Laws barring noncompete clauses spreading(businessinsurance.com)
businessinsurance.com
Laws barring noncompete clauses spreading
https://www.businessinsurance.com/article/20220901/NEWS06/912352002/Laws-barring-noncompete-clauses-spreading
223 comments
I'm fine with allowing non-competes as long as the company pays the ex-employee their full salary for the length of the non-compete and can't rescind the non-compete without mutual consent. For example, an 18 month non-compete would mean 18 months of paid vacation after you leave a job.
I imagine this would be functionally equivalent to a ban on non-competes because it seems like it'd be an insane waste of money but if a company wants to provide a paid vacation on the way out I see no reason to stop them. Unpaid non-competes should be illegal as somebody's right to earn a living trumps a corporation's right to impose an unconscionable contract on its employees.
I imagine this would be functionally equivalent to a ban on non-competes because it seems like it'd be an insane waste of money but if a company wants to provide a paid vacation on the way out I see no reason to stop them. Unpaid non-competes should be illegal as somebody's right to earn a living trumps a corporation's right to impose an unconscionable contract on its employees.
I think that's fine for the employee (great, really: long-term paid vacation!), but if the goal is to create the "next Silicon Valley" or whatever, then allowing paid non-competes is going to work against that goal. You want an employee to get excited about striking out on their own and starting a company, immediately after quitting their old job (or, hell, before quitting their old job, as some SV founders do). Allowing their previous employer to delay that by 6, 12, 18 months (or whatever) isn't great for the entrepreneurial spirit.
Maybe, but the cost means that it won't be the norm, they'll only actually exercise it when they really, really need to.
Yeah that is pretty common in the hedge fund/trading world. They call it garden leave and you get your base salary for usually 6-18 months. The downside to that is you only get your base salary which is usually a fraction of the expected bonus.
> garden leave
It's called the same thing in Germany. The term also applies to when you quit, but the employer wants to cut your access to the company ahead of your contract termination date. It's typical to have 1-3 months of "notice period" in Germany.
It's called the same thing in Germany. The term also applies to when you quit, but the employer wants to cut your access to the company ahead of your contract termination date. It's typical to have 1-3 months of "notice period" in Germany.
This is functionally how it works in Germany. Usually reserved for C-level types.
It's also done because it not allowed to have anti-poaching clauses IIRC.
It's also done because it not allowed to have anti-poaching clauses IIRC.
This is a smart way to go about it.
Only a tiny portion of truly critical positions would have compensated non-competes under this system and the rest would have no such blocks.
Only a tiny portion of truly critical positions would have compensated non-competes under this system and the rest would have no such blocks.
This is how it works in Norway.
Paying to delay competitors could be a good use of money for companies in many circumstances. That would work fine for an individual from a financial perspective, but keeping talent away from work is suboptimal for society as a whole.
> but keeping talent away from work is suboptimal for society
I think this is basically a non-issue in practice. People with such iron-clad non-competes typically either a) take a non competing job, or b) work on something anyway. The latter effectively means the original company funds some research.
If you do this with say, sales people, or traders, or whatever, it shuts down their work. If you do it with engineers they'll just make something at home.
I think this is basically a non-issue in practice. People with such iron-clad non-competes typically either a) take a non competing job, or b) work on something anyway. The latter effectively means the original company funds some research.
If you do this with say, sales people, or traders, or whatever, it shuts down their work. If you do it with engineers they'll just make something at home.
I'm impressed by your faith in engineers, but it might be misplaced. I enjoyed a five months paid non compete when last moving between banks, and build nothing worthwhile during that time.
> I enjoyed a five months paid non compete when last moving between banks, and build nothing worthwhile during that time.
Every now and then I see someone comment on HN about their experience with longer between-jobs periods, sabbatical, etc. The core theme I've noticed is that, apparently, it's common to "waste" some 3-6 months before one starts making good use of their time - apparently this is how much it takes to properly switch over to being fully self-directed.
If that hypothesis is accurate, then it's not surprising you've built "nothing worthwhile" during your five-month break - you've got yanked back into employment right as you were finally ready to make good use of your time!
Every now and then I see someone comment on HN about their experience with longer between-jobs periods, sabbatical, etc. The core theme I've noticed is that, apparently, it's common to "waste" some 3-6 months before one starts making good use of their time - apparently this is how much it takes to properly switch over to being fully self-directed.
If that hypothesis is accurate, then it's not surprising you've built "nothing worthwhile" during your five-month break - you've got yanked back into employment right as you were finally ready to make good use of your time!
This is almost exactly how noncompetes work in practice in the finance industry, where most employment contracts are governed by New York law or something similar, which will generally require the payment of "consideration" during the noncompete for it to be enforceable. The amount of consideration is part of what you negotiate when you join, generally always at least your most recent base salary at resignation, but possibly much more, i.e. some fraction of your total comp.
Usually the way it works is that when you resign, the employer has a fixed amount of time (specified in your contract) within which to decide whether to exercise the noncompete, and for how long (i.e. they could elect a subset of the maximum term in your contract), and once exercised, they can't change their mind. If you violate the noncompete, they'll of course stop the payments, possibly claw back payments, keep your deferred comp (which they are holding over your head during the noncompete), possibly reset the noncompete clock (so you have to start waiting all over again), and possibly sue you. Details will vary, but broadly that's my experience.
Some consider it one of the major perks of the industry, assuming you become important enough to have it exercised on you, and would be sad to see them banned. Firms consider it money well spent, which makes sense when you consider that investment strategies have no real protection as intellectual property... copyright is only narrowly useful, patenting would mean disclosing, and so at the end of the day they are just trade secrets, which can really only be protected by nondisclosure and noncompete agreements.
Usually the way it works is that when you resign, the employer has a fixed amount of time (specified in your contract) within which to decide whether to exercise the noncompete, and for how long (i.e. they could elect a subset of the maximum term in your contract), and once exercised, they can't change their mind. If you violate the noncompete, they'll of course stop the payments, possibly claw back payments, keep your deferred comp (which they are holding over your head during the noncompete), possibly reset the noncompete clock (so you have to start waiting all over again), and possibly sue you. Details will vary, but broadly that's my experience.
Some consider it one of the major perks of the industry, assuming you become important enough to have it exercised on you, and would be sad to see them banned. Firms consider it money well spent, which makes sense when you consider that investment strategies have no real protection as intellectual property... copyright is only narrowly useful, patenting would mean disclosing, and so at the end of the day they are just trade secrets, which can really only be protected by nondisclosure and noncompete agreements.
> I see no reason to stop them
This sort of a non-compete would almost have certainly resulted in Zoom not being built.
This sort of a non-compete would almost have certainly resulted in Zoom not being built.
After visiting SV, I wonder why anyone would want to replicate it. I was so disappointed to see so much poverty, such high rents and such poor public transit in the tech capital of the world. It seriously realigned my perspective.
Obviously there is a little more to it than that. Oklahoma and North Dakota have both banned noncompetes for 130 years or more. no nexus of tech in either place.
...and then there is Michigan where they were banned beginning in 1905, but then the ban was repealed 80 years later in 1985.
...and then there is Michigan where they were banned beginning in 1905, but then the ban was repealed 80 years later in 1985.
(it's actually just the weather)
> "But I'll spend money to train my employees and they'll just take those skills to go work for a competitor or start their own business!" Yes, that's a feature of the system, not a bug.
Pay your employees well, listen to their problems and fix them, and they won't leave the company for a competitor.
People leave for a handful of main reasons to competitors:
1. Money - this is the most obvious. Most employers simply don't want to give pay rises, to the point where they would rather hire a new person at 50-100% higher than your current salary, to do the same job, than to give you a 25-30% raise.
2. Bad management - second most common reason I see people leave, even for lesser paying jobs, just to be rid of bad managers. And for some reason most companies would rather hire _yet another_ manager to "fix things" rather than listen to the actual workers' problems. So the worker leaves when all they see is manager upon manager upon manager getting paid 2-3-5x as much as they are, who either don't do jackshit, or are overbearing micro-managers. Oh and of course these managers often claim any success of their managed people, while pushing any blame on them simultaneously.
3. No way to progress, either professionally, or within the company hierarchy. A lot of professionals end up doing the exact same job for years upon years, without going anywhere. They don't get promoted to a new position (but get new responsibilities continuously, without any financial renumeration of course), they can't go to another project, they're stuck in one place. And nobody likes feeling stuck.
Overall, a company can easily ensure that people they invest in, stay with the company to use those skills - just freaking listen to them. Not the managers, not some external "corporate coach", the people you invested in. Make sure they're happy, and they'll stay with you.
Oh, also, let's debunk that whole "I invested money in you therefore you can't work for my competitors" bullshit - all that investment, that's actually net zero for the company, since they can do tax writeoffs on those, as an expense. So at the end, that argument is pure BS, and restricting (ex) employees from working for the competition is pure pettiness.
Pay your employees well, listen to their problems and fix them, and they won't leave the company for a competitor.
People leave for a handful of main reasons to competitors:
1. Money - this is the most obvious. Most employers simply don't want to give pay rises, to the point where they would rather hire a new person at 50-100% higher than your current salary, to do the same job, than to give you a 25-30% raise.
2. Bad management - second most common reason I see people leave, even for lesser paying jobs, just to be rid of bad managers. And for some reason most companies would rather hire _yet another_ manager to "fix things" rather than listen to the actual workers' problems. So the worker leaves when all they see is manager upon manager upon manager getting paid 2-3-5x as much as they are, who either don't do jackshit, or are overbearing micro-managers. Oh and of course these managers often claim any success of their managed people, while pushing any blame on them simultaneously.
3. No way to progress, either professionally, or within the company hierarchy. A lot of professionals end up doing the exact same job for years upon years, without going anywhere. They don't get promoted to a new position (but get new responsibilities continuously, without any financial renumeration of course), they can't go to another project, they're stuck in one place. And nobody likes feeling stuck.
Overall, a company can easily ensure that people they invest in, stay with the company to use those skills - just freaking listen to them. Not the managers, not some external "corporate coach", the people you invested in. Make sure they're happy, and they'll stay with you.
Oh, also, let's debunk that whole "I invested money in you therefore you can't work for my competitors" bullshit - all that investment, that's actually net zero for the company, since they can do tax writeoffs on those, as an expense. So at the end, that argument is pure BS, and restricting (ex) employees from working for the competition is pure pettiness.
