name the competitors that you couldn’t go work for directly (6 months or a year), all of which were also small companies.
That sort of non-compete that seems reasonable to me- very specific, time limited, and only for people with actual trade knowledge.
A good test is the number of openings a prohibition covers. The non-compete I signed covered maybe 30 openings nationwide in a good year, and zero in my local metro area.
That sort of non-compete that seems reasonable to me- very specific, time limited, and only for people with actual trade knowledge.
A good test is the number of openings a prohibition covers. The non-compete I signed covered maybe 30 openings nationwide in a good year, and zero in my local metro area.
Why do you believe employers should be able to control who you work for when they're no longer paying you?
One easy test for contract fairness I learned from my lawyer is, "Would it make sense if it were symmetric?" So, e.g., would your employer also agree not to go after clients that your next employer has? Or would they agree not to hire any engineers you consider competitive with yourself while you're there and for a year after you leave?
My guess is no.
One easy test for contract fairness I learned from my lawyer is, "Would it make sense if it were symmetric?" So, e.g., would your employer also agree not to go after clients that your next employer has? Or would they agree not to hire any engineers you consider competitive with yourself while you're there and for a year after you leave?
My guess is no.
Can anyone shed light as to why the push for symmetric non-competes isn't a movement?
I think it's because most employees just have no interest in diminishing competition. And if they did, most don't have the bargaining power to make it happen. And that to me is what corporate non-competes are generally about: exercising power for gain, and nevermind who it hurts.
There's an easy solution to this: They can offer you some amount of money not to work for those competitors for 6-12 months, and you can accept it, deny it, or renegotiate it.
That money is the premium embedded in their income
I think cases like this are super rare compared to the harmful cases, so it would still be a net gain for society
Also- most of the reasonable cases for noncompetes are already covered by trade secret/NDA stuff
Also- most of the reasonable cases for noncompetes are already covered by trade secret/NDA stuff
They "cracked down" on...two glass manufacturers and a security firm?
Posting this on the website and claiming that it constitutes "vigorous enforcement" shows just how ineffective these underfunded Government agencies typically are. They rarely choose to go after large companies, who can keep flouting regulations with impunity.
Smells like an Abacus Federal Savings Bank [1].
----------------------------------------
[1] https://en.wikipedia.org/wiki/Abacus_Federal_Savings_Bank
Posting this on the website and claiming that it constitutes "vigorous enforcement" shows just how ineffective these underfunded Government agencies typically are. They rarely choose to go after large companies, who can keep flouting regulations with impunity.
Smells like an Abacus Federal Savings Bank [1].
----------------------------------------
[1] https://en.wikipedia.org/wiki/Abacus_Federal_Savings_Bank
What's really interesting about this is that the FTC is now considering labor to be a market in which anti-trust rules apply. That is a development of the past two years.
IANAL and this was the DOJ not the FTC, so maybe there's some context I'm not getting, but the Apple/Google/Adobe/Intel/Intuit/Pixar no-poaching settlement was in 2010:
https://www.justice.gov/opa/pr/justice-department-requires-s...
https://www.justice.gov/opa/pr/justice-department-requires-s...
I'm not clear on why those non-competes were illegal when others aren't. Any lawyers in here willing to shine their flashlight on the right rabbit hole for me to descend? (I do have some experience in legal research tools and documents by proxy as a developer, just no significant knowledge of law.)
Some levels of non-compete would be legal according to most people. If you work as a chef at my Mexican restaurant, it seems fair to bar you from opening another Mexican restaurant within say 1 mile. For a year.
Simple, small, limited conditions to stop certain behaviors.
As to why many industry/business non-competes are legal? There’s a good chance they may not be. But until taken to court we don’t really know.
I’d be curious to know why these companies were chosen. Were they especially bad? Or just the companies they had the best evidence against?
Simple, small, limited conditions to stop certain behaviors.
As to why many industry/business non-competes are legal? There’s a good chance they may not be. But until taken to court we don’t really know.
I’d be curious to know why these companies were chosen. Were they especially bad? Or just the companies they had the best evidence against?
> If you work as a chef at my Mexican restaurant, it seems fair to bar you from opening another Mexican restaurant within say 1 mile. For a year.
I would argue that's not fair at all. Think about what you're saying: you're saying that your Mexican restaurant should effectively not have to worry about your competition providing a better job to your staff than what you offer. That changes the dynamic so that you don't have to worry about doing your best to retain your staff.
