Laws barring noncompete clauses spreading

https://www.businessinsurance.com/article/20220901/NEWS06/912352002/Laws-barring-noncompete-clauses-spreading

by hhs • 4 years ago

372 216 4 years ago

ptudan• 4 years ago

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.

DebtDeflation• 4 years ago

It jumped the shark a few years back when Jimmy Johns tried to force their "sandwich artists" to sign non-competes.

Sohcahtoa82• 4 years ago

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.

omginternets5• 4 years ago

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”.

lazide15• 4 years ago

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.

toomuchtodo2• 4 years ago

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.

ec109685• 4 years ago

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.

jaxn2• 4 years ago

Every admin assistant should be under an NDA / Confidentiality agreement. Same for personal security. But those are not non-competes.

ChrisMarshallNY• 4 years ago

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.

jasonwatkinspdx2• 4 years ago

Believe it or not they're now being used for fast food employees.

nraynaud• 4 years ago

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”

msrenee• 4 years ago

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.

Natsu• 4 years ago

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.

biomcgary2• 4 years ago

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.

cma• 4 years ago

Why even allow this? Just makes things less competitive and pays people to be unproductive.

jiggawatts• 4 years ago

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.

hailwren• 4 years ago

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.

ghaff10• 4 years ago

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.

mywittyname2• 4 years ago

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.

willcipriano• 4 years ago

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.

drogus5• 4 years ago

This is how it works in Germany and in some other EU countries. Companies need to pay 50% of an average of 3 last months salary in order to enforce a non-compete clause.

debesyla• 4 years ago

Yeah, same in Lithuania.

mkl95• 4 years ago

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.

loceng• 4 years ago

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?

weberer• 4 years ago

Lol, no.

blep_• 4 years ago

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.

julienreszka• 4 years ago

I don't think this is comparable.

matsemann• 4 years ago

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.

shadowgovt• 4 years ago

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).

neon_electro• 4 years ago

https://en.wikipedia.org/wiki/Solidarity

whimsicalism4• 4 years ago

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

aidenn02• 4 years ago

While that does occasionally happen in the US as well, it's illegal (both general strikes and sympathy strikes were banned by Taft-Hartley).

bonestamp2• 4 years ago

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.

whimsicalism4• 4 years ago

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.

bhaney2• 4 years ago

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.

rdiddly• 4 years ago

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.

exabrial3• 4 years ago

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.

bhaney2• 4 years ago

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.

gruez• 4 years ago

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.

ghaff10• 4 years ago

I agree with the second part but otherwise seems like an RSU schedule for a public company.

shagie4• 4 years ago

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

exabrial3• 4 years ago

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.

ptmcc• 4 years ago

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.

deathanatos2• 4 years ago

Good riddance to this form of wage suppression. Let's do forced arbitration next.

bigmattystyles• 4 years ago

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.

shemnon42• 4 years ago

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...

deathanatos2• 4 years ago

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.)

jonny_eh• 4 years ago

my friend who is an attorney said she prefers arbitration

So let her opt-in. Why force it?

pyuser583• 4 years ago

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.

encryptluks2• 4 years ago

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.

mbostleman• 4 years ago

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?

andirk2• 4 years ago

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.

mywittyname2• 4 years ago

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.

paxys2• 4 years ago

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.

yellowapple3• 4 years ago

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.

andirk2• 4 years ago

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...

squokko3• 4 years ago

Yes, if you produce no IP then nobody is really going to care what you do or don't do

paxys2• 4 years ago

Over the years so many different jurisdictions around the US and the world have stated their desire to be the "next Silicon Valley" and have poured an immense amount of money and effort to make it so, whether in the form of incentives for businesses, tax breaks, education, job training, or even just straight paying smart people to move there. 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.

"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.

kennend32• 4 years ago

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.

yardie• 4 years ago

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.

diob3• 4 years ago

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.

lazide15• 4 years ago

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.

vkou• 4 years ago

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...

ghaff10• 4 years ago

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.

lotsofpulp• 4 years ago

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.

vxNsr• 4 years ago

Yup kinda interesting to see this play out. With the federal trade secrets law tho it no longer matters.

rileymat2• 4 years ago

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.

NegativeK2• 4 years ago

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.

harry8• 4 years ago

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.

ghaff10• 4 years ago

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.

Cupertino95014• 4 years ago

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.

oolveea2• 4 years ago

Dejure harry defacto

bdw5204• 4 years ago

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.

MichaelZuo• 4 years ago

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.

divbzero• 4 years ago

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.

makestuff• 4 years ago

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.

6502nerdface• 4 years ago

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.

karthikb• 4 years ago

I see no reason to stop them

This sort of a non-compete would almost have certainly resulted in Zoom not being built.

kelnos2• 4 years ago

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.

SuperQue2• 4 years ago

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.

chrisdhoover• 4 years ago

Some say the valley dominated over route 128 for this very reason.

ghaff10• 4 years ago

Except things didn’t really switch West for many years and a lot of other factors were in play.

ryandrake2• 4 years ago

"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.

m4632• 4 years ago

wonder how that is solved in practice?

(also wondering about the armed services and paying for medical school)

origin_path2• 4 years ago

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.

snovv_crash• 4 years ago

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.

TeMPOraL2• 4 years ago

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?

m4632• 4 years ago

I thought austin was like silicon valley, but with own-the-employee-mind-invasiveness. Maybe companies get bigger and move to austin?

bluGill3• 4 years ago

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.

sokoloff4• 4 years ago

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.

whyenot• 4 years ago

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.

coding123• 4 years ago

(it's actually just the weather)

fonix232• 4 years ago

"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.

nicbou• 4 years ago

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.

yellowapple3• 4 years ago

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.

drogus5• 4 years ago

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.

yrgulation4• 4 years ago

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.

ghaff10• 4 years ago

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.

aidenn02• 4 years ago

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.

drogus5• 4 years ago

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.

squokko3• 4 years ago

It should be 125%. Make them really really want it.

drogus5• 4 years ago

Sounds good to me!

chaostheory• 4 years ago

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

aiperson• 4 years ago

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.

munk-a2• 4 years ago

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.

site-packages1• 4 years ago

What’s the enforcement for these anyways, when a company insists on enforcement? “Cease working for your new employer or else”?

jyu• 4 years ago

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.

anttisalmela• 4 years ago

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.

hjeutysd• 4 years ago

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.

Waterluvian• 4 years ago

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.

indymike• 4 years ago

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.

CaptainJack• 4 years ago

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.

yrgulation4• 4 years ago

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.

omginternets5• 4 years ago

Fwiw, I worked in the UK for several years and noncompetes were absolutely standard. Moreover, they appear to be enforceable.

brindlejim• 4 years ago

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.

_tom_3• 4 years ago

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.

kbos87• 4 years ago

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.

oolveea2• 4 years ago

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.. … ………..

_tom_3• 4 years ago

Most starting salaries in tech are over $100k, at least in high COL areas. That's why the limit.

LatteLazy• 4 years ago

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?

Laws barring noncompete clauses spreading

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