Here (Canada) the courts almost always rule that the non-compete is unenforceable. The core issue is the rights of an individual to earn a living supersedes the rights of a corporation.
https://globalnews.ca/content/8363992/can-non-compete-clause...
" The majority of non-compete clauses challenged in the judicial system have been rendered unenforceable. Canadian courts, in my experience, look unfavourably on clauses that restrict an individual’s ability to use their knowledge and experience to earn a living."
What companies here do falls into two general categories:
1) attempt to get people to sign and hope they don't know it is unenforceable.
2) pay people to stay at home and not-compete - Given this is expensive it doesnt happen often.
https://globalnews.ca/content/8363992/can-non-compete-clause...
" The majority of non-compete clauses challenged in the judicial system have been rendered unenforceable. Canadian courts, in my experience, look unfavourably on clauses that restrict an individual’s ability to use their knowledge and experience to earn a living."
What companies here do falls into two general categories:
1) attempt to get people to sign and hope they don't know it is unenforceable.
2) pay people to stay at home and not-compete - Given this is expensive it doesnt happen often.
I wonder what the cross-section of the population is smart enough to be worth making sign a non-compete yet not smart enough to do a basic Google search on their enforceability.
A lot of people are good natured and just take others at their word.
This is exactly why I posted this. I want to make sure other Canadians are aware...
It is really dumb that while unenforceable, companies are able to get you to sign. As per the link the government is working on laws to outright ban the process.
The government needs to step up here, and enforce its own laws. If these are unenforceable companies should not be allowed to "trick" people.
It is really dumb that while unenforceable, companies are able to get you to sign. As per the link the government is working on laws to outright ban the process.
The government needs to step up here, and enforce its own laws. If these are unenforceable companies should not be allowed to "trick" people.
Canadians don't break rules.
Right, the idea is to train + pay them well enough that they stay. It helps the local economy because rather than your business putting more into investments around the world (or wherever the rich store / grow their money), that person puts the money in the local economy.
Folks understand this, but their pay depends on them not understanding it so. . . here we are perpetually.
Funny enough, paying folks well often will pay dividends for your business in the long run. So long term they would make more money.
Humans are unfortunately quite short sighted, which I'm fairly sure nothing can be done about. We're just fancy animals after all.
Folks understand this, but their pay depends on them not understanding it so. . . here we are perpetually.
Funny enough, paying folks well often will pay dividends for your business in the long run. So long term they would make more money.
Humans are unfortunately quite short sighted, which I'm fairly sure nothing can be done about. We're just fancy animals after all.
I saw first hand a sales guy at a prior company I worked for start a side business directly competing with the primary business he was working for in his day job, while still working with them. Including redirecting customers while working for them.
The owner got suspicious due to some comments made by customers, and started listening in on the phone calls he was making on the company phone system.
This was a small business, and it nearly tanked the company, as the customers were confused as hell, and the ‘new’ company wasn’t doing well either. She ended up having to fire him, and sue him, but it took years, and meanwhile he kept operating.
He was paid well, but for some people it’s never enough.
I don’t care what anyone says, that is shitty criminal behavior.
The owner got suspicious due to some comments made by customers, and started listening in on the phone calls he was making on the company phone system.
This was a small business, and it nearly tanked the company, as the customers were confused as hell, and the ‘new’ company wasn’t doing well either. She ended up having to fire him, and sue him, but it took years, and meanwhile he kept operating.
He was paid well, but for some people it’s never enough.
I don’t care what anyone says, that is shitty criminal behavior.
That's basically the one situation in which non-competes are enforceable in the US. The problem is, most people don't understand that, and fall prey to companies putting non-compete clauses into their employment agreements that say they can't go do CRUD software development at any company in a 50 mile radius.
Yeah, I'd say that's different, not sure how the anecdote applies whatsoever.
The reason it’s relevant is because that is literally what a non compete is supposed to be for.
This is talking about non competes that apply after one is no longer employed.
Yours is something entirely different.
Yours is something entirely different.
If it was different, then he would have been fine once he was fired no?
But that is not the case.
But that is not the case.
If he wants to quit and compete with you he should be able to even if this destroys your business. The problem is he used his access while employed to redirect customers. It wasn't fine after he was fired not because it wasn't ok for him to compete with his prior employer but because he had already swiped your customer base. The prior behavior and challenges after he left are inextricably intertwined. Him quitting didn't separate them.
If he had done NOTHING while employed and quit to do his own thing do you think it would have been a problem? If so why?
If he had done NOTHING while employed and quit to do his own thing do you think it would have been a problem? If so why?
I think you might want to re-read things a bit.
1) It wasn't my business, and I'm not sure why you seem to think it was.
2) He only started the business because he was able to siphon off customers, and felt it was easy money.
3) If he had quit, and started his own business (even based on the prior one), and started from scratch, that wouldn't have been a problem. Him waiting a period of time (non-competes pretty much HAVE to be time limited to hold up anywhere) would not likely have changed it either.
But that would have required more work and more risk.
It's rare that folks actually do that.
1) It wasn't my business, and I'm not sure why you seem to think it was.
2) He only started the business because he was able to siphon off customers, and felt it was easy money.
3) If he had quit, and started his own business (even based on the prior one), and started from scratch, that wouldn't have been a problem. Him waiting a period of time (non-competes pretty much HAVE to be time limited to hold up anywhere) would not likely have changed it either.
But that would have required more work and more risk.
It's rare that folks actually do that.
Different and yet his is a lot more valid than want most are
> Every such scheme has generally failed because they refused to emulate the one key piece of California law that is necessary for a startup ecosystem to exist – banning noncompetes.
As I look out the window of my Seattle apartment, observing a literal forest of new construction, sky-rocketing rents and costs of living, I must interpret the tech boom here as 'the next Silicon Valley failing', because Washington state has had a very strong form of non-competes prior to 2020, and a somewhat strong form of non-competes today.
Or, maybe I can choose to believe my eyes, and note that the the presence or absence of non-competes isn't a very important factor for driving a tech boom. [1]
It is a popular topic to bikeshed over, though.
[1] As a sibling poster points out, non-competes are absent in Canada, and yet nobody can accuse any locale in Canada of being the next SV...
As I look out the window of my Seattle apartment, observing a literal forest of new construction, sky-rocketing rents and costs of living, I must interpret the tech boom here as 'the next Silicon Valley failing', because Washington state has had a very strong form of non-competes prior to 2020, and a somewhat strong form of non-competes today.
Or, maybe I can choose to believe my eyes, and note that the the presence or absence of non-competes isn't a very important factor for driving a tech boom. [1]
It is a popular topic to bikeshed over, though.
[1] As a sibling poster points out, non-competes are absent in Canada, and yet nobody can accuse any locale in Canada of being the next SV...
You can argue the degree to which non-competes have contributed to Silicon Vslley success but there are a ton of companies elsewhere in the country with various degrees of non/compete enforcement that have had and have considerable success in various technology sectors. Another example is MA which historically did allow non-compete enforcement (now somewhat weakened) which spawned the whole Route 128 computer industry and more recently biotech/pharma.
Although allowed, I only once had to sign a pretty limited non-compete with an MA company. And people jumped between the various minicomputer companies all the time although tenures tended to be longer for other reasons.
Although allowed, I only once had to sign a pretty limited non-compete with an MA company. And people jumped between the various minicomputer companies all the time although tenures tended to be longer for other reasons.
> Or, maybe I can choose to believe my eyes, and note that the the presence or absence of non-competes isn't a very important factor for driving a tech boom. [1]
Or that other factors of working in WA somewhat mitigate downsides of non competes. Sad that WA lawmakers accepted the bribes from large businesses and capped non compete bans at $100k per year payrates. Could have leveled the playing field with CA a bit more.
Or that other factors of working in WA somewhat mitigate downsides of non competes. Sad that WA lawmakers accepted the bribes from large businesses and capped non compete bans at $100k per year payrates. Could have leveled the playing field with CA a bit more.
Seattle succeeds because it's the same time zone and Cali, Microsoft pulled tens of thousands of programmers here, then Amazon, now we have critical mass. What we don't have is nearly as many companies starting up here. I think noncompetes do actually reduce the number of new companies started in Seattle, and also reduce people switching jobs.
Yup kinda interesting to see this play out. With the federal trade secrets law tho it no longer matters.
Does banning non competes help if you don't already have businesses attracted to an area in some critical mass?
I can see how it could make for a vibrant scene if you already have incumbents, but if you are an area trying to attract them, I am not sure that works.
I can see how it could make for a vibrant scene if you already have incumbents, but if you are an area trying to attract them, I am not sure that works.
Without talent, your employer pool isn't going to grow much. Non-competes are one of many things to make the chicken and egg problem worse.
Beyond banning them de-jure you've also got to ban them de-facto.
"We all know non-competes are unenforceable and illegal." <- Absolutely useless if you can end up in court. Using unenforceable rights as a deterrant is common and potential future employers get spooked by it even if it is illegal. "Don't hire Jill, Mary is almost as good and has no non-compete. Don't want to go to court even if its unenforceable."
There are no consequences for forcing someone to have the stress, expense, time and to secure the financing so that if everything works as it should (which it often doesn't in all the various legal systems) you get only some of that back. If it doesn't work as it should you're toast. Not a nice thing to be hit with when the law is clearly designed that you should not be hit with anything at all.
For an individual or a startup it matters. For a large revenue incumbant they have people employed to abuse the system like that and the business expense of doing it is trivial, more than worth it. The law may exist so that the strongest do not always get their way - but this is an ideal with many exceptions including this one.
Ban away, but with no consequences for abuse and all measurements for the abused being the magnitude of the downside alone, no upside possible you don't get the result you're looking for.
Summary dismissal with costs, compensation and the potential to be branded a vexatious litigant so it is more difficult to bring any court action against anyone would be a real consequence for abusing the rules. Is the best one? Is it fair? Dunno. What we have now in most countries sure isn't.
"We all know non-competes are unenforceable and illegal." <- Absolutely useless if you can end up in court. Using unenforceable rights as a deterrant is common and potential future employers get spooked by it even if it is illegal. "Don't hire Jill, Mary is almost as good and has no non-compete. Don't want to go to court even if its unenforceable."