This problem is the crux of why Silicon Valley is so successful (where you can't do this there) and tech hubs in other locations aren't anywhere close to as successful (where you can do this there).
I would argue that's not fair at all. Think about what you're saying: you're saying that your Mexican restaurant should effectively not have to worry about your competition providing a better job to your staff than what you offer. That changes the dynamic so that you don't have to worry about doing your best to retain your staff.
This problem is the crux of why Silicon Valley is so successful (where you can't do this there) and tech hubs in other locations aren't anywhere close to as successful (where you can do this there).
You didn’t read the comment. It’s not about getting a job in a restaurant within 1 mile - but rather opening a restroom yourself in that radius.
Right. Your chef should be able to work anywhere that needs a chef.
I don’t think it’s fair if they leave you without a chef and open a new restaurant selling the same kind of cuisine down the bock tomorrow.
That seems more like a spite restaurant. And I’m ok with putting a simple time/distance limit on that. Next year? Nearby city? Different kind of food? Go for it tomorrow.
I don’t think it’s fair if they leave you without a chef and open a new restaurant selling the same kind of cuisine down the bock tomorrow.
That seems more like a spite restaurant. And I’m ok with putting a simple time/distance limit on that. Next year? Nearby city? Different kind of food? Go for it tomorrow.
What do you mean, it’s not fair? I genuinely don’t see anything wrong with a “spite restaurant”.
I’ve tried to come up with a comparable situation where the roles are reversed. Suppose that you owned a restaurant. If you fire your chef and buy your local competitor, can the chef argue that this purchase shouldn’t be allowed because he can’t get a job in the local market anymore?
I’ve tried to come up with a comparable situation where the roles are reversed. Suppose that you owned a restaurant. If you fire your chef and buy your local competitor, can the chef argue that this purchase shouldn’t be allowed because he can’t get a job in the local market anymore?
It still applies even if the chef in question creates their own restaurant. This is literally how startups are born. Here in CT, a lot of pizza places are spun up by pizza people leaving a pizza place and creating their own.
That's always been the way the restaurant business worked, but big chains actually have been using non-competes for a while. They claim their training, even for the front of the house, is that unique and valuable. Absurd.
This is a step in the right direction. However, I don’t know how much more the FTC can do on a case by case basis.
I’m curious if the Supreme Court has taken up cases about non-competes and analyzed if they violate the constitution since they clearly block individual freedom to pursue a living.
I’m curious if the Supreme Court has taken up cases about non-competes and analyzed if they violate the constitution since they clearly block individual freedom to pursue a living.
I promise you, the current court would never make that ruling, and may feel that we give too FEW deferences to the logic of our very good corporate overlords.
Something that may be worse than non-competes is arbitration clauses and jury waivers. Heck, most employment law is heavy-handed against the employee.
Is there a place I could learn about non-compete law? I'm curious whether my existing NC could be enforced.
It varies state by state since there are different rules by each on what clauses in non competes can be enforced. Some states like CA and MA straight up ban them.
Are you sure non-competes are banned in MA? Do you have a source for that?
I was curious, and it looks like they made it hard to enforce, capped at a year, and require a garden pay (50%) period.
https://www.upcounsel.com/non-compete-agreement-enforceabili...
https://www.upcounsel.com/non-compete-agreement-enforceabili...
Thanks for finding this out
Talk to a lawyer about it, IMO.
Pay a lawyer for an hour.
[deleted]
Just curious, but how would your employer find out who you're working for when you go somewhere else?
Will they do it with hospitals?
Things like this are the best way to increase per-employee productivity in the economy, which has been flatlining.
Another example could be tacitly encouraging holding multiple jobs.
When the interests of employers conflict with the interests of overall economic productivity, government should lean towards the latter, instead of always taking the side of the employer. Let capitalism do what it does best.
Another example could be tacitly encouraging holding multiple jobs.
When the interests of employers conflict with the interests of overall economic productivity, government should lean towards the latter, instead of always taking the side of the employer. Let capitalism do what it does best.
From the article:
> “In its complaints, the FTC said the restrictions constituted an unfair method of competition under Section 5 of the FTC Act. In each case, the FTC has ordered the companies to cease enforcing, threatening to enforce, or imposing noncompete restrictions on relevant workers. They also are required to notify all affected employees that they are no longer bound by the noncompete restrictions.”
