California has proven for decades now that getting rid of non-competes is good for the economy and good for workers. It's bizarre that this move hasn't been copied in every other state, especially among those who routinely invest large amounts of money to try and become "the next silicon valley".
Unfortunately sometimes laws are made not for the best benefit of society as a whole but for the benefit of a powerful or well positioned minority. Now check out the Colorado law. It says that non-competes are forbidden except for four exceptions. Check out the fourth exception:
4. Contracts with executive and management personnel and employees who constitute professional staff to executive and management personnel.
There is an actual clause covering secretaries! So you can be sure your secretary will not go working for a competitor. You do not have to think hard to guess who had this law written for themselves.
… or it could (reasonably) be that secretaries to executives tend to have access to highly privileged information, much more so than most employees of the company, on a level similar to the executive themselves.
You're right, instead of treating them(secretaries) like a trusted confidant and rewarding them well financially - thus ensuring their loyalty (even after their employment!) and compensating them for their truly valuable contribution - we should instead create a law that hamstrings an entire industry and continue to bend the knee to the rich and whatever is convenient for them.
I’m no fan of noncompetes — and I would also rather generate (and have previously generated) loyalty through compensation, goodwill and camaraderie, but this entire argument strikes me as disingenuous.
- The almost conspiracy-esque malice of bending ‘to the rich’ that the grandparent poster was talking about is much more easily explained by ‘these people also have unusually privileged information’.
- I think the thinking (perhaps unfairly) went like this: Whilst there is such a thing as domain skill, a noncompete should affect a secretary or assistant minimally in practice, as they generally have a broad, non-domain-specific skillset, unlike the executive they report to.
> Whilst there is such a thing as domain skill, a noncompete should affect a secretary or assistant minimally in practice, as they generally have a broad, non-domain-specific skillset, unlike the executive they report to.
These aren't what people think of as 'secretaries'. These are highly skilled executive assistants with WAY more domain-specific skills than you're giving them credit for. I have friends that do this for C level executives. Including at $100bn+ companies. A non-compete within a given industry would severely hamstring their future career.
Ugh, I think this is the curse of Internet comments, where you can never include enough disclaimers.
I knew this (correct) case would be made as I was writing my comment, but thought I could avoid including a sub-clause to deal with this topic.
So yes — I know folks like this too and fully acknowledge the skillset involved. Some of those folks have a deep skillset and yet don’t have any particular knowledge such that a noncompete would make sense to keep them from spreading it.
Per my comment I don’t like noncompetes — but I do think that this is the thinking that was used to define policy around this.
I also do think that there is an exclusion zone, whereby folks are either:
- Non-specific and not affected by this materially.
- Highly skilled and /would/ take material privileged information with them.
- High skilled and /would not/.
I suspect the last category is just elided in the thinking that led to this coming to be.
At the risk of deflating this highly-charged discussion, I think the reason for the "executive staff" carve-out might be a little more ho-hum: they are often employed via the same contract as the executive they support.
Yup -- I actually am inclined to agree with my sibling commenter all the way up top.
I don't think the answer here is necessarily all that clever -- charged conversation notwithstanding, I just wanted to get at the fact that it's likely /not a conspiracy/.
I would love to deflate this mess of a subthread. :)
> At the risk of deflating this highly-charged discussion, I think the reason for the "executive staff" carve-out might be a little more ho-hum: they are often employed via the same contract as the executive they support.
Huh? The VP of Engineering has a hefty stock plan, a guaranteed bonus, and a three-year contract. Do you really think that her secretary has anything comparable? Heck, her secretary doesn't even have a three-year contract.
It depends on the executive contract. Some of them will offer a guaranteed number of support staff of the executive’s choice (now whether the admin has to negotiate a separate contract with the exec, I don’t know) and you’ll often see admins move along with the exec from job to job.
But I don’t know if that is why the carve-out is there or not. I doubt it, but some exec contracts absolutely allow for a guaranteed support staff of the exec’s choosing.
> The VP's contract is irrelevant when we're talking about staff.
No it's not. If the VP's contract says "The company will hire an assistant for you" then the assistant negotiates with HR for their salary like a regular employee. If the VP's contract says "You get $100K/yr to hire an assistant" then the assistant can't get a raise until the VP's contract changes.
> The VP's contract reasonably protects the VP from the consequences of a non-compete.
It might, or it might not. Contracts do whatever they say they do. If the contract says "You and your staff can't work for any of our competitors unless it's a leap year and you say Pretty Please" then that's what it says.
More generally, above a certain level, executives are more like a small agency than a single person. If you hire Tim Cook to be the next CEO of your startup, he's going to bring his current assistant(s) with him, he's not just going to inherit whoever the old CEO's assistant was.