There are no consequences for forcing someone to have the stress, expense, time and to secure the financing so that if everything works as it should (which it often doesn't in all the various legal systems) you get only some of that back. If it doesn't work as it should you're toast. Not a nice thing to be hit with when the law is clearly designed that you should not be hit with anything at all.
For an individual or a startup it matters. For a large revenue incumbant they have people employed to abuse the system like that and the business expense of doing it is trivial, more than worth it. The law may exist so that the strongest do not always get their way - but this is an ideal with many exceptions including this one.
Ban away, but with no consequences for abuse and all measurements for the abused being the magnitude of the downside alone, no upside possible you don't get the result you're looking for.
Summary dismissal with costs, compensation and the potential to be branded a vexatious litigant so it is more difficult to bring any court action against anyone would be a real consequence for abusing the rules. Is the best one? Is it fair? Dunno. What we have now in most countries sure isn't.
I worked for a very small company. We wouldn’t hire anyone with a non-compete end of story end of discussion. Just wasn’t a risk or cost management was willing to even entertain.
How would you know they had one?
What is the process for disclosing or discovering non-competes? Ostensibly part of a private citizen's employment contract, that's a confidential document.
So what basis would a prospective employer have to request a copy, and how would said third party verify its authenticity?
So what basis would a prospective employer have to request a copy, and how would said third party verify its authenticity?
Most contracts I’ve signed have language to the effect of “the employee is not bound to any covenants that could restrict his ability to provide his services to the company”, which would include noncompetes.
Of course, noncompetes being unenforceable make for a good argument that one is not, in fact, bound by that covenant.
In practice, I’ve always just answered “no” to the question on this basis. If any former employer behaves in such a way as to get me fired from my present job, I’m rather optimistic about my prospects for legal remedy.
Of course, noncompetes being unenforceable make for a good argument that one is not, in fact, bound by that covenant.
In practice, I’ve always just answered “no” to the question on this basis. If any former employer behaves in such a way as to get me fired from my present job, I’m rather optimistic about my prospects for legal remedy.
You ask them. And you probably have little interest in seeing a copy in my example. Just if there is one.
Yes, they can presumably lie to you. But if you then so much as get a letter from a lawyer at that point, you fire them at a minimum.
Yes, they can presumably lie to you. But if you then so much as get a letter from a lawyer at that point, you fire them at a minimum.
I've never heard of a court case involving a noncompete. Have you?
(of course, I live in California.)
It's maybe a little different if you're a chef and you've spent a lifetime mastering a particular recipe which is very hard to get right. You teach it to someone, and he goes out and opens his own restaurant selling that same dish. You can see the intuitive appeal of a noncompete, even if it's usually ineffective, and actually harmful to a high-tech ecosystem.
(of course, I live in California.)
It's maybe a little different if you're a chef and you've spent a lifetime mastering a particular recipe which is very hard to get right. You teach it to someone, and he goes out and opens his own restaurant selling that same dish. You can see the intuitive appeal of a noncompete, even if it's usually ineffective, and actually harmful to a high-tech ecosystem.
Here are 2 cases of Amazon suing former employees after they quit and got hired by Google:
https://news.bloomberglaw.com/daily-labor-report/amazon-uses...
https://www.geekwire.com/2019/amazon-sues-former-aws-exec-jo...
Disclosure: I work at Google.
https://news.bloomberglaw.com/daily-labor-report/amazon-uses...
https://www.geekwire.com/2019/amazon-sues-former-aws-exec-jo...
Disclosure: I work at Google.
Blue Mountain Enterprises, LLC v. Owen https://law.justia.com/cases/california/court-of-appeal/2022...
https://www.jdsupra.com/legalnews/california-court-of-appeal...
> Despite California’s general hostility towards post-termination restrictive covenants, the California Court of Appeal, in a recently published opinion, Blue Mountain Enters., LLC v. Owen, 74 Cal.App.5th 537 (1st Dist. Jan. 10, 2022), affirmed that a post-termination customer non-solicitation agreement was enforceable under California Business & Professions Code § 16601.
> Under most circumstances, contractual provisions that prevent a person from engaging in a profession, trade, or business, including customer non-solicitation agreements, are void in California. However, section 16601 of the California Business and Professions Code carves out a statutory exception to the rule for individuals selling all of their interest, including goodwill, in a business.
> ...
> After Owen’s employment was terminated for cause, Owen established a competing construction services company and sent a letter to Blue Mountain customers stating, among other things, that he was launching his new business with “greater perspective, more resources and a much stronger team.” Blue Mountain obtained preliminary and permanent injunctive relief prohibiting Owen from soliciting its customers and prevailed on its motion for summary judgment adjudication of its breach of contract claim.
https://www.jdsupra.com/legalnews/california-court-of-appeal...
> Despite California’s general hostility towards post-termination restrictive covenants, the California Court of Appeal, in a recently published opinion, Blue Mountain Enters., LLC v. Owen, 74 Cal.App.5th 537 (1st Dist. Jan. 10, 2022), affirmed that a post-termination customer non-solicitation agreement was enforceable under California Business & Professions Code § 16601.
> Under most circumstances, contractual provisions that prevent a person from engaging in a profession, trade, or business, including customer non-solicitation agreements, are void in California. However, section 16601 of the California Business and Professions Code carves out a statutory exception to the rule for individuals selling all of their interest, including goodwill, in a business.
> ...
> After Owen’s employment was terminated for cause, Owen established a competing construction services company and sent a letter to Blue Mountain customers stating, among other things, that he was launching his new business with “greater perspective, more resources and a much stronger team.” Blue Mountain obtained preliminary and permanent injunctive relief prohibiting Owen from soliciting its customers and prevailed on its motion for summary judgment adjudication of its breach of contract claim.
That's a "post-termination customer non-solicitation agreement", as you quoted, not a non-compete. CA may generally prohibit those as well, but we can't tell from this if a hypothetical non-compete would have been enforced in the same situation.
[deleted]
I have heard of such cases.
The situation regarding the difficult recipe could be handled under the Uniform Trade Secret Act, as adopted in various states, or under common law related to tortious misappropriation of classified information.
This might be a place where restrictive covenants not to compete aren’t really relevant, and if they disappeared, employees might still have all the tools they need to protect their interests.
The situation regarding the difficult recipe could be handled under the Uniform Trade Secret Act, as adopted in various states, or under common law related to tortious misappropriation of classified information.
This might be a place where restrictive covenants not to compete aren’t really relevant, and if they disappeared, employees might still have all the tools they need to protect their interests.
Brown v. TGS Management Co., LLC is an interesting court case involving a "noncompete" from California: https://law.justia.com/cases/california/court-of-appeal/2020...
I have a friend who got a new job, then gave it up because his previous employer "reminded" him that he had signed a non-compete.
Now, we're both in Ohio, where it likely would have been enforceable, but the point I'm making is that a court case wasn't necessary - the mere threat was sufficient.
Now, we're both in Ohio, where it likely would have been enforceable, but the point I'm making is that a court case wasn't necessary - the mere threat was sufficient.
Had the same reminder when I changed jobs (in MA) ages ago. That reminder went to me and to the general counsel of my new employer.
Got hauled into a meeting with HR and general counsel where they both said basically “we got the same letter; we don’t think we compete nor would a court find we do; we’re sending them the following letter; don’t worry about it and get back to work.”
Got hauled into a meeting with HR and general counsel where they both said basically “we got the same letter; we don’t think we compete nor would a court find we do; we’re sending them the following letter; don’t worry about it and get back to work.”
Yes. They aren't common, but I e seen maybe half a dozen. Typically high level employees. Never a normal engineer.
IBM v Papermaster was a pretty high profile one.
Dejure harry defacto
Some say the valley dominated over route 128 for this very reason.
Except things didn’t really switch West for many years and a lot of other factors were in play.
> "But I'll spend money to train my employees and they'll just take those skills to go work for a competitor or start their own business!" Yes, that's a feature of the system, not a bug.
This mentality has never made sense to me. Why would a business invest so much money into training someone, then fail to spend the money needed to retain the (more valuable) trained employee?? "They'll leave after we train them" is a ridiculously easily preventable problem.
This mentality has never made sense to me. Why would a business invest so much money into training someone, then fail to spend the money needed to retain the (more valuable) trained employee?? "They'll leave after we train them" is a ridiculously easily preventable problem.
The investment into training isn't merely money and can't usually be neatly calculated. It's usually paid in the form of time, motivation, distraction and lost opportunities by more senior staff. If you, personally, sink a year into training someone intensively, and then they leave, would you perceive it as merely lost opportunity costs? Probably not. Mentors and mentees are supposed to have a more than purely transactional relationship in most understandings.
As to why not just pay more, probably the reason you were trying to train someone to begin with is because you can't afford to pay the higher wages to just poach the most experienced people? Otherwise why not just pay the higher wages to start with and skip the risky and slow training? Also, the software world has the unique problem that everyone is competing against VC backed startups that are willing to spend more up front to minimize time to market, so these firms generally don't train but can afford to poach anyone who is trained at a perhaps unsustainably high salary.
As to why not just pay more, probably the reason you were trying to train someone to begin with is because you can't afford to pay the higher wages to just poach the most experienced people? Otherwise why not just pay the higher wages to start with and skip the risky and slow training? Also, the software world has the unique problem that everyone is competing against VC backed startups that are willing to spend more up front to minimize time to market, so these firms generally don't train but can afford to poach anyone who is trained at a perhaps unsustainably high salary.
> why not just pay the higher wages to start with and skip the risky and slow training?
It’s not like walking around with sacks of money and hiring people interested in that money is low-risk. I’ve found training to be lower risk/uncertainty than hiring in terms of fewer outright failures and negative surprises.
It’s not like walking around with sacks of money and hiring people interested in that money is low-risk. I’ve found training to be lower risk/uncertainty than hiring in terms of fewer outright failures and negative surprises.
Yet, companies just love to hire instead of retain. Take an employee who just got trained/experience and is now worth $N, who is currently making $N-2. Most companies I've worked with would piss and moan about giving that employee a raise to $N-1. They'd rather let him leave. Then, they suddenly have no problem hiring a relatively unknown employee and paying him $N+2. It's never made sense to me in all my decades in this business. Obviously value-destroying behavior that's routinely done by most companies.
You talk as if figuring out what an employee is worth is easy, and that worth is absolute (same to all employers). If you have competitors who are willing to pay a premium over what the skills are worth to the first company not to train someone, then this situation can arise.
