How non-competes are damaging the Massachusetts economy: Angela's story

http://www.boston.com/business/technology/innoeco/2011/09/noncomps.html#

by ilamont • 15 years ago

90 82 15 years ago

wccrawford4• 15 years ago

Part of the problem is that people don't -think- about what they're signing. If they did, there would be a lot less crap that goes on.

But non-competes are one of the few things I don't disagree with. It's only a year, and it's only that 1 industry. And it's designed to prevent people from giving away business secrets to the new company. The kind of person who would accidentally give away business secrets is the very same kind that doesn't pay attention to what they're signing.

I have both signed non-competes, and refused to sign them, when the situations were acceptable and unacceptable respectively. If, in her situation, she didn't think she would be privy to business secrets, she should not have signed a non-compete.

And finally, it's not like she can't get a job elsewhere. That she chose to stay in the same industry was her fault. If she wasn't privy to any business secrets, she doesn't have any more experience in that industry than any other.

kabdib• 15 years ago

... only a year...

That's an incredibly long time.

That she chose to stay in the same industry was her fault

I consider my mind and my skill set as a tool of my trade. If I can't use it freely, I'm a serf. Presumably she wouldn't be allowed to /start/ a company, either.

A cow-orker of mine came to (large software company) from (another large software company), and had expertise in a certain sensitive area. We only found out about this when we asked him the reason he would go silent in meetings on certain subjects. He was under a funky trade-secret non-compete that had been worked out by lawyers, and was gagged for (I believe) five years from having technical input on stuff he was an expert in at the other company.

I don't agree with any of it.

yummyfajitas• 15 years ago

Presumably she wouldn't be allowed to /start/ a company, either.

No, she couldn't start a competing company.

I signed a noncompete, and am now starting a company. The only thing the noncompete prevents me from doing is a certain kind of high frequency trading.

yardie2• 15 years ago

Oh please. You jump through all the hoops during the interview process to get the job and then it comes down to the final part where you have to sign a contract as condition for employment.

This is where the thinking comes in. I've had these contracts before. Fresh out of school, my choices were sign this and take a position in the career I want and studied for or continue bussing tables. The employer loads the contract with enough ominous legal mumbo-jumbo that it can be dangerous for you but not so dangerous that a court would take one look at it and toss it for being very one-sided.

Most people aren't rockstars, they take a job because they need it and it might be the only offer they've received in weeks if not months. There is a huge world of difference between your typical entry level job and your typical C-level, Mark Papermaster type of position. Most people don't have a company like Apple going to bat for them over NCAs.

Like you I've also questioned NCAs and you can make small adjustments if you need to. And if the company wants you bad enough they can strip entire sections. But your typical job just wants a warm body in a world of interchangable warm bodies, make too many waves and they might think it's better to replace you with another warm body.

xiaoma• 15 years ago

I absolutely agree. For that reason, I've made non-competes and claims of IP I create on my own time with my own resources one of the first things I ask about. Invariably, the bosses I've had have reassured me that the scope of either would be narrow and only what's necessary to protect the core business interests of the company. Invariably, I've been presented with a thick pile of papers full of absolutely ridiculous claims over IP, restrictions on what I can do on my time and non-competes that would make me unemployable.

However, by asking long before ever being offered a job of time it puts me in a much stronger negotiating position when the time comes. Thus far, I've refused every single contract preventing me from working in my field and/or preventing hobby projects related to my work. Unfortunately, that sometimes means leaving promising companies.

jdhopeunique• 15 years ago

I interviewed for a job and got accepted. There were no contracts until I was hired, gave my 2 weeks notice at the former job, and then on the first day was presented with a non-compete to sign just as "routine paperwork". I didn't sign, but had already gave notice at the previous job. Luckily I was single, with no family or debt, and found a near-minimum wage job as an electrician's helper. That was 5 o 6 years ago, I shudder to think what I would do now in this economy. What happens when you are presented with a non-compete after a day or week of being employed? If you quit, can you get unemployment benefits? It's a hard situation. I live in Louisiana, btw.