Here is the full excerpt of section 5 as it currently stands in the United States Code as section 45 (15 U.S.C. § 45(a).) [Text in square brackets are my own]:
Why we are reading section (§) 45 of USC, not section 5: “Almost every provision of an act that is classified as a section of the Code is assigned a designation that differs from its act section number. For example, section 401 of the Social Security Act (act of August 14, 1935, chapter 531) is classified to section 601 of title 42. Most Code sections are based on an entire act section, but a few sections,[…], are based on less than an entire act section.” [3]
Citations:
[1] The Federal Trade Commission Act of 1914: https://www.govinfo.gov/content/pkg/COMPS-388/uslm/COMPS-388...
[2] Current United States Code (of law): (15 U.S.C. § 45(a).) https://uscode.house.gov/view.xhtml?req=granuleid%3AUSC-prel...
[3] A guide to reading US Law https://uscode.house.gov/detailed_guide.xhtml
> “In its complaints, the FTC said the restrictions constituted an unfair method of competition under Section 5 of the FTC Act. In each case, the FTC has ordered the companies to cease enforcing, threatening to enforce, or imposing noncompete restrictions on relevant workers. They also are required to notify all affected employees that they are no longer bound by the noncompete restrictions.”
Here is the full excerpt of section 5 as it currently stands in the United States Code as section 45 (15 U.S.C. § 45(a).) [Text in square brackets are my own]:
§45. Unfair methods of competition unlawful; prevention by Commission
(a) Declaration of unlawfulness; power to prohibit unfair practices; inapplicability to foreign trade
(1) Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful.
(2) The Commission is hereby empowered and directed to prevent persons, partnerships, or corporations, except […a dozen exceptions…], from using unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce.
(3) This subsection shall not apply to unfair methods of competition involving commerce with foreign nations (other than import commerce) unless— […insert paragraphs of exceptions…]. If this subsection applies to such methods of competition only because of the operation of subparagraph (A)(ii) [“on export commerce with foreign nations, of a person engaged in such commerce in the United States”], this subsection shall apply to such conduct only for injury to export business in the United States.
(4)(A) For purposes of subsection (a), the term "unfair or deceptive acts or practices" includes such acts or practices involving foreign commerce that—
(i) cause or are likely to cause reasonably foreseeable injury within the United States; or
(ii) involve material conduct occurring within the United States.
(B) All remedies available to the Commission with respect to unfair and deceptive acts or practices shall be available for acts and practices described in this paragraph, including restitution to domestic or foreign victims.
Why we are reading section (§) 45 of USC, not section 5: “Almost every provision of an act that is classified as a section of the Code is assigned a designation that differs from its act section number. For example, section 401 of the Social Security Act (act of August 14, 1935, chapter 531) is classified to section 601 of title 42. Most Code sections are based on an entire act section, but a few sections,[…], are based on less than an entire act section.” [3]
Citations:
[1] The Federal Trade Commission Act of 1914: https://www.govinfo.gov/content/pkg/COMPS-388/uslm/COMPS-388...
[2] Current United States Code (of law): (15 U.S.C. § 45(a).) https://uscode.house.gov/view.xhtml?req=granuleid%3AUSC-prel...
[3] A guide to reading US Law https://uscode.house.gov/detailed_guide.xhtml
Do you happen to be currently in law school?
We really need general regulations on non-competes. Bare minimum, it should be required that a company pay you a full salary if they want to block you from seeking employment elsewhere with your skills.
If a company really cares that much about stopping competitors from taking advantage of your skillset, they need to be willing to pay up.
If a company really cares that much about stopping competitors from taking advantage of your skillset, they need to be willing to pay up.
On top of that, non-competes shouldn't be enforceable on employees who are laid off or fired. If a company doesn't want to retain an employee, they shouldn't have any say over what that employee does with their skills afterwards.
This seems like the barest of minimums, yes. I conceptually understand wanting to ensure an employee can't use their connections at your company to then "cut out the middleman" and deal direct for a better cut. But obviously if a company lets you go, they are no longer choosing to invest in that employee's skills.
But then if you want to avoid the non-compete you would just get fired on purpose.
Classic unintended consequence of regulation.
But I do agree that non-competes should be illegal or somehow highly disincentivized.