The issue is that a company that (all else equal) doesn't spend on training has more budget for salaries. Employees who already have skills generally value salary over additional training.
Also there's the obvious culture / coordination angle: if enough companies train their employees, then the people they hire to replace ones that left were already trained by their competitor. It boosts average competence level for everyone. And, to the extent it builds goodwill with the (ex)employees, you may discover they're sending quality candidates your way.
Unfortunately, this is a coordination problem, and those are what humanity sucks at.
> This mentality has never made sense to me. Why would a business invest so much money into training someone, then fail to spend the money needed to retain the (more valuable) trained employee??
It didn't and doesn't to me either. It's very similar to the disturbingly common case of a company cheaping out on office chairs, computer hardware, etc. when the total cost of creating a comfortable working environment for an employee is less than the company pays them for a month of work!
Or, related, and perhaps even more common in tech: skimping on infra (be it physical or virtual), despite again wasting more money in lost productivity than they save. Like e.g. at one place, I used to regularly complain about the amount of build bots we had for the team, and the resources allocated to them. The response was always that it's as much as we can get from the company cloud, to which I'd reply, why not buy more compute? Never got a straight answer to that. Sure, more and beefier machines cost some money, but when the CI is running at capacity at all times, and you have several well-paid devs sitting there and getting distracted while waiting for their jobs to finish... Penny-wise, pound-foolish was the saying?
In fact, I'd happily spend a fraction of my salary to buy a beefy PC to use as a compilation server. And another one to lend to the team's CI infra. But I can't do that, because procedures and company IP protection and whatnot. In the end, I was left with the feeling that the company just wants to make it hard for me to do the very job they're paying me for.
You'd think that management and finance education would let the company do the obvious math, but apparently, it doesn't. But then, the whole problem seems eerily similar to what's apparently a Business Wisdom today (and to me is total insanity): always being focused on acquiring new customers, and not paying attention to retaining existing ones. Maybe the reasons are similar, whatever they are?
Unfortunately, this is a coordination problem, and those are what humanity sucks at.
> This mentality has never made sense to me. Why would a business invest so much money into training someone, then fail to spend the money needed to retain the (more valuable) trained employee??
It didn't and doesn't to me either. It's very similar to the disturbingly common case of a company cheaping out on office chairs, computer hardware, etc. when the total cost of creating a comfortable working environment for an employee is less than the company pays them for a month of work!
Or, related, and perhaps even more common in tech: skimping on infra (be it physical or virtual), despite again wasting more money in lost productivity than they save. Like e.g. at one place, I used to regularly complain about the amount of build bots we had for the team, and the resources allocated to them. The response was always that it's as much as we can get from the company cloud, to which I'd reply, why not buy more compute? Never got a straight answer to that. Sure, more and beefier machines cost some money, but when the CI is running at capacity at all times, and you have several well-paid devs sitting there and getting distracted while waiting for their jobs to finish... Penny-wise, pound-foolish was the saying?
In fact, I'd happily spend a fraction of my salary to buy a beefy PC to use as a compilation server. And another one to lend to the team's CI infra. But I can't do that, because procedures and company IP protection and whatnot. In the end, I was left with the feeling that the company just wants to make it hard for me to do the very job they're paying me for.
You'd think that management and finance education would let the company do the obvious math, but apparently, it doesn't. But then, the whole problem seems eerily similar to what's apparently a Business Wisdom today (and to me is total insanity): always being focused on acquiring new customers, and not paying attention to retaining existing ones. Maybe the reasons are similar, whatever they are?
wonder how that is solved in practice?
(also wondering about the armed services and paying for medical school)
(also wondering about the armed services and paying for medical school)
I thought austin was like silicon valley, but with own-the-employee-mind-invasiveness. Maybe companies get bigger and move to austin?
The real danger is if you don't train your people and they stay. That risk is why you train everyone even those who leave.
For cases of expensive training it is fair to demand they pay you back if you don't stay for a couple years. We are talking about a full masters at a major university though, not just some random 3 day design patterns class or whatever the hotness of the day is.
For cases of expensive training it is fair to demand they pay you back if you don't stay for a couple years. We are talking about a full masters at a major university though, not just some random 3 day design patterns class or whatever the hotness of the day is.
The clawback also needs to be contingent on the employee somehow requesting the training and initiating the end of the job.
If you spend $20K on an MBA that I initiated and I quit, totally fair to have an arrangement where I have to pay some of that back.
If you fire me? No obligation.
If you send me to some series of certifications because you want me to have them? Also no obligation.
If you spend $20K on an MBA that I initiated and I quit, totally fair to have an arrangement where I have to pay some of that back.
If you fire me? No obligation.
If you send me to some series of certifications because you want me to have them? Also no obligation.
> If you fire me? No obligation.
Lets change fire to lay off. There is a subtle but important difference. If you fire someone it is generally for cause - that is they did something bad. You still want someone doing their job, but because of their bad behavior it can't be them. That is if someone gets a MBA, moves to a management position and starts demanding sex of their underlings, you fire them and demand they pay for the education you got.
By contrast when you lay someone off, you are saying "you were good at your job, but we don't need someone doing your job anymore" (or maybe we can't afford to pay someone to do the job). You lost your job, but there wasn't anything you could have done different if you wanted to stay.
Lets change fire to lay off. There is a subtle but important difference. If you fire someone it is generally for cause - that is they did something bad. You still want someone doing their job, but because of their bad behavior it can't be them. That is if someone gets a MBA, moves to a management position and starts demanding sex of their underlings, you fire them and demand they pay for the education you got.
By contrast when you lay someone off, you are saying "you were good at your job, but we don't need someone doing your job anymore" (or maybe we can't afford to pay someone to do the job). You lost your job, but there wasn't anything you could have done different if you wanted to stay.
People mostly get fired for not doing or for sucking at their job rather than for sexual harassment. For a termination "for cause", I don't care much either way whether the training is reimbursable to the company. For termination for poor performance (still a "firing"), I think training should not be reimbursable.
Firing for gross misconduct is a reasonable exception, but not all firings in general.
Makes a ton of sense. Completely absurd for security guards and administrative assistants to have non-compete clauses. Just another way businesses were trying to reduce the willingness of employees to quit so that they can suppress wages.
It jumped the shark a few years back when Jimmy Johns tried to force their "sandwich artists" to sign non-competes.
Jesus, “sandwich artist” is borderline insulting one’s intelligence.
In France, the official term for a janitor was “surface technician”, which I previously considered to be the most condescending name for a job, but it has been violently dethroned by “sandwich artist”.
In France, the official term for a janitor was “surface technician”, which I previously considered to be the most condescending name for a job, but it has been violently dethroned by “sandwich artist”.
Does JJ refer to their employees as sandwich artists too? I thought that was just a Subway thing.
But yeah, beyond ridiculous, as if a JJ employee is going to leak some crazy trade secret to Subway or whoever.
But yeah, beyond ridiculous, as if a JJ employee is going to leak some crazy trade secret to Subway or whoever.
I assume the "sandwich artist" title is an allusion to that old saying - y'know because they pay their employees so little that they're starving.
That's the most hilarious double speak. I can only imagine the repressed artists getting told off for putting 5 slices of cheese on a foot-long instead of 4. "I was just trying to express myself, you said I was an artist."
[deleted]
Everyone knows you spread mustard from right to left. We aren't knaves.
Believe it or not they're now being used for fast food employees.
Petsmart makes you sign one or at least used to. For the groomers that they sent to training, it makes sense. For the cashiers, it ought to be illegal to have them sign it even though it's mostly unenforceable. It's an intimidation tactic. There's nothing that a damn pet store employee learns in training or in 5 years on the floor that could even begin to be considered a trade secret.
Reminds me of how Gallup made everyone sign a 6-month contract in an at-will state. If you want folks to stay for at least 6 months, then don't suck so much to work for. One of the cultiest places I've ever had the misfortune to work at.
Reminds me of how Gallup made everyone sign a 6-month contract in an at-will state. If you want folks to stay for at least 6 months, then don't suck so much to work for. One of the cultiest places I've ever had the misfortune to work at.
What is a bit hilarious is the idea that the new guy will change any procedure at his new place because of his experience somewhere else. “Thank you, but it’s the franchise HQ who makes the rules, not the rank and file”
It's just a retention tool, a shitty abusive one.
Admin assistants (like actual admin assistants) usually have access to full customer contact lists, and exposure to rather intimate details of the business and executives lives.
They’re definitely not comparable to security guards in that sense.
They’re definitely not comparable to security guards in that sense.
This is not enough of an excuse to encumber someone from earning a living elsewhere.
> “Employers need to get creative about how to impose restrictions to protect themselves against individuals” in whom they have made significant investments, or who have been allowed access to trade secrets, to protect themselves against such employees leaving, said Maxwell N. Shaffer, a partner with Holland & Knight LLP in Denver.
The sort of healthy employee-employer relationship that retains talent.
> “Employers need to get creative about how to impose restrictions to protect themselves against individuals” in whom they have made significant investments, or who have been allowed access to trade secrets, to protect themselves against such employees leaving, said Maxwell N. Shaffer, a partner with Holland & Knight LLP in Denver.
The sort of healthy employee-employer relationship that retains talent.
What is being banned are non-competes that don’t pay someone to not compete.
There are legitimate reasons for actual non-competes in many of these cases, and CAlifornia for instance just requires you pay them for it.
Which in such a situation seems justified.
There are legitimate reasons for actual non-competes in many of these cases, and CAlifornia for instance just requires you pay them for it.
Which in such a situation seems justified.
I agree. If you want to pay someone to sit on the bench because that has value to you ("Garden Leave"), I support that. If you want to twist their arm because you have power as an employer, nope. That's what labor law and regulation are for.
Lots of examples of malicious employers doing the latter, as you'll note the sentiment throughout the thread comments and laws intending to patch this bug in statute.
Lots of examples of malicious employers doing the latter, as you'll note the sentiment throughout the thread comments and laws intending to patch this bug in statute.
Why let them have that at all. The honest true is instead of worrying what strategy most balances the interests of 99.9% of people and a few whiny rich people we could spend that time creating actual value. Whereas if you want to continue on with the Rube Goldberg device we ought to force them to pay not employers present rate but market rate and cost of foregone opportunity.