An edit to the above: I tried negotiating in a respectful manner but didn't have much leverage after quitting my previous job and being told "What are you, a lawyer?"

arghnoname• 15 years ago

I had something similar happen. A month or two into a job (which I relocated for) they notified me that they had 'forgotten' some standard paper work, one of which was a non-compete that said, essentially, that I couldn't work in tech for a year after leaving the company.

It's a very nasty situation. I had incurred what was significant expense for me at the time moving and my previous position had been filled. It was very early in my career, so getting a job would have taken longer than the meager savings I had time to accumulate by that time.

So I signed it. I consider having savings enough to be without work for a year, at minimum, over crap like this is a high priority for me. So also is not being at the arbitrary whims of the employer in a fairly one-sided power dynamic.

pyre• 15 years ago

  > it's only that 1 industry

What if she was working at Microsoft, for example? They have their hand in a number of industries. She couldn't become a game programmer even if all she worked on at Microsoft was the .Net framework because game publishers are in competition with Microsoft's 1st party Xbox titles, and she may have overheard a trade secret in the hall way one time.

angdis• 15 years ago

It is _really_ hard for someone straight out of college (as Angela was) to say "no" to a pile of legal boilerplate that probably will never be enforced. Practically everyone does it. Not doing it "marks" one as somebody who might make trouble, even if the employer isn't mean/persnickety enough to ever try to enforce the non-compete.

At least the company doing the suing is getting some negative publicity for it. What a jerk.

mchanson3• 15 years ago

I disagree that it marks someone who might be trouble. If you are respectful and explain yourself the negotiating employment terms can be a very positive, but stressful, experience.

I agree it can be hard in the first job (I didn't do it then), but I don't think it gets you labeled as a trouble maker. It actually could get you labeled as a thoughtful and aggressive person. This can actually help quite a bit for your relationship with the new company.

Just be sure you are negotiating with your new boss and NOT HR. Make it light and playful if you can. Explain yourself as best you can. Read up on negotiation (there are a number of great books on it) so that you don't do it in a way that is bad for the relationship.

gwillen• 15 years ago

I don't think you realize that, at large companies, you don't necessarily _get_ to negotiate with your new boss. Large companies like standardization, and generally everything goes through HR, and everything is boilerplate. If a large company makes you an offer with a non-compete clause, your only remedy is typically to walk away.

Nat0• 15 years ago

Unfortunately, at many companies you won't even meet your boss until after signing the paperwork. This leaves you to try and explain it to someone who will see your hesitance to sign and take it to mean that you are either planning on leaving the job quickly or that you will not follow authority.

mchanson3• 15 years ago

I work in the Boston area. I said yes to my first job's non-compete. In each job after that (I'm on my third) I have said no. I've negotiated it as part of my employment.

First job was a big company; second two have been with smaller firms. If an employer wants you I think refusing to sign one is unlikely to get in the way.

I've also, without a lawyers help, modified my employment agreement for my current and last job. I've hired a number of folks over the years and not had them negotiate these types of things.

Always negotiate; you can get a lot of what you need/want.

onemoreact• 15 years ago

I can't agree more with the negotiate bit. I met someone that ended up sighing a fairly draconian non-compete that said they would pay his old salary for as long as they wanted to keep it in force. It was something along the lines of they got to make that choice at the time of his departure.

dsr_• 15 years ago

That's really the only fair way to do it: if you don't want me working for someone else, pay me for that [non-]work.

demallien• 15 years ago

Non-competes are incredibly unfair on workers. Companies already have a way of stopping their trade secrets from walking out the door - make the employee's life better than what they would have working for the competitor.

Instead of that, what do we see? Employers that grudgingly give tiny pay rises to loyal employees that are essential cogs to their operations. I can't feel terribly sorry for the company when the employee decides that their career would be better served working for the competitor.

epoxyhockey• 15 years ago

Another way companies can stop their trade secrets from walking out the door is a confidentiality agreement. I tell all of my prospective employers that I don't sign non-competes, but I will sign a confidentiality agreement.