Regardless of the specifics of any regulation, the burden should be on the company and should err on the side of the employee’s benefit. It’s never fair to pit an individuals livelihood against a corporation.
Can a salesman leave and take all his clients with him, even if there were given to him by the company?
Preventing a sales person from soliciting their former customers is entirely covered by a non-solicitation contract, and claiming that a non-compete agreement is needed is a total straw man.
That's different than what non-compete contracts are used for, so that's a different discussion entirely. A corporation that abuses non-competes can destroy an individual's life. There's no real reverse of that, and stealing trade secrets is already covered by law (see what happened to Anthony Levandowski).
It's completely unfair to pit an individual against a corporation. For the individual, a lawsuit related to a non-compete can consume their entire life for years while everyone working at the corporation has no real skin in the game. They'll go home and night and live their lives. Worst case they have to work late. It's not comparable at all.
It's better for a corporation to be wronged by an individual, than for an individual to be wronged by a corporation. So the law should err on the side of the individual.
To answer your question directly: frankly I don't see why not. Why can't the clients choose to change vendors? Is it not a free market? Are clients really going to change vendors just to still have the same sales rep?
It's completely unfair to pit an individual against a corporation. For the individual, a lawsuit related to a non-compete can consume their entire life for years while everyone working at the corporation has no real skin in the game. They'll go home and night and live their lives. Worst case they have to work late. It's not comparable at all.
It's better for a corporation to be wronged by an individual, than for an individual to be wronged by a corporation. So the law should err on the side of the individual.
To answer your question directly: frankly I don't see why not. Why can't the clients choose to change vendors? Is it not a free market? Are clients really going to change vendors just to still have the same sales rep?
This angle is strange to me.
A salesman doesn't exist as an island. He's selling products or services from a particular company, no? And if he leaves, he would then be selling products or services from a different company. Yes, maybe some clients will like the salesman enough to switch suppliers, but surely the fact that it's a different company with at least somewhat different products/services matters too, no?
A salesman doesn't exist as an island. He's selling products or services from a particular company, no? And if he leaves, he would then be selling products or services from a different company. Yes, maybe some clients will like the salesman enough to switch suppliers, but surely the fact that it's a different company with at least somewhat different products/services matters too, no?
Yes, happens all the time, and it’s not a big deal. There’s product and business strategies to help protect against that.
Also, it’s not as easy as it seems, and in cases where it is, it’s good for the overall economy: competition lowers prices the right way (unlike mergers and acquisitions).
I’m a dyed-red socialist so please explain something to me: why is this a net bad for society? Presumably the clients are leaving for a reason, so wouldn’t that just be the market doing what it’s supposed to (matching demand with supply)?
Why are all these lazy entitled companies not pulling themselves up by their bootstraps and doing everything they can to keep customers?
Why are all these lazy entitled companies not pulling themselves up by their bootstraps and doing everything they can to keep customers?
As long as "full salary" is defined as your total compensation. Financial firms set base salaries low relative to total compensation (bonus can be 200-500%+ base) so that your TC drops dramatically if you leave. Sometimes the next job will buy you out, but with 18 month non competes being common, sometimes you are just screwed.
I train myself, I educate myself, I continue all that, the company just rents an expert, but I own me.
I posted on the parent as well, but I find non-competes reasonable only if they are time limited (like 6 months to a year), very narrowly tailored and affect a very small number of job openings. I think Google blocking someone from going to Bing ridiculous, but a stoping a move from being the chief of staff at Google Maps to the chief of staff at Bing maps is far more reasonable.
It’s far less reasonable.
If you are skilled in being the chief of staff at google maps, it is likely your highest market value is in that particular niche.
Restricting your employment opportunities to those where you don’t have the highest market value through the use of non-competes is absolutely unethical and needs to be banned.
If you are skilled in being the chief of staff at google maps, it is likely your highest market value is in that particular niche.
Restricting your employment opportunities to those where you don’t have the highest market value through the use of non-competes is absolutely unethical and needs to be banned.
its not about ethics - its theft. They are fraudulently manipulating the market for competitive salaries in a particular job.
It should be treated in the same way as other kinds of market fraud, insider trad8ng and rigging are treated.
It should be treated in the same way as other kinds of market fraud, insider trad8ng and rigging are treated.