You might say that's incredibly unaffordable but that is the point. Otherwise the employer is robbing society of the value created in addition to stealing the difference between present rate and market rate + foregone opportunities.
You might say that's incredibly unaffordable but that is the point. Otherwise the employer is robbing society of the value created in addition to stealing the difference between present rate and market rate + foregone opportunities.
Because employees can be shitty people too. See my comment upthread about an up close and personal view I had to one such shitty employee.
What you seem to be advocating is to never allow a company<-> employee to have a non compete clause, even if the company is happy to pay for it.
Which yikes. Do you think what Levandowski did with Waymo/Uber helped anyone? Including ‘society’ overall?
What you seem to be advocating is to never allow a company<-> employee to have a non compete clause, even if the company is happy to pay for it.
Which yikes. Do you think what Levandowski did with Waymo/Uber helped anyone? Including ‘society’ overall?
I don't care what they are happy to pay for. There are plenty of other tools available to protect the interests of companies. For example Levandowski stole trade secrets and is being sued for 9 figures and indicted. You couldn't have picked a worse example of the need for post employment non-competes if you tried.
Likewise your other example is an employee taking an employees money and their customers at the same time. It would have been sufficient to bar him from competing and working against the employers interests WHILE he was there.
If he had quit and called prior customers and said I know you do business with blank but I can do better would that really have been wrong?
Likewise your other example is an employee taking an employees money and their customers at the same time. It would have been sufficient to bar him from competing and working against the employers interests WHILE he was there.
If he had quit and called prior customers and said I know you do business with blank but I can do better would that really have been wrong?
> What is being banned are non-competes that don’t pay someone to not compete.
Employers will just say "the no-compete compensations is built in to your pay".
Employers will just say "the no-compete compensations is built in to your pay".
Which is what is banned in California. If someone wants an enforceable non-compete, they need to pay them (fairly and explicitly) for the time they’re not allowed to compete.
They can say anything, but the behavior has gotten enough voter anger to make politicians view this as something to regulate, so their opinion on the matter is quickly going to lose any weight
Sure, and in this case as soon as the pay stops, the non-compete obligations stop as well.
There are already laws against Admin assistants from taking full customer contact lists from one job to another. You don't need non-competes to enforce that.
Really, which laws are those?
The only ones I’m aware of would be trade secret laws, but they’re dubiously applicable to bare customer contact lists.
You can make contractual restrictions of course (company property), but good luck being able to prove they actually took it unless they’re really dumb. Merely contacting all, or many, customers for instance wouldn’t prove it.
Being able to show they work for competitor x is easy, however, as is showing they’re pursuing customers in the same space.
The only ones I’m aware of would be trade secret laws, but they’re dubiously applicable to bare customer contact lists.
You can make contractual restrictions of course (company property), but good luck being able to prove they actually took it unless they’re really dumb. Merely contacting all, or many, customers for instance wouldn’t prove it.
Being able to show they work for competitor x is easy, however, as is showing they’re pursuing customers in the same space.
lol, no. Confidential business information is an area heavily protected by law. Customer lists are the canonical example.
It’s much easier to win this kind of civil suit than a criminal case. The court can absolutely crush a business that is founded in this manner to compensate the former employer.
It’s much easier to win this kind of civil suit than a criminal case. The court can absolutely crush a business that is founded in this manner to compensate the former employer.
Then surely you’ll have no issues providing a cite of the relevant criminal code?
Criminal code is specific to jurisdiction, in California this would probably be the most relevant section - https://codes.findlaw.com/ca/penal-code/pen-sect-499c.html . Whether a customer list is a trade secret depends on a bunch of factors in that state's (or countries) trade secret laws (the penal code is just a fraction of them) but in general a mere list of names and telephone numbers likely will not qualify, but a list that includes their buying habits or pricing of current contracts likely will.
Yeah no.
From your link ‘9) “Trade secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process, that:
(A) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and
(B) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.’
Pretty hard to imagine a customer list meeting any of those criteria.
From your link ‘9) “Trade secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process, that:
(A) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and
(B) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.’
Pretty hard to imagine a customer list meeting any of those criteria.
A customer list can absolutely be reasonably considered to be information with actual and potential value from not being generally known to other persons (competitors) who would obtain economic value from it's disclosure.
So long as you make a reasonable effort to keep it from being public knowledge, it meets the criteria you quoted.
So long as you make a reasonable effort to keep it from being public knowledge, it meets the criteria you quoted.
Thanks for reading the ref!
In most court cases I’ve seen about this, it isn’t enough to keep it from being public.
It has to be protected from employees to the degree necessary to keep it a secret. It’s why all the song and dance around the ‘secret ingredients’ in KFC/Pepsi/Coke ‘secret recipes’ (that and marketing). If it was common knowledge at the company, even if it wasn’t public knowledge, they couldn’t use the trade secrets acts to prosecute offenders.
If everyone at the company knows who is on the customer list, including folks who don’t have a privileged need to know it, it isn’t a secret. It just isn’t public knowledge. That still means it isn’t eligible for trade secret protection.
So while yes, it’s possible - if they do that - it’s not at all common with how the information is protected in my experience, and it would be very difficult to actually prosecute anyone under the trade secrets laws because of it.
Civil lawsuit? Different burden of proof, different calculus. Tort law is about being compensated for a loss or injury, after all, and there is no requirement that such loss or injury have been from a criminal act.
In most court cases I’ve seen about this, it isn’t enough to keep it from being public.
It has to be protected from employees to the degree necessary to keep it a secret. It’s why all the song and dance around the ‘secret ingredients’ in KFC/Pepsi/Coke ‘secret recipes’ (that and marketing). If it was common knowledge at the company, even if it wasn’t public knowledge, they couldn’t use the trade secrets acts to prosecute offenders.
If everyone at the company knows who is on the customer list, including folks who don’t have a privileged need to know it, it isn’t a secret. It just isn’t public knowledge. That still means it isn’t eligible for trade secret protection.
So while yes, it’s possible - if they do that - it’s not at all common with how the information is protected in my experience, and it would be very difficult to actually prosecute anyone under the trade secrets laws because of it.
Civil lawsuit? Different burden of proof, different calculus. Tort law is about being compensated for a loss or injury, after all, and there is no requirement that such loss or injury have been from a criminal act.
I think you missed the “civil suit” part. Common law business torts are not found in statute.
No, I didn’t miss it. You’re moving the goalposts.
That something is a civil tort doesn’t mean it’s a criminal offense (what is generally referred to as ‘illegal’). Trade secret theft is illegal.
But trade secrets have a specific definition which can pretty much never plausibly include a list of customers.
That something is a civil tort doesn’t mean it’s a criminal offense (what is generally referred to as ‘illegal’). Trade secret theft is illegal.
But trade secrets have a specific definition which can pretty much never plausibly include a list of customers.
Then why didn't Dunder Mifflin sue the Michael Scott Paper Company?
Because they didn't reach out to the very real lawyers at Boston Legal.
Specifically, you can't take trade secrets from one employer to the next. Customer contact lists are just one example of this.
Trade secrets have a very specific definition, and a mere list of contact information that is already likely public in an unfocused way (aka contact lists) almost certainly doesn’t qualify. Neither would a list of company names, etc.
That information however IS highly valuable, especially paired with knowledge of how a company is doing sales, how it is positioning itself internally strategy wise, etc. some of those things could be trade secrets, if adequately protected, but almost no one I know would meet such a bar with how they handle it. It would be at most confidential information, and could count as a NDA violation, but would be difficult to prove unless someone was really sloppy.
That information however IS highly valuable, especially paired with knowledge of how a company is doing sales, how it is positioning itself internally strategy wise, etc. some of those things could be trade secrets, if adequately protected, but almost no one I know would meet such a bar with how they handle it. It would be at most confidential information, and could count as a NDA violation, but would be difficult to prove unless someone was really sloppy.
The idea of a client or customer list being public information is profoundly ludicrous. It’s the canonical example, as another commenter put it.
I never said it was public information. I saw it might be, in some cases, a collection of otherwise public information.
As to if it could be protected as a trade secret depends entirely on how it is stored, secured, what it contains, and who is given access to it.
But very unlikely. It has an actual definition [https://www.law.cornell.edu/wex/trade_secret]
As to if someone could sue someone else for damages related to breach of an otherwise valid contractual obligation, then of course.
As to if such a lawsuit would be successful will of course depend on a lot of factors, including if that obligation is valid under law, if anyone can show proof it occurred (and wasn’t say someone ‘using their extensive personal connections in the industry’), etc.
But that is an expensive, time consuming, and ultimately shitty time in court with few guarantees unless someone was really sloppy.
As to if it could be protected as a trade secret depends entirely on how it is stored, secured, what it contains, and who is given access to it.
But very unlikely. It has an actual definition [https://www.law.cornell.edu/wex/trade_secret]
As to if someone could sue someone else for damages related to breach of an otherwise valid contractual obligation, then of course.
As to if such a lawsuit would be successful will of course depend on a lot of factors, including if that obligation is valid under law, if anyone can show proof it occurred (and wasn’t say someone ‘using their extensive personal connections in the industry’), etc.
But that is an expensive, time consuming, and ultimately shitty time in court with few guarantees unless someone was really sloppy.
There are already laws against taking trade secrets/proprietary information, and using it elsewhere.
You go to jail for that. It's called "theft."
My company had us sign a ridiculous NCA. It pretty much made it impossible to get a job anywhere, after leaving the company; even if they fired you, or laid you off.
Their description of a "competitor" was so vague, that it could, literally, be applied to a 7-11, as they potentially sold peripherals that could be plugged into our devices.
You go to jail for that. It's called "theft."
My company had us sign a ridiculous NCA. It pretty much made it impossible to get a job anywhere, after leaving the company; even if they fired you, or laid you off.
Their description of a "competitor" was so vague, that it could, literally, be applied to a 7-11, as they potentially sold peripherals that could be plugged into our devices.
Every admin assistant should be under an NDA / Confidentiality agreement. Same for personal security. But those are not non-competes.
If they're that important, then the company should pay a significant percentage of their pay to keep them from doing their profession, or GTFO.
I am saying that they do NOT have non-competes.
IMHO, companies should have to compensate the employee for the period of the non-compete since they're still effectively working for them. Salary limits are okay, but don't really go far enough. If they want this it has a value and should be compensated for fairly.