I don’t see it as the governments job to ensure the loyalty of those with privileged information through legal force, that should be ensured through higher salaries. It’s an example of a law which exists purely to facilitate inequality and to ensure that people paid so little they will never become homeowners can be threatened with joblessness and poverty if they get a competitor to increase their salaries because of the value of the information they know. These non-competes make it companies can expense enforcing loyalty through legal force to the public purse, instead of actually having to pay for loyalty.
Most laws revolving around protecting corporate secrets are enablers of inequality that the public pays for. It’s one of these services the government provides to business that it really shouldn’t.
As per line one of my comment — I also don’t much like non-competes.
The only reason I commented was to dispel and push back on the conspiracy-esque style that the parent commenter used to characterise /how/ the law got written this way.
I don't really understand what noncompete clauses are for. I would have thought that the law already provides for suing an "unfaithful servant". Surely when you take paid employment, there's an implied obligation to take due care of trade secrets.
The last contract I signed (1 sheet of A4) bound me not to take work with a "competitor" for 6 months after quitting. Since the employer's clients were all local, I took that as meaning I was not to take a job with a web-shop in the same town. And I thought 6 months seemed reasonable - after all, we weren't developing patentable inventions, we were just making websites.
[Edit] I think the purpose of the clause was mainly to stop me taking customer lists to the competitor. I'd have thought that fell squarely into the "unfaithful servant" bag - it's a scummy way for an employee to carry on.
So do legal teams, anyone that touches or creates IP, accounting, IT staff etc. NDAs suffice and "they have access to information" isn't a reason to use anticompetitive laws against secretaries. If a company is worried about "highly privileged information" leaking because an employee is now answering phones at another company, then they've got some serious security problems that non-competes won't fix.
This is a common misconception. “Reasonable” does have a specific meaning in many legal contexts, and courts typically have a more specific test for what constitutes “reasonable”
For example, a state that has a law which says non-competes much be “reasonable”, may be enforced by the courts as “1 year in duration and within 50 miles”.
The problem is that 50 miles seems reasonable on its face; however, it ignores context.
Let's say you work for a consultancy in a large metropolitan area covering 5MM+ people and this area has 100+ consultancies. There are many groups of these consultancies and they all service different verticals. There are no other major areas with concentrations of business within hundreds of miles (see middle America).
A person may have been working exclusively within the healthcare vertical at one consultancy and would move to another to work in a completely different vertical (e.g., retail). Would 'reasonable' cover this nuance? Probably not, particularly not in the favor of the worker.
Yes, I have lived that exact situation before and I think non-competes should be outlawed entirely. I’m just saying that the word “reasonable” doesn’t make a law open-ended.
It's only subjective until the judiciary establishes a standard test or interpretation. Which they have done in every state that has language like this in their laws.
In practice, you can call up a lawyer in any state that requires non-competes to be "reasonable" and they can tell you more specifically what the court will enforce.
I'm pretty sure secretaries know a great deal about their boss's business. It behind that, I assume executive staff can transition industries a lot easier than most employees.
Why would rich and powerful executives lobby to make sure there is an 'exception' that keeps them bound by these contracts?
One answer: It helps them. If you're in demand, you can extract more money by promising to keep the secrets. This gives "executives" and "secretaries to executives" a special way to extract a little more.
I'm not versed in secretarial terms-of-art, but given the unusual grammatical construction, I believe the "to" you left out of that list is actually doing the heavy lifting. Assumedly there is a difference between working under executive and management personnel and being staff TO executive and management personnel.
Though a real quick search did turn up a case where what the lawmakers intended by "management" was in question, so there is a distinct possibility they wrote their terms badly. It's weird reading a law that introduces terms like that without defining them.
Sounds like bad law whether I say FOR or TO, both programmers and secretaries work for them. I am still professional staff to their whims. If they want me to dump medical records in this way or another way, I am required to do so towards their whims.
I feel like the lawyers writing the law felt bad about saying: The people directly responsible for scheduling lunches and making sure executives have time to poop between calls.
I think the reality of it is that secretaries are a form of excessiveness and they are afraid of losing that.
One of the major assumptions of market economics is a competitive environment. Here is a study on the policy of non-competes from the Office of Economic Policy in the US treasury.
First I had no idea how prolific non-competes are.
> Non-competes are a central labor market institution, with nearly one fifth of all American workers currently bound by such a contract.
After the policy recommendations, here is the conclusion from that paper.