I think the argument would be that if Google knows that Bing could hire its chief of staff at any time, that will cause Google to invest less in R&D because that R&D could fairly easily be obtained by a competitor.
I assume intellectual property law is sufficient to cover this case in practice though, because Silicon Valley is in California where noncompetes are unenforceable, and Silicon Valley is not exactly known for lack of R&D investment.
I assume intellectual property law is sufficient to cover this case in practice though, because Silicon Valley is in California where noncompetes are unenforceable, and Silicon Valley is not exactly known for lack of R&D investment.
Even preventing direct lateral moves prevents... competition. Where would we be without the Traitorous Eight?
Bing Maps has a chief of staff??
Chief of what? People use Bing Maps?
Chief of what? People use Bing Maps?
Ok. Your salary is $1, but we reliably pay a bonus of $250k.
I meant total compensation.
That still is anticompetitive.
I think that's why the "bare minimum" language was used: It's a lot better than the status quo, but doesn't go far enough.
The competition could still poach the employee for more money, if they deemed them worth it. Which is plain old competition.
Well, maybe, but in practice companies would only rarely use it, since they wouldn't want to pay for someone to not do work.
Meh I dunno, I'd take it
Whole heartedly agree.
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Then how would a company protect it's trade secrets?
Trade secrets are already strongly and strictly protected at national and state level regardless of non compete agreements.
You are never allowed to steal trade secrets or use them elsewhere even if you didn’t sign any agreement about it.
An NDA isn’t even technically required. There are state and national laws which blanket ban using trade secrets outside of the company you worked for.
You are never allowed to steal trade secrets or use them elsewhere even if you didn’t sign any agreement about it.
An NDA isn’t even technically required. There are state and national laws which blanket ban using trade secrets outside of the company you worked for.
How would a previous employer know what a former employee is telling their current employer about what they know from their former employer?
Not saying anything is right or wrong, just that when something is illegal doesn't mean it prevents that crime.
Not saying anything is right or wrong, just that when something is illegal doesn't mean it prevents that crime.
> How would a previous employer know what a former employee is telling their current employer...
They don't. What I learned while working for your company isn't your company's property any more. Good ideas almost always eventually spread in our industry. And I think thats a good thing for software as a whole!
You can protect your data, and your code. But you can't really stop someone quitting a job at your company, working somewhere else and reimplementing a software system that worked well. It might take years to do it, but probably not decades.
I honestly think this is a pretty good tradeoff. It means if you build some software, you have head start, but not an impenetrable wall. For someone to compete, it'll take a lot of time and money just to catch up with where you are today. So it'll be hard to do but possible. This leaves the door open for any incumbent to be outcompeted in the market if they stop doing good work.
And thats a good thing! Competition is painful, but it pushes us to make better products for our users. Ultimately thats better for everyone.
They don't. What I learned while working for your company isn't your company's property any more. Good ideas almost always eventually spread in our industry. And I think thats a good thing for software as a whole!
You can protect your data, and your code. But you can't really stop someone quitting a job at your company, working somewhere else and reimplementing a software system that worked well. It might take years to do it, but probably not decades.
I honestly think this is a pretty good tradeoff. It means if you build some software, you have head start, but not an impenetrable wall. For someone to compete, it'll take a lot of time and money just to catch up with where you are today. So it'll be hard to do but possible. This leaves the door open for any incumbent to be outcompeted in the market if they stop doing good work.
And thats a good thing! Competition is painful, but it pushes us to make better products for our users. Ultimately thats better for everyone.
>You can protect your data, and your code. But you can't really stop someone quitting a job at your company, working somewhere else and reimplementing a software system that worked well. It might take years to do it, but probably not decades.
I don't even think this case is undesirable. If we were welders, it would be absurd to be prevented from using a welding technique we learned on the job at a new employer. System design is just a technique.
I don't even think this case is undesirable. If we were welders, it would be absurd to be prevented from using a welding technique we learned on the job at a new employer. System design is just a technique.
If it were a genuinely innovative new technique, it should be patented, which will grant exclusivity for some period in exchange for it _not_ being a trade secret.
Patents have become effectively unenforceable in many domains. The retreat to trade secrets is a reaction to this. Eschewing patents in favor of trade secrets is a common strategy these days. Ironically, this was the situation patents were intended to prevent, were they enforceable.
> What I learned while working for your company isn't your company's property any more. Good ideas almost always eventually spread in our industry.