I agree. Rather than having legislators get into the weeds of defining "compete", "trade secrets", "customer poaching", etc., laws should simply require that enforcing ANY post-employment terms require the former employer to pay the former employee the greater of the employee's maximum salary plus 10% (to cover opportunity cost) or 110% of any offer by a prospective new employer. Who better than the company to price the value of what the former employee knows? Maybe cap enforcement to 2-3 years.
My current employer tried to make me sign a noncompete clause and I asked them for precisely this.
They were flabbergasted that I wanted compensation in exchange for essentially cutting myself off from a wide swath of employment opportunities.
“Aren’t you our slave to do with as we see fit!?” was very much the attitude that I was getting.
They were flabbergasted that I wanted compensation in exchange for essentially cutting myself off from a wide swath of employment opportunities.
“Aren’t you our slave to do with as we see fit!?” was very much the attitude that I was getting.
Why even allow this? Just makes things less competitive and pays people to be unproductive.
No business would do this; non-competes would be de facto banned. It's not a sincere suggestion.
>No business would do this; non-competes would be de facto banned
That is the point. It is a sincere suggestion, because it would force companies to only seek out a non-compete in the case where the employees knowledge is valuable enough to warrant subsidizing their extended vacation.
And this does happen in the finance industry. Some businesses do in fact do this.
That is the point. It is a sincere suggestion, because it would force companies to only seek out a non-compete in the case where the employees knowledge is valuable enough to warrant subsidizing their extended vacation.
And this does happen in the finance industry. Some businesses do in fact do this.
I think rare situations can exist where a company would reasonably conclude that paying the employee not to compete is worth a lot more to the company than their salary. However, they should pay for it, not the employee (or the market, for that matter).
I think open source, the internet, and Stable Diffusion have shown that the diffusion of knowledge is generally in the public interest. I really think judges made a serious mistake when they stopped treating non-compete clauses as unlawful prior restraints on trade. They are not remotely in the public interest.
I think open source, the internet, and Stable Diffusion have shown that the diffusion of knowledge is generally in the public interest. I really think judges made a serious mistake when they stopped treating non-compete clauses as unlawful prior restraints on trade. They are not remotely in the public interest.
This would make things interesting.
I kind of want to see what would happen if states passed laws saying that all non-compete clauses contained an implicit agreement that the employee be paid their entire salary (including bonuses) for the pro-rated duration of the non-compete and that such clauses can be triggered by either party.
We all know the value of a non-compete clause is $0 for most employees. Hell, they are probably most effective at bullying unproductive workers who hate their jobs into staying on too long, thus might actually be a net negative for employers.
I kind of want to see what would happen if states passed laws saying that all non-compete clauses contained an implicit agreement that the employee be paid their entire salary (including bonuses) for the pro-rated duration of the non-compete and that such clauses can be triggered by either party.
We all know the value of a non-compete clause is $0 for most employees. Hell, they are probably most effective at bullying unproductive workers who hate their jobs into staying on too long, thus might actually be a net negative for employers.
The best part would be the rapid "Oh no, we don't need you on a non-compete anymore" throughout the state the day after the law passed. All of sudden how to fold sheets the Ramada way isn't a highly confidential trade secret.
>The best part would be the rapid "Oh no, we don't need you on a non-compete anymore"
I've witnessed this on the other end. Someone was being pressured to engage in sales that would violate her non-compete that was openly discussed during the hiring phase. When she essentially said, "Sure, I have no problem breaking it as long as you put it in writing that you'll cover any legal fees" suddenly the new employer didn't think sales in that region were quite as important.
I've witnessed this on the other end. Someone was being pressured to engage in sales that would violate her non-compete that was openly discussed during the hiring phase. When she essentially said, "Sure, I have no problem breaking it as long as you put it in writing that you'll cover any legal fees" suddenly the new employer didn't think sales in that region were quite as important.
Yep. This is what we do in finance. It sucks a bit because most of our comp is bonus and you only get your base pay on garden leave, but I’m shocked this isn’t a requirement.
Garden leave isn’t a panacea. And in MA it’s minimum 50% of salary. It does make the employer put skin in the game which is no small thing. But it may end up with someone not being able to be in a competitive job for a year for maybe 25% of their prior comp. Not a great situation for a lot of people.
Where I live (Norway), these laws came thanks to unions. When I graduated, all developer jobs I was offered had a noncompete clause in the contract. These were wide and potentially career-altering if enforced, barring you from doing basically any kind of work for long stretches of time. All companies when pushed basically said "ohh, we seldom enforce them, only for upper management", but still they insisted on them being there.
Luckily my union, Tekna, helped squish most of these in 2015. They can no longer be general, they have to name specific companies and areas you can't work for if you ask. And pay full salary while enforced. So now they're basically non-existent for individual contributors / devs, except for maybe naming the main competitor if you work for a niche company.
Luckily my union, Tekna, helped squish most of these in 2015. They can no longer be general, they have to name specific companies and areas you can't work for if you ask. And pay full salary while enforced. So now they're basically non-existent for individual contributors / devs, except for maybe naming the main competitor if you work for a niche company.
I had a chance to visit Norway recently, and this was something that a tour guide impressed upon us about the culture; she gave an example of a restaurant in town that was caught skimming pay, and it wasn't just a union representing restaurant workers they heard from; they found themselves unable to find someone to repair plumbing or their storefront (the plumbers and glaziers wouldn't work with them), and their ingredient supply chain suffered (truck drivers told them to make their own 3AM trip to stock up).
While that does occasionally happen in the US as well, it's illegal (both general strikes and sympathy strikes were banned by Taft-Hartley).
This also happens in the US, it just isn't reported on heavily by the media.
When the dining workers at my university in the US were campaigning for a contract, teamsters blocked most truck deliveries to the university
When the dining workers at my university in the US were campaigning for a contract, teamsters blocked most truck deliveries to the university
Labor action generally is barely reported on in the US. You have to go to far-left media like Democracy Now to hear about most of it. People who don't seek that out could be forgiven for thinking unions in the US almost never do anything at all.
It's worth noting also that this sort of "secondary strike" approach is explicitly illegal in the United States.
> And pay full salary while enforced.
That's a good clause, that will basically eliminate them. It makes sense from the government's standpoint, they don't want anything that restricts people's income because that restricts their (tax) income too.
That's a good clause, that will basically eliminate them. It makes sense from the government's standpoint, they don't want anything that restricts people's income because that restricts their (tax) income too.
> that will basically eliminate them
in NYC, it doesn't seem to stop quant firms. they have a term for it, although I forget what.
in NYC, it doesn't seem to stop quant firms. they have a term for it, although I forget what.
But if they're willing to pay it, it seems like it probably means this is a real issue rather than just a way to punish employees who leave, and it seems like they're reasonably compensating employees for the problem.
i think they are probably slightly disincentivizing leaving if they are only paying base salary.
someone who knows more will have to chime in, i didn't even remember this was called gardening leave
someone who knows more will have to chime in, i didn't even remember this was called gardening leave
Yeah, that's fair, if I only got base salary I'd be pretty strongly disincentivized to take such a deal.
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Gardening leave.
Garden leave
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> Nobody likes being told when they’re about to hire someone that that person does not make enough to be eligible for a noncompete
Am I supposed to feel sorry because a business has to choose between either paying an employee more, or not restricting what that employee does after they leave? Let me get my tiny violin.
Am I supposed to feel sorry because a business has to choose between either paying an employee more, or not restricting what that employee does after they leave? Let me get my tiny violin.
Yeah it's a weird thing to say. Nobody likes being told they're going too fast to be eligible for immunity from speeding tickets either, and yet they chose what speed to travel in that jurisdiction didn't they.
Also the law isn't really about enforcing what people "like," otherwise you wouldn't need a law.
Also the law isn't really about enforcing what people "like," otherwise you wouldn't need a law.
Good riddance to this form of wage suppression. Let's do forced arbitration next.
For some reason (I never dug deeper), my friend who is an attorney said she prefers arbitration. Maybe because she already is an attorney? The only thing I can think of is that it is more expedient and having seen behind the curtain the talk of biased arbiters (biased towards the Goliath) are exaggerated. But if anyone can opine I'm all ears.
Forced arbitration is bad for employees, based on empirical evidence
* It has a chilling effect: less disputes are filed
* employees prevail less often
* when employees do win the employee portion of the award is less than standard litigation
https://facesofforcedarbitration.com/wp-content/uploads/2019...
* It has a chilling effect: less disputes are filed
* employees prevail less often
* when employees do win the employee portion of the award is less than standard litigation
https://facesofforcedarbitration.com/wp-content/uploads/2019...
I've yet to hear a single valid reason for forced arbitration. I have nothing against two parties, at the time of a dispute, who want to engage in arbitration, in doing so.
There's also numerous stuff that should, IMO, fall into class action, but gets divvied up in forced arbitration, to the point where it isn't worth the time and expense for the individuals in the class to continue to pursue justice. (Although there have been some novel DoS style mass-arbitrations … that's more of a means of trying to force the corporations hand into a normal class action, and towards justice.)
Normally the reasons cited for arbitration are things like "the courts are slow" or "the courts are expensive" or "the courts are overwhelmed" — but you could still just do arbitration at the time of dispute with those. Saying that forced arbitration is better from these arguments is non sequitur.
There's also a conflict of interest between the chosen arbiter and the company. (And conflict of interest is independent of bias; a good arbiter can very well be unbiased, but it is easier for everyone involved to believe that if there isn't a conflict of interest.)
There's also numerous stuff that should, IMO, fall into class action, but gets divvied up in forced arbitration, to the point where it isn't worth the time and expense for the individuals in the class to continue to pursue justice. (Although there have been some novel DoS style mass-arbitrations … that's more of a means of trying to force the corporations hand into a normal class action, and towards justice.)
Normally the reasons cited for arbitration are things like "the courts are slow" or "the courts are expensive" or "the courts are overwhelmed" — but you could still just do arbitration at the time of dispute with those. Saying that forced arbitration is better from these arguments is non sequitur.
There's also a conflict of interest between the chosen arbiter and the company. (And conflict of interest is independent of bias; a good arbiter can very well be unbiased, but it is easier for everyone involved to believe that if there isn't a conflict of interest.)
I’ve heard this from attorneys. The gist is: arbitration/mediation make sure the case is settled quickly. Big corporations can afford attorneys to appeal and appeal and appeal. With arbitration that does happen.