A non-compete is professional suicide, in my opinion. There is no upside to the employee at all.

dhimes• 15 years ago

A non-compete should be accompanied by a commensurate severance package in order to be taken seriously by a prospective employee.

jamesbkel• 15 years ago

Completely agree. I was in a very similar to the woman in the article. I started at a Boston Medical/Life-science research LLC as a statistical programmer. The intention was to bring me on as the head of stats/quant work since they had been farming it for the past few years. After 2 months they decided they didn't actually have enough work to justify paying me (can't blame them for that, it reached a point where I literally was walking up to fellow employees asking if there was anything I could do to pitch in since I had NOTHING to do and I also don't consider "killing time on facebook/youtube etc." acceptable when I'm on their dollar).

Point being, I did not sign their boilerplate non-compete. They were actually fine with that as long I signed a confidentiality agreement... and that's only fair.

damorip• 15 years ago

Don't like it, don't sign it.

Was she under duress when signing? Nothing in the article suggests she was. She signed the contract voluntarily and should stand by her decision. If she was too lazy to do her due diligance before signing, that's her fault too.

unshift• 15 years ago

it's very common for people to be as compliant as possible during the hiring process so as not to jeopardize the job, especially their first job out of school.

that tends to be the result of years of people saying "you're lucky to get a job at all" combined with a long search and endless interviews.

and while yes, she did sign the non compete, it doesn't mean it's not bullshit, which is the entire point of the article. of course you can be a hardass and say "she signed it", "should have read it more carefully", "her fault", etc, but now she's on the dole until the clause expires because someone had a hissy fit and threatened to sue her employer. it's a crappy, stifling situation all around which is what the article aimed to point out.

mikeash• 15 years ago

Depends. Does graduating in the worst economic client in decades and being lucky enough to find a job that will put food on the table but having that job be conditional on signing the agreement count as "duress"?

yock• 15 years ago

The article states that NCAs are contracts, but doesn't contract law stipulate that there must be some amount of equity between the consideration offered by the parties involved? Could a company really quantify the benefit of employment at that company, on a non-pro-rata basis (since you're held to the NCA whether you work there for an hour or a decade), to be worth an entire year's salary? That seems a tough bite to swallow.

wccrawford4• 15 years ago

It's not a year's salary. It's a year you can't work for a competitor. You can work for anyone else, just not a competitor.

learc832• 15 years ago

Depending on what you do, it can be rather hard to work for a company that isn't a competitor. For instance, the hair dresser mentioned in the article. He couldn't work for a competing salon. Short of relocation, where can a hairdresser work that's not a competitor.

potatolicious• 15 years ago

I recently left a job working for a large corporation that has its hands in everything (think Sony, Microsoft, etc). The non-compete in that case makes no sense - I was involved in, naturally, a very small corner of the company, but I was barred from touching anything that my former employer engaged in.

So, even if I was working on word processing apps, the fact that the company has a hand in cloud computing makes me unable to take a job that field also.

As corporations get larger, these issues will become more prevalent.

learc832• 15 years ago

Yes contracts do have to be equitable to be valid, but the definition of equitable is vague.

geebee3• 15 years ago

I agree that they are unfair, though that alone won't get them eliminated. Part of the problem is that there is a huge imbalance of power between a low-level employee and a corporation. I guess many programmers are talented enough to say no to jobs, but a lot of people have to work for a while and endure many months of unemployment to land that first job. Once they do, they'll be hesitant to do something that might jeopardize it.

I suppose some people might say "so be it" - after all, we don't normally intervene. Two weeks of vacation with a forced closure over the summer and winter that eats it all up might seem unfair as well, but we (at least in the US) don't typically look to the gov't to force companies to act differently (though obviously we do set some standards, just not to the same extent you might see in Europe).

Even so, I think that non-competes are a terrible idea, mainly because they damage the economy and do harm everyone. They're also different from many other contracts in that they have a powerful effect on people who were not a party to the original contract. The employee may have signed an agreement not to work for anyone else, but the new company certainly never signed an agreement not to hire that worker!