You are only thinking about code. Imagine knowing all the dirty secrets about how your company screwed customers. I have seen employment contracts forbidding working for a customer, in addition to competitors and in addition to an NDA.
You are only thinking about code. Imagine knowing all the dirty secrets about how your company screwed customers. I have seen employment contracts forbidding working for a customer, in addition to competitors and in addition to an NDA.
Again, that dirty laundry eventually being aired is a good thing for our industry. There need to be costs to being a scumbag, even if the cost is just to your reputation.
Not saying it isn't; just that there's another angle outside of software.
The "Front Page" ethics test is probably the best one I've heard: "What would people think if what was being done was reported on the front page of the NY Times or other major news outlet?"
The "Front Page" ethics test is probably the best one I've heard: "What would people think if what was being done was reported on the front page of the NY Times or other major news outlet?"
There is no reasonable way to definitively control this, though explicit theft of trade secrets between companies is prosecuted in practice and dangerous enough that ethical companies are careful about even the appearance of impropriety.
Where trade secrets really leak (in tech), in my experience, is engineer to engineer. A chat between friends over beers about some technical problem. It is nearly untraceable and it doesn’t involve anyone leaving their job.
As a fun example, database tech is buried in trade secret restrictions and has been for decades. There is a classic problem in cache replacement algorithms that has no solution in literature. Nonetheless, an astonishingly elegant solution exists — the kind that you can’t believe you never thought of it yourself after you learn it — that has been selectively passed around informally among practitioners for (at least) a decade or two. No one knows who invented it but it was likely developed at one of the old database research powerhouses like Oracle, IBM, et al that have severe trade secret regimes. A trade secret that leaks isn’t a trade secret, but there are enormous punitive consequences if anyone knows who leaked it.
This kind of trade secret leakage happens even under non-compete regimes and it is pretty common. When it happens, the probability of figuring out how it happened is very low. It has to be part of your risk model.
Where trade secrets really leak (in tech), in my experience, is engineer to engineer. A chat between friends over beers about some technical problem. It is nearly untraceable and it doesn’t involve anyone leaving their job.
As a fun example, database tech is buried in trade secret restrictions and has been for decades. There is a classic problem in cache replacement algorithms that has no solution in literature. Nonetheless, an astonishingly elegant solution exists — the kind that you can’t believe you never thought of it yourself after you learn it — that has been selectively passed around informally among practitioners for (at least) a decade or two. No one knows who invented it but it was likely developed at one of the old database research powerhouses like Oracle, IBM, et al that have severe trade secret regimes. A trade secret that leaks isn’t a trade secret, but there are enormous punitive consequences if anyone knows who leaked it.
This kind of trade secret leakage happens even under non-compete regimes and it is pretty common. When it happens, the probability of figuring out how it happened is very low. It has to be part of your risk model.
How would any other signed document let "a previous employer know what a former employee is telling their current employer about what they know from their former employer?"
A non-compete agreement doesn't actually "prevent" an employee from working at another company any more than an NDA prevents an employee from divulging confidential trade secrets.
A non-compete agreement doesn't actually "prevent" an employee from working at another company any more than an NDA prevents an employee from divulging confidential trade secrets.
That's true of many illegal things. Trespassing is illegal, but people still put locks, gates, fences, etc on their property because people will still trespass if they want to. The purpose of the law is to dissuade people from doing it because there are consequences for that action.
If you're talking about trade secrets, I believe if there is evidence in the product/products that a former employees company is releasing that seems to be operating or working in a similar product they could gather publicly available evidence, hire a PI, and ultimately attempt to subpoena additional information if there is sufficient evidence that the employee is actually sharing trade secrets from a previous company.
If you're talking about trade secrets, I believe if there is evidence in the product/products that a former employees company is releasing that seems to be operating or working in a similar product they could gather publicly available evidence, hire a PI, and ultimately attempt to subpoena additional information if there is sufficient evidence that the employee is actually sharing trade secrets from a previous company.
As far as I'm concerned, if you can hold it in your head, it's probably not worthy of being protected as a trade secret, at least if we're talking about something technical like software and not a KFC recipe. Downloading a bunch of data like the Uber guy is obviously theft, but being able to remember, in general terms, how some software program worked doesn't seem protectable to me: there's no way you could really re-implement it the same way just from memory unless you have some truly superhuman memory skills. Any modern codebase is huge, the product of dozens of people or more, and not something one person can hope to remember well enough to make a real copy.