The flip side, as I understand it, is that arbitration firms are clients of the company.
> my friend who is an attorney said she prefers arbitration
So let her opt-in. Why force it?
So let her opt-in. Why force it?
Arbitration can also be more expensive than a court case. In many jurisdictions the cost to file a complaint is less than $100 but arbitration can cost $2500+ to file and sometimes you still have to compensate the arbitrator even if you win.
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In Germany in order for a non-compete agreement to be valid a company has to pay an employee money for the non-compete period. 50% of an average of last 3 months of employment. With this law I would be actually quite happy for a company to include a non-compete clause in the contract.
It would be financially devastating for me to halve my salary for a year; perhaps if the non-compete weren't too broad, I could make some of that up with contract work, but I'd also be paying for healthcare for my family which adds up as well.
Yeah, I absolutely couldn't survive on 50% of my current salary, but as far as I know non-compete can't also be "any programming job". So given I sign a non-compete with, for example, a fintech company, it would be totally fine to join company doing something completely different. But then with half of my salary already paid I could do like 4 days week and not necessarily go with a highest paying option.
That’s a nice and probably fair law. If you do wish to restrict your employees in what they do post employment then you need to pay them. I wouldnt mind sitting around getting half pay.
You might not. Im guessing the person with a mortgage and family to support might feel differently. Especially if it’s half pay of base salary.
I agree yes, not saying it should be the norm and i am totally against non competes.
Usually you can still find jobs easily. Most of these laws also bar companies from defining it very broadly, so I don't think they could make a non-compete like "any programming job"
No. Many people cannot just find a new high-paying job quickly/easily.
Outside of development specifically I have heard first hand examples that were essentially the equivalent of “any programming job.”
Outside of development specifically I have heard first hand examples that were essentially the equivalent of “any programming job.”
My current contract has a lot of oddly specific noncompete stuff. Fortunately those clauses are mostly non enforceable in my country, unless your former employer still pays you a bunch of money every month. Those clauses are there to please investors.
Finland is currently transitioning to a system where employer must compensate for the time employee is restricted, and all previously agreed contracts must be either terminated before this year ends or employee will get paid for the time according to the new law - 40% of the salary if restriction is for less than six months, 60% if more than six months.
One of the best features of legislating against non-competes is that an employer can't sue a former employee for violating a non-compete. Right now, for most occupations in my jurisdiction (Indiana, USA), non-competes are usually not enforceable, but it costs $500-$2500 to get these lawsuits thrown out. Some employers will sue former employees knowing they can't afford a defense, or just to throw shade on them at their new job.
Years ago I had a former CEO throw a ridiculous tantrum over me leaving to work for a different company in an adjacent industry. He emailed me demanding I quit my job.
A quick review with a lawyer that the non-compete is unenforceable in my province and a nastygram sent by my lawyer, and he took his tantrum elsewhere.
The problem is that so many people, including some I know, get scared at the prospect of legal action that they fold, letting bully CEOs win.
These laws will help.
A quick review with a lawyer that the non-compete is unenforceable in my province and a nastygram sent by my lawyer, and he took his tantrum elsewhere.
The problem is that so many people, including some I know, get scared at the prospect of legal action that they fold, letting bully CEOs win.
These laws will help.
In the US these clauses are almost never enforceable and simply serve as a chilling effect. There is a fundamental issue with non-competes that if they prevent a person's well being they can't be enforced so if a person secures a job that would violate their non-compete the enforcement of their non-compete would cause them to lose their income. This is considered a hardship so enforcement of a non-compete clause requires a clear demonstration that other work would be available which in many cases is hard to do in the modern world since it'll often require there existing a genuine offer of work to the individual - offers are normally private so they can be hard to discover but, additionally, simply demonstrating the availability and presence of job listings is usually insufficient because hiring processes are a lot more complex today then in 1800 when some dude would hand you a shovel and offer you a dime at the end of the day.
I applaud their death - they are fundamentally bad for employees.
I applaud their death - they are fundamentally bad for employees.
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The existence of non-competes doesn't surprise me and I'm OK with companies being allowed to require them. But what shocks me is that companies do not offer commensurate severance packages. If you have a 12-month non-compete, then you'd better pay 12 months of total compensation as severance. Over the past year, I did 3 intense long interview loops and declined 2 offers and accepted the third (a FAANG where I work now). The first two places had me jumping through hoops - take home assessments, tricky behavioral interviews, intense live coding, etc., amounting to like 10+ interview rounds spent evaluating me before making an offer. At the offer stage I politely mentioned that the offer letter included an X-month non-compete agreement and I was only able to consider signing if the doc was amended to also include an X-month severance package with clear terms on "just cause" firings (when severance is exempted) and "good reason" quitting (when severance is owed even if I quit, very common in cases where 'just cause' is included), or, I offered, the non-compete can just be removed (one of the two firms already had its main presence in California but I live on the east coast where this role was based ... but still, why a company already complying with laws banning non-competes for 90% of their workforce feels a need to include it for east coast employees is just beyond me).
Of course, they both completely balked at this and we could not move forward so I declined both offers. The third company had a non-compete initially but removed it as soon as I asked - it was completely pedestrian.
It's an indication of crazy entitlement on behalf of employers that they think workers should give away *for free* significant rights (like, uh, getting a new job quickly after a layoff, in your field of expertise). These rights are clearly not compensated as part of your base compensation from a job offer and any employee would be crazy to agree to those terms without severance protection. It just communicates bizarre entitlement and unprofessionalism. I hope more candidates will wise up to this and require severance packages or else decline the offers.
Of course, they both completely balked at this and we could not move forward so I declined both offers. The third company had a non-compete initially but removed it as soon as I asked - it was completely pedestrian.
It's an indication of crazy entitlement on behalf of employers that they think workers should give away *for free* significant rights (like, uh, getting a new job quickly after a layoff, in your field of expertise). These rights are clearly not compensated as part of your base compensation from a job offer and any employee would be crazy to agree to those terms without severance protection. It just communicates bizarre entitlement and unprofessionalism. I hope more candidates will wise up to this and require severance packages or else decline the offers.
The UK has had a government call for evidence on the subject of non-compete, with the aim of limiting them as well, but nothing has been done so far.
I'm myself in the long, lengthy and costly process of trying to fight a two years non-compete (well, 1yr garden leave + 1yr non-compete), and it's taxing. It adds stress, makes it harder to market yourself, and on top of that there is this clear asymmetry where the costs if it was to go to high court (£150k) would be huge for you, but petty change for your employer. On top of that, they'd get to claim these as expenses (so pre-tax), but you couldn't get any kind of tax-credit (so effectively post-tax). System is biased, it's about time they would change it.
I'm myself in the long, lengthy and costly process of trying to fight a two years non-compete (well, 1yr garden leave + 1yr non-compete), and it's taxing. It adds stress, makes it harder to market yourself, and on top of that there is this clear asymmetry where the costs if it was to go to high court (£150k) would be huge for you, but petty change for your employer. On top of that, they'd get to claim these as expenses (so pre-tax), but you couldn't get any kind of tax-credit (so effectively post-tax). System is biased, it's about time they would change it.
Thats interesting, i never heard of or met anyone in the uk with a non compete clause and always assumed it is a non issue.
Fwiw, I worked in the UK for several years and noncompetes were absolutely standard. Moreover, they appear to be enforceable.
What domain out of curiosity?
I did software consulting for a few different clients that built "smart" irrigation pumps. The work was an even split between a custom SOP/ERP/back-office system, and data-ingestion/processing pipelines. There was a fair bit of IP involved.
This is one of SF Bay Area’s (and California’s) largest advantages. It’s one of the reasons why so many companies are formed and thrive here
This is a great development for many of these new areas, but a bad one for California since it loses one of its edges
This is a great development for many of these new areas, but a bad one for California since it loses one of its edges
I am technically held to a non-compete by my employer, but it honestly never crosses my mind. If push came to shove and I wanted to move on to somewhere they had a problem with, I feel like odds are tiny that they'd do anything close to trying to enforce it. It's a terrible look to come after your employees based on a non-compete, and I bet most brand-conscious employers would think twice about the value in actually testing it.
While this is a good thing, be careful: other shady practices are spreading to replace non-competes. One example is clauses requiring employees to pay companies back for "training" provided if they leave for any reason. Can you afford to take a new job with a 10k pay rise if you have to pay existing employer 20k to leave?
Banning non-competes is a great idea.
However, everyone here should be aware that lots of startups are now including "power of attorney" clauses in their employment contracts that grant to the employer power of attorney to assign inventions to themselves. Feels like there's a lot of room for abuse, which could discourage moves to competitors.
However, everyone here should be aware that lots of startups are now including "power of attorney" clauses in their employment contracts that grant to the employer power of attorney to assign inventions to themselves. Feels like there's a lot of room for abuse, which could discourage moves to competitors.
Yeah, I've signed that. I hate it, but I understand. If the employee can't be reached, they can still finish the patent. If the employee won't cooperate, they can get the patent.
They better be paying for this upfront.
They better be paying for this upfront.
I think a better system is an up-front repayable bonus: "We'll pay you $2k on sign-on, but you have to stay for 2 years" or something.
This benefits job applicants (extra money!), employers (retention), and protects applicants (employers abusing non-compete agreements for everything), and is a far easier legal process to execute.
This benefits job applicants (extra money!), employers (retention), and protects applicants (employers abusing non-compete agreements for everything), and is a far easier legal process to execute.
This seems like the equivalent of a predatory loan with the interest paid in opportunity cost, and doesn't even properly address the same problem that noncompetes do.
>This seems like the equivalent of a predatory loan with the interest paid in opportunity cost
I don't see the issue. If you feel like you might bail later, you're free to keep the money in an interest bearing account so you can pay it back.
I don't see the issue. If you feel like you might bail later, you're free to keep the money in an interest bearing account so you can pay it back.
I agree with the second part but otherwise seems like an RSU schedule for a public company.
That's attempting to solve a different problem (employee retention) than non-competes attempt to address in their original form.
For example, how does a company prevent (setting aside the "should they" debate) an employee from:
1) leaving and starting up a consultancy for installing former employer's software (competing with company professional services)
2) leaving and starting up a new company that is a competitor to the former company
For example, how does a company prevent (setting aside the "should they" debate) an employee from:
1) leaving and starting up a consultancy for installing former employer's software (competing with company professional services)
2) leaving and starting up a new company that is a competitor to the former company
1) That would be IP theft, and is already covered by other laws.