The main reason I can see for enforcing these non-competes is the notion that companies will increase hiring and invest more in training unexperienced workers by providing reassurance to the employer that the person will not immediately take the skills straight over to a different company. I wonder how big a problem this really is. Even if it's a problem, is it a bigger problem than what we have here? This woman is now on unemployment insurance rather than creating wealth through employment and contributing to the tax base. As you can probably tell, I doubt this has much effect. I don't think that software patents cause much innovation that would not have otherwise occurred, but I do think they stifle innovation. I don't think that non-competes cause much hiring that would not have otherwise occurred, but I do think that they stifle hiring.

Interesting that the journalist here expressed surprise that the owner of the business enforcing the non-compete is actually opposed to them in principle. I don't think people in software are surprised. There are all kinds of things, from non-competes to patents, that we don't like but engage in anyway (to refrain on principle seems, to many people, like "unilateral disarmament" in a war zone).

achille• 15 years ago

Here in California, non-competes are not enforceable, and I think it's empowered employees. I don't see employers complaining. I see them colluding with each other

See: http://boingboing.net/2008/08/08/california-supreme-c-1.html

VladRussian2• 15 years ago

>I agree that they are unfair,

i think it depends. The hairdresser in the article may have moved to the salon next block - there is obviously an element of competition here, her regular clients may follow her, etc... - it seems valid for me to enforce non-compete in such a case. On the other side if her new job is sufficiently distant from the old one that no actual competition between businesses exists - then no-compete is satisfied by the virtue of the absent competition.

The same in the software - my previous non-compete was clear and very specific about same clients (existing or engaged in some degree), products, etc... and while my new employer does have similarly looking product - they are in different market segments, and i made sure to have nothing to do with this product (to avoid any violations of confidential agreement as well).

Like any good contract, the non-compete should be specific and fair - this also in the interests of the old employer as enforcing a specific and fair agreement in case of clear violation is much easier than vague "i never be a programmer again"

jimbokun• 15 years ago

"The hairdresser in the article may have moved to the salon next block - there is obviously an element of competition here, her regular clients may follow her, etc... - it seems valid for me to enforce non-compete in such a case."

Why are you against competition?

danssig10• 15 years ago

>there is obviously an element of competition here

As there should be. Do you not like free markets?

>her regular clients may follow her

Good. Her value is not "doing hair" it's attracting clients (i.e. you can be very good at doing hair but have a personality that makes no one want to deal with you). That's what defines her market value that she's selling every day. If she finds a customer (i.e. company) willing to pay her a better rate for the value she provides (i.e. clients) then the rational thing for her to do is move her offering to that customer (i.e. company).

>the non-compete should be specific and fair

The existence of a non-compete is unfair. They only exist because of the power deficit between companies and workers.

rmc• 15 years ago

Reminds me of a quote I saw recently: "what if we train our workers and they leave?" "what if we don't and they don't?"

sp332• 15 years ago

This is what regulation is for. Banning non-competes means companies don't have to feel like they're at a disadvantage for doing the right thing.

WingForward6• 15 years ago

Outlawing non-competes would make employers less likely to hire because they're not just about trade secrets.

They're about encouraging employers to make the investment in a new employee, knowing the time and effort put into that person isn't going to be easily transferred to a competitor.

That said, you can negotiate a non-compete, either doing away with it completely, or changing the terms.

Non-competes generally have at least three limiting features: industry, time, and region.

You can negotiate on the industry side: from "same industry" to "company's direct competitors".

You can negotiate on the region:"the Northeast" to "New England" to "metro Boston".

And you can negotiate on the time: twelve months, to six, to three.

I've just thought of this, but I think it would be fair it limit the non-competes based on the time worked in a position in a company. Less than one month and more than five years in a position, the non-compete clause goes away. Or the terms change.

danssig10• 15 years ago

wtf? Are you posting from the 70's or something? Companies of today are not remotely loyal. Why should employees be? Years ago companies had to actually pay to train employees in whatever programming language they use. Now they get us to pay for that ourselves in college (this is why so many universities switched to Java).