> Though non-compete contracts can have important social benefits, principally related to the protection of trade secrets, a growing body of evidence suggests that they are frequently used in ways that are inimical to the interests of workers and the broader economy. Enhancing the transparency of non-competes, better aligning them with legitimate social purposes like protection of trade secrets, and instituting minimal worker protections can all help to ensure that non-compete contracts contribute to economic growth without unduly burdening workers.
Yes, the ability to prohibit an employee from choosing who to work for, while costing the company nothing at all does indeed lead to worse outcomes for the worker.
Any non-compete clause must come with a requirement to pay that employee to not compete. That will quickly get rid of non-competes that aren't actually their for the purpose of protecting trade secrets.
On Wall Street we often have Garden Leave, where an employee continues to receive salary and benefits for a period of time after resigning to go to a competitor. Seems pretty fair to me.
It bothers me that they needed a study to figure this out. It's almost a law of the universe that businesses will attempt to accumulate as much advantage and leverage as possible. Simply put, why would a business choose not to have a non-compete? It costs them nothing and reduces employee leverage and options which will obviously lead to them accepting poorer working conditions and inferior compensation. The only reasons not to have this standard legal boilerplate on every contract are: it's literally illegal or otherwise unenforceable, or the employee already has so much leverage they can negotiate terms of the contract.
> It's bizarre that this move hasn't been copied in every other state, especially among those who routinely invest large amounts of money to try and become "the next silicon valley".
Some states are more friendly to labor exploitation than others.
They didn’t really exist yet (they did, but they were tiny, not on anybody’s radar, and not really competing for top end experienced / senior talent for example, they were just vacuuming up new college grads)..
The defendants were high-technology companies Adobe, Apple Inc., Google, Intel, Intuit, Pixar, Lucasfilm and eBay, each of which was headquartered in Silicon Valley, in the southern San Francisco Bay Area of California.
The civil suit was filed by five plaintiffs. It accused the tech companies of collusion between 2005 and 2009 to refrain from recruiting each other's employees.
Ahh, thanks for the correction. I missed that he stepped down in 2019. My point was that Google failed to remove someone who engaged in criminal activity for several years even after it was made public, which seems to me like tacit approval by the Google board.
Here in Japan, the whole industry colludes as a matter of course. Every company will ask you your current compensation, and then calculate an offer no more than +10%~15%. I'm sure there are exceptions, but that seems to be the widely accepted practice.
I can think of several patented medicines that are not being pursued commercially in the US despite their approval in other countries and proven efficacy. I can think of one that's sat on by a company that already produces a similar medication.
Companies will sit on new medications until right before/after the similar, but older, medications they own/license are off patent, that way they always have another patented medication waiting in the wings for when they're done squeezing every cent they can out of their old ones.
As someone who has worked in the industry, this hasn't been my observation at all. There is never "one" patent for a drug and candidates tend to be patented quite early, so the clock starts ticking. A company may be lucky to get several more patents, but it's not guaranteed.
Plus, there is nothing stopping another company from making a similar drug and beating you to market - there were over 6 -statin drugs in the market at one point.
I don't think it is surprising at all. It needs someone to champion the cause. While it isn't good, it doesn't really effect that many people. At least it isn't as obvious. So no one really takes up the cause
Why does it need a champion? Suppose some legislator is drunk one night and decides to introduce a bill banning non-competes. Who would vote against it?
I can only hope that California follows Colorado's lead here. We cannot have a competitive gap. More jail time for labor exploitation, please! Especially given all the news stories about people leaving California, I think vigorously enforced criminal penalties for execs mistreating workers would be great for the economy, great for workers, and something states like Texas and Florida would have hard time getting passed.
There are few trading firms in california because of the non-compete situation. There are costs to everything even feel-good populism that seems like a no-brainer.
There are few trading firms in California because (i) most trading in the US is done in New York and surrounding areas during New York hours, and (ii) New York is very far from California.
If a trading firm is going to use human traders they would not do it in Cali, because they will have to force their traders to work at uncomfortable hours. If a trading firm is going to use solely computers, they would not do it in California because the time a network signal takes to reach California from New York actually matters in computer based trading.
> There are few trading firms in california because of the non-compete situation.
That doesn't make sense. If that were true, there would be one trading firm in California that only existed to hire traders from other firms and copy results.
Unfortunately, you can’t get out of a noncompete with an employer in state A that allows noncompetes by taking a job with a competitor in a different state B that doesn’t allow noncompetes.
The trading center of the world is NYC and/or Greenwich, CT if you want to be cheeky about it. If the NYSE was in SF, you'd see a lot more trading firms there. Fintech is largely not in cali, as well.