2) That is the problem I think this solves: retain your key employees. Maybe pay them a bit better than that 2% annual raise.
2) That is the problem I think this solves: retain your key employees. Maybe pay them a bit better than that 2% annual raise.
Starting up a consultancy to do installation of your former employer's software for clients isn't IP theft. If I worked for Atlassian and then created a company that did consulting for how to install Jira and and organize workflows - there's no IP theft involved there.
Creating a new competitor isn't about retaining employees. Consider the situation of https://en.wikipedia.org/wiki/Rose_Blumkin
> In 1989, six years after selling 90% of her company to Berkshire Hathaway, Blumkin retired, only to come out of retirement in three months to open up a rival store. It was called "Mrs. B's Clearance and Factory Outlet" and was situated directly across the street from the Furniture Mart. It became profitable by 1991. Buffett acquired the business in 1992. Blumkin continued to be involved in day-to-day operations until shortly before her death at the age of 104.
While this case wasn't covered and Buffett certainly handled it different than the non-compete, but should there be the ability to prevent that sort of behavior with a non-compete agreement?
Creating a new competitor isn't about retaining employees. Consider the situation of https://en.wikipedia.org/wiki/Rose_Blumkin
> In 1989, six years after selling 90% of her company to Berkshire Hathaway, Blumkin retired, only to come out of retirement in three months to open up a rival store. It was called "Mrs. B's Clearance and Factory Outlet" and was situated directly across the street from the Furniture Mart. It became profitable by 1991. Buffett acquired the business in 1992. Blumkin continued to be involved in day-to-day operations until shortly before her death at the age of 104.
While this case wasn't covered and Buffett certainly handled it different than the non-compete, but should there be the ability to prevent that sort of behavior with a non-compete agreement?
This is the system working as it should. Rose Blumkin's entrepreneurial talents were used to produce two successful businesses rather than one.
I fail to see what's wrong with this. Not trolling, what actual harm is being done here? it should be priced into the risk of acquiring the company right?
> If I worked for Atlassian and then created a company that did consulting for how to install Jira and and organize workflows - there's no IP theft involved there.
That also seems like a very silly thing to prohibit in the first place, since Atlassian's getting paid either way in that case.
That also seems like a very silly thing to prohibit in the first place, since Atlassian's getting paid either way in that case.
I'm sorry, I misread the parent comment. I thought they meant recreating the the software, not installing it.
I'm thinking more the professional services / support. "I used to work for $foocorp, pay me $money and I will help you install your software and support it better than $foocorp offers."
Another example is Epic's "not quite a non-compete" is that they won't release the certificates(?) that an employee got for supporting their software (as part of employee training) for a period of time after separating from the company. I'll admit to being hazy on this but (I believe) that this is to make it difficult to start a consultancy for installing health care software right after leaving as you wouldn't be able to demonstrate the certificates that you got while working there (and getting them again is costly).
Though, if you want an example of "recreate the software" (though not with IP infringements), look at Dave Hitz and James Lau from Netapp and that they formerly worked at Auspex. I'm sure that they dotted all the 'i's and crossed all the 't's with leaving a company and starting a new one that became a direct competitor - but that sort of thing happens too. I'm not sure what California's non-compete laws were like in '92.
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The "you can't work anywhere using a computer" as a non-compete is certainly something that isn't reasonable. A "you can't start a competing company and try to get former clients to switch to you after selling your old one" is enforceable.
So where does the "you leave a company and then start a consultancy that competes directly with the professional services, consulting, or support of the previous company" fall? That's a question I haven't found an answer to.
As to the bit on some things being enforceable: Blue Mountain Enterprises, LLC v. Owen ( https://law.justia.com/cases/california/court-of-appeal/2022... )
> Primary Holding
> Court of appeal upholds the enforcement of a restrictive covenant against a former employee who had sold his ownership interest in the company while concurrently agreeing to the covenant.
And we've got an example where a non-compete / non-solicitation agreement was enforced, appealed, and found correct.
Another example is Epic's "not quite a non-compete" is that they won't release the certificates(?) that an employee got for supporting their software (as part of employee training) for a period of time after separating from the company. I'll admit to being hazy on this but (I believe) that this is to make it difficult to start a consultancy for installing health care software right after leaving as you wouldn't be able to demonstrate the certificates that you got while working there (and getting them again is costly).
Though, if you want an example of "recreate the software" (though not with IP infringements), look at Dave Hitz and James Lau from Netapp and that they formerly worked at Auspex. I'm sure that they dotted all the 'i's and crossed all the 't's with leaving a company and starting a new one that became a direct competitor - but that sort of thing happens too. I'm not sure what California's non-compete laws were like in '92.
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The "you can't work anywhere using a computer" as a non-compete is certainly something that isn't reasonable. A "you can't start a competing company and try to get former clients to switch to you after selling your old one" is enforceable.
So where does the "you leave a company and then start a consultancy that competes directly with the professional services, consulting, or support of the previous company" fall? That's a question I haven't found an answer to.
As to the bit on some things being enforceable: Blue Mountain Enterprises, LLC v. Owen ( https://law.justia.com/cases/california/court-of-appeal/2022... )
> Primary Holding
> Court of appeal upholds the enforcement of a restrictive covenant against a former employee who had sold his ownership interest in the company while concurrently agreeing to the covenant.
And we've got an example where a non-compete / non-solicitation agreement was enforced, appealed, and found correct.
I don't see how this addresses non-competes at all. Also that is already how many sign-on bonuses work.
Retention is only tangentially related to non-competes. People leave for all sorts of reasons. If a company wants to restrict what they can do after they leave then they can pay them for that supposed value. We'd find out really quickly that most non-competes are bunk.
Not to mention that you'd need to add a couple zeroes to that sign-on bonus for it to mean squat to anyone actually working with valuable proprietary information.
Retention is only tangentially related to non-competes. People leave for all sorts of reasons. If a company wants to restrict what they can do after they leave then they can pay them for that supposed value. We'd find out really quickly that most non-competes are bunk.
Not to mention that you'd need to add a couple zeroes to that sign-on bonus for it to mean squat to anyone actually working with valuable proprietary information.
What’s the enforcement for these anyways, when a company insists on enforcement? “Cease working for your new employer or else”?
noncompete clauses are good if you actually get compensation for not working at a competitor. e.g. firms paying you a decent salary for ~2 years after your employment is over. signing a blanket noncompete without compensation is the problem.
So from I understand only companies that can pay 100k can make their employees sign non-compete, and keep this big firm’s technology secret, whereas a startup that cannot pay 100k, its tech can be openly shared.. … ………..
Most starting salaries in tech are over $100k, at least in high COL areas. That's why the limit.
My personal experience with non-compete is something that was being purchased from me by my employer as part of a severance package. Does this mean that that ability for me and my employer to make those deals is removed?
They should ban unpaid non-compete clauses above 6 months. I wouldn't want them to go further than that. A half-year paid vacation is a pretty good thing for almost all workers.
> Colorado employers have expressed frustration with the new law, said Carrie Hoffman, a partner with Foley & Lardner LLP in Dallas. “Nobody likes being told when they’re about to hire someone” that that person does not make enough to be eligible for a noncompete, she said.
Pay up or shut up. It's that fucking simple, and these abusive employers should not only be grateful that these clauses haven't been outlawed outright (as they should be), but also grateful that there's an earnings cap at all, let alone one that's low enough to exclude large swaths of the professional workforce.
Pay up or shut up. It's that fucking simple, and these abusive employers should not only be grateful that these clauses haven't been outlawed outright (as they should be), but also grateful that there's an earnings cap at all, let alone one that's low enough to exclude large swaths of the professional workforce.
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Isn't this ethos similar to being counter to monopolistic patents?
Could this trend lead to the abolishment of patents - and perhaps should an effort be made to help people understand the comparison?
Could this trend lead to the abolishment of patents - and perhaps should an effort be made to help people understand the comparison?
> and perhaps should an effort be made to help people understand the comparison?
I would recommend that, because the connection isn't obvious to me.
I would recommend that, because the connection isn't obvious to me.
I don't think this is comparable.
Lol, no.
Am I the only one who doesn't add any inventions and doesn't care about a non-compete clause because I will never honor it and come at me bro if you want to try to enforce it?
I respect making sure the company doesn't steal someone's previous IP and I respect a company guarding their own IP. But I also respect that a person can work wherever the f they want without a previous company having any say.
I respect making sure the company doesn't steal someone's previous IP and I respect a company guarding their own IP. But I also respect that a person can work wherever the f they want without a previous company having any say.
Yes, if you produce no IP then nobody is really going to care what you do or don't do
> and come at me bro if you want to try to enforce it?
I spoke to an employment lawyer who told me in pretty clear terms: the company can come after you to enforce one if they like; it's a tossup as to whether or not it will be upheld; and regardless, it will cost a pretty penny to fight.
I'd personally would not want to have that hanging over my head.
I spoke to an employment lawyer who told me in pretty clear terms: the company can come after you to enforce one if they like; it's a tossup as to whether or not it will be upheld; and regardless, it will cost a pretty penny to fight.
I'd personally would not want to have that hanging over my head.
You're not the only one, but this kind of "I'm a sovereign citizen!" defense also won't hold up in court for a second if the company actually wants to come after you.
The vast majority of people don't run into such issues simply because they aren't important enough and/or haven't produced anything of value to waste a lawyer's time over.
The vast majority of people don't run into such issues simply because they aren't important enough and/or haven't produced anything of value to waste a lawyer's time over.
I just list my GitHub/Bitbucket/Sourcehut/etc. user pages and my website and say "everything listed at these URLs". I've yet to get any complaints about that.
My Attorney General and my state fully agree with me in no uncertain terms thanks [0]. Feel free to add all those "we're not responsible at all!" clauses that ski resorts add which are also not enforceable. Thanks for the downvotes.
[0] https://oag.ca.gov/news/press-releases/attorney-general-bont...
[0] https://oag.ca.gov/news/press-releases/attorney-general-bont...
"But I'll spend money to train my employees and they'll just take those skills to go work for a competitor or start their own business!" Yes, that's a feature of the system, not a bug.