In my whole career I've always gotten my best salary increases by moving. If companies want to keep me around the way to do it is not with a modern form of slavery but rather by keeping me happy. If they have some stupid rule that says the max raise per year is 3% and I can get 8% somewhere else then fuck them.

WingForward6• 15 years ago

Oh, you know how to program? Ok, great, that's the minimum you need to get a job. I hope you can read too.

But what do you know about the clients? Who at Company B needs to be handled with kid gloves? Who likes it when you're pushy? How much can you negotiate with Company C on the timeline? What are the strengths of the other developers both in house and at other firms?

That's the stuff you can only learn by working in the industry. That's what makes an employee valuable. That's the real skills, the stuff you won't learn in school.

WingForward6• 15 years ago

I have little sympathy for Angela.

In this story, you had a 21 year-old work for a company for three years. That company invested time in a green worker. After three months, maybe after two years, she actually started producing for the company.

After she is trained and producing for her company, she quits and gets another job in the same field (but not a direct competitor).

She quits that and tried to work for a competitor of her original employer and is let go.

She is collecting unemployment (possibly at the combined expense of employers 1, 2, & 3 and the people of Massachusetts).

I don't see what the inequity here is.

wizzard2• 15 years ago

I don't understand how she is able to collect unemployment benefits... it says in the article she left her previous jobs on her own.

We can't really guess from this article how much proprietary information was involved in her line of work, but the other examples in the article (gymnastics instructor and hairdresser) made me sick. Non-competes are supposed to be used to protect intellectual property, not to take away someone's entire living.

ebiester• 15 years ago

She was laid off from the company who just hired her.

wizzard2• 15 years ago

You can't collect unemployment based on two weeks of work. Try again.

nighthawk• 15 years ago

this is definitely one thing that california's got right.

"Non-compete agreements are automatically void as a matter of law in California, except for a small set of specific situations expressly authorized by statute. They were outlawed by the original California Civil Code in 1872."

http://en.wikipedia.org/wiki/Non-compete_clause

kristopolous• 15 years ago

IANAL but I think the clause totally flies in the face of free-agency. Existing IP protections already should cover a former employers concerns; if I rip off a trade secret for a competitor from a former employer, then I am already breaking an existing law and can be taken to court regardless of a no-compete clause. The no compete clause is an onerous restriction placed on all parties; innocence regardless.

When I walk out the door, I would assume the contract is over and I'm at liberty to use my freedom of contract to go elsewhere.

danssig10• 15 years ago

Ah, I think people are downvoting you because they thought you meant CA's clause flies in the face of free-agency. You actually meant no-compete clauses do, right? If so, yes, that's the point of them.

nasmorn• 15 years ago

The argument that non-competes increases hiring is like saying debt slavery increases credit. Probably true but society pays for it in the end.

That said instead of outlawing the practice the law should demand sevetance based on salary for each month of non-compete. Even 50% is probably enough to quench interest for it in junior positions.

mahyarm• 15 years ago

Make it that non-competes are enforced only if the employer is willing to pay the employee's lost wages & benefits in full until the expiry date. If the employer does not want to enforce it, then they don't have to pay.

A confidentiality agreement is completely separate from this.

dreamdu5t• 15 years ago

How is this legal? What kind of twisted legal logic is used to justify this?

How does contract law work if you can sign a contract preventing other contracts from being signed?

danssig10• 15 years ago

Exactly. To be honest I've always just assumed these clauses were invalid and signed them. It isn't logical that one can sign away their rights beyond their employment.

Woost2• 15 years ago

How does the US unemployment office look at someone declining a job offer due to a refusal to sign non-compete (or other part of the employment contract)?

Is it the same as if the person got a valid job offer and refused (so they lose unemployment), or are there exceptions?

wslh• 15 years ago

Is non compete a kind of cartelization?

donaldc• 15 years ago

The most interesting part of this article is that the CEO of the company enforcing the non-compete says that the Massachusetts economy would be better off if they were non-enforceable. (He just doesn't want to "disarm unilaterally".)

How non-competes are damaging the Massachusetts economy: Angela's story

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