Oh, and you forgot anything that requires child labour in the 21st century. I love these OP type of comments. They always give me a chuckle. I feel like everything reverts to child labour or tragedy of the commons (pollution, excessive harvesting of natural resources). Seriously, can you imagine what businesses said in Victorian England when the child labour acts were proposed? And how about the environmental laws in 1970s in United States? "Oh, how can we continue our filthy, harmful business under these new laws?" This kind of thinking promotes "race to the bottom" mentality that I reject. You said it best: "Some kind of businesses aren't worth having."
On a more positive note: I wish wealthy countries would pass laws to ban ship breaking in countries with weaker environmental laws. It seems like a terrible loop hole today that would not be very expensive to patch. When you look at how chemical plants operate in wealthy (mostly environmentally clean) places, pollution controls are front and center for the whole staff. They well know the fines easily exceed profits, and they don't want to wreck their own communities with pollution.
Citadel, Jump, IMC, Optiver, DRW, Susquehanna International are some of the largest trading firms in the world, and the vast majority of their operations are outside NYC
I'm confused by this comment. I am assume you are not talking about physical commodity trading firms, but rather securities trading firms. If yes, this comment makes no sense. Anyone worth anything in the securities markets is covered by a non-complete clause, but you are paid for it. For example: If your contract says you cannot move to a competitor for six months after you leave, then your current employer is contractually obligated to keep you as a paid employee for those six months. Yes, these contracts have been reviewed by state's attorneys in New York, where most trading firms are based in the US.
The real issue is when firms won't pay workers for this privilege. This should be outlawed. It is harmful to workers and competition ("free movement of labour").
Thats because many trading firms have a handful of key algorithms that took a lot of time and money to develop the first time, but that could be re-implemented with not much effort at a new employer.
This applies to pretty much any valuable information that fits in one person's head.
Back in 1995, working for an Investment Bank in London, Perot Systems tried to have us sign a non-compete that included the primary industry, adjacent industries and basically a circle drawn around London with a (IIRC) a 300 mile restriction on working in IT. Which not only prevented me from working anywhere in England, but ruled out a big chunk of Northern Europe. I assumed that it was because the guys who wrote the contracts were Texan and had a different view of distance than us Brits, but the cultural clash was enormous (contract failed after 12-18 months, but I was gone anyway).
Probably not legal in the UK at the time, but irritated enough of us to leave and go and work somewhere else.
You might also view them as a tacit admission that the value you create is worthless to competitors after a year (or whatever the period is).
Either way, they make little sense for the vast majority of non-C-level employees. Employers should be bidding on the employee's knowledge and skills, like you say. If it's imperative that the employee not move to the competition, then do the cost-benefit to retain that employee.
non-compete laws seem like something out of a gilded age nightmare. Saying an employee is not allowed to work in their industry even when they quit is absurd. It is totally pro-employer and extremely anti-employee. How these laws are even around in the 21st century in the US is beyond me. Glad CO took a step to stop this horrific practice.
The way I’ve seen it work in finance is that you are basically given one year’s salary and benefits up front in exchange for not working anywhere for one year. I’d take that.
If you're having the non-compete enforced against you by a Hedge Fund, there's a good chance that 65% of your total compensation is in the form of bonuses. So getting "just your salary" would amount to a 65% pay cut.
On the flip side, you're still getting paid 6 figures to relax, recharge, travel the world and have fun. I would personally love it. But my ex-colleagues feel very differently
While that's at least "fair" in an immediate monetary sense, it's still a bad deal at the end of the day. You've now been out of your industry for a year when you go back and your value has dropped as a result.
Not really. As far as I know (just from reading Matt Levine) everyone knows about these policies, everyone has gaps like this due to gardening leave, and so it's completely expected and does not "drop your value"
>Saying an employee is not allowed to work in their industry even when they quit is absurd
A noncompete does not ban you from working in the industry. Typically it only restricts you from working on competing products. You are only being banned for a period of time from a small part of the giant space of the tech industry.
I'm not allowed to work for any travel focused company for another 20 months according to my previous contract. It might be illegal but also I'm so done with that industry I don't really care.
Untrue. I've seen non competes like "you can't work with any company that's a potential competitor". That's for a software engineer working in a software development agency. Had I signed it, it would keep me out of like 75% of the companies I could work for.
Besides, even in situations where this is not the case, it's still absurd. Companies are all like "free market, supply and demand and bla bla bla" until it goes against them. If you wanna be a capitalist, then be accept capitalism as it should be: a great competition.
Businesses hate capitalism. Capitalism forces them to compete, and competition is hard. What they want is a restricted market that keeps out competitors and entrenches their position.