Yeah but than the person is liable and could be charged in that case
Example: Former Uber Executive Sentenced To 18 Months In Jail For Trade Secret Theft From Google https://www.justice.gov/usao-ndca/pr/former-uber-executive-s...
> Anthony Scott Levandowski pleaded guilty and was sentenced today to 18 months in prison for trade secret theft related to Google’s self-driving car program, announced United States Attorney David L. Anderson and John F. Bennett, Special Agent in Charge of the Federal Bureau of Investigation. Levandowski was also ordered to pay a $95,000 fine and $756,499.22 in restitution.
> Anthony Scott Levandowski pleaded guilty and was sentenced today to 18 months in prison for trade secret theft related to Google’s self-driving car program, announced United States Attorney David L. Anderson and John F. Bennett, Special Agent in Charge of the Federal Bureau of Investigation. Levandowski was also ordered to pay a $95,000 fine and $756,499.22 in restitution.
This is an extreme example. This guy downloaded gigabytes of data from Google before he left. The vast majority of cases are not like this and empowers world never know what their former employees tell subsequent employers
That was straight up IP theft. Not hey Uber here’s how we solved XYZ problem at Google after 4 years of R&D digging.
Trade secrets are protected by criminal statutes. Misappropriate trade secrets you go to jail. That is beyond any other protection. For comparison, company could commit wage theft, and no one is going to jail.
Look, I understand most of you here are on the employee side, but please try and think through how this works in the real-world. And not for mega-corps, but smaller business who have ~0% chance of litigating a trade secrets case.
There are dozens of small optimizations in my tech that where painstakingly discovered through years of research and iterative improvement. These are not cost-effectively patentable.
Even if you believe the trade secrets 'work' do you think companies are going to document every design of optics, electronics, laser frequencies, rf powers? Then if we did then we'd get a series of posts about how onerous the regular confidential info acknowledgement forms are for the employee.
Not to mention, once it becomes 'commonly known' via disclosure, it may not even be protectable anymore.
Non-competes sidestep all these issues. Sure, if they are overly broad its bad, but they have an important role to play.
There are dozens of small optimizations in my tech that where painstakingly discovered through years of research and iterative improvement. These are not cost-effectively patentable.
Even if you believe the trade secrets 'work' do you think companies are going to document every design of optics, electronics, laser frequencies, rf powers? Then if we did then we'd get a series of posts about how onerous the regular confidential info acknowledgement forms are for the employee.
Not to mention, once it becomes 'commonly known' via disclosure, it may not even be protectable anymore.
Non-competes sidestep all these issues. Sure, if they are overly broad its bad, but they have an important role to play.
Presumably if the trade secret is so important that the employee must absolutely not compete, then it is worth paying out salary and benefits during said noncompete.
“Uniform Trade Secrets Act”
https://en.m.wikipedia.org/wiki/Uniform_Trade_Secrets_Act
Edit: My (possibly incorrect) understanding is that rather than having a blanket “everything is our secret” kind of contracts like we have now, the act requires the company to specify what they have that they consider a secret, and to show that they take steps to protect those secrets above and beyond regular day-to-day information exchange within their company.
For example, a list of customers would have to be explicitly identified as “secret”, and handled more carefully.
Edit: My (possibly incorrect) understanding is that rather than having a blanket “everything is our secret” kind of contracts like we have now, the act requires the company to specify what they have that they consider a secret, and to show that they take steps to protect those secrets above and beyond regular day-to-day information exchange within their company.
For example, a list of customers would have to be explicitly identified as “secret”, and handled more carefully.
An NDA, same way they do now.
I would wager that there aren't many trade secrets (I'm sure there are some) that a security guard (from the link) could bring with them.
Using an NDA like everyone else.
Be an employer people don’t want to leave. Same logic as they enjoy.
themitigating(12)
A few years later, I moved to the company's offices in Washington State, where non-competes are allowed. Before the move I emailed HR and asked if I needed to sign the WA state employment agreement (with that non-compete clause) and they said "no". I saved that email.
Forward a decade, I resigned to work for a competitor.
That exit interview was fun. :-)
[I was working on completely different stuff at the new company. I do take NDAs and trade secrets seriously].