Capitalists (i.e., those who own the capital) hate competition. They love to buy regulations and other restraints of trade that keep out competitors and entrench their positions. This occurs in every capitalist society, everywhere, always. So, it's somewhat misleading that their philosophy pretends to value what they hate.
I wish there were good terms for what we sometimes think we mean when we say "capitalism". "Free market" seems good, but the word "capitalism" often shows up in the definition...
It depends. In the US each state has their own rules on how restrictive a non-compete can be. Some only allow narrow limitations, while other allow far more broad restrictions on who you can work for.
The terms of most non-compete prohibit you from working on a "competing product", they prohibit you from working at a company that works on a competing product. Specifically if there is an intersection in products made by two companies, they are competitors.
If you're in a small town there aren't that many different jobs, so a non-compete means "you cannot work" - e.g. if you have a Walmart job with a non-compete, you can't go work at Target.
At the other end, if you work at a large tech company it turns out you probably can't work at any other large tech company. If you work at a startup you can't move to a large company, and vice versa.
And "only banned for a period of time" is a nice way of glossing over a sim to twelve month period (pretty much as long as the company thinks that they can get away with) in which you no longer have healthcare, and ability to pay rent, etc because you can't get a market rate job.
If a company believes that you leaving and working for someone else will cause them harm they should be willing to pay you to not work for those competitors.
Fwiw, most states don't allow enforcement of non-competes for low level jobs like clerks. So in practice you could go from Walmart to Target in most places. They put those clauses in for the chilling effect. It's a scare tactic.
Not to mention that job opportunities which doesn't violate the non compete but the company still decide not to hire for fear you'll leave in a couple of months due to the other company trying to enforce an unenforceable non compete.
I strongly disagree with these punishment options. On one hand jail is overkill for the majority of cases. We as a country jail too many people as it is, and correctly assigning prison sentences to the appropriate person when crimes are committed by a corporation is something our justice system does poorly. On the other hand a $750 fine is completely inadequate to prevent abuses. The huge gap between fining management a few days (or hours) of pay, or jailing them for months is bizarre, yet those are the only options given to the judge.
Wage theft is the largest segment of theft, and the penalties there are only fines. Other forms of theft are punished almost exclusively via jailtime. In general, corporate crimes are punished with fines, and are absorbed by the businesses, offering no real deterrent, and absolutely no personal responsibility.
Normally I wouldn't be in favor of putting more people in jail, but we do need some form of a real deterrent for corporate crime, and making people think about their personal actions at work will hopefully change the culture of compliance.
Completely agree with this. We put way too many people in jail. And a lot of the times it may just be the "fall-guy" who gets put in the slammer rather than the people who made the decision behind closed doors. And besides, there will be companies who will just have teams of lawyers prepared to make sure it never becomes a jail sentence.
$750 is ridiculously low to the point where almost any company would see that as a cost of doing business. It needs to be much more harsh to do any real damage to corporate finances.
Why is it overkill? In Colorado, if you steal goods worth $50-$300, you can do up to 6 months in jail. [1] An improper non-compete could cost a worker a lot more than that and it's a max of 4 months in jail.
That's also overkill. 6 months in prison for $300 of stolen good is cruel and unnecessary. The average annual cost per inmate for Colorado is nearly $40k [1], so at six months it's $20k. $300 stolen costs the state $20k, that's just absurd. At that amount you should get some sort of forced community service option before any sort of jail time is considered, or a fine at like 5x the amount paid to the person you stole it from.
I agree. But I think the only way we'll solve this issue is by having sentencing parity for white-collar crimes.
Right now plenty of people look at that and say, "It's obvious that Those People will only learn if they're strictly punished. We can't be soft on crime!" But if we have similar sentences for things like wage theft, where many more people will identify with the perp, I think they'll be much more willing to say, "Gosh, that seems like overkill."
I think the jail clauses are in there to act as a chilling effect and deter employers from putting in the clauses at all without consulting an attorney. Basically playing the Uno reverse card on employers who put unenforceable non-competes in contracts to deter employers from leaving.
In principle, I agree that jail time is too harsh, but I have to admit I find it satisfying to turn the tables like that. Plus it's not like the jail term is ever going to be used.
I'm glad some laws are finally applying appropriate punishments for corporate malfeasance. Until we start giving jail time to executives who willfully and openly violate laws, we don't have a chance of stopping the onslaught of corporate lawlessness.
The punishments we give are too harsh on petty crimes committed by the poor and powerless, but far to lenient on the vast crimes of the rich and powerful.
"The poor and powerless" can't afford legal representation (and public defenders are notoriously poorly funded), so they're easier to prosecute. They also can't afford lobbyists, so they didn't write the laws in the first place.
I was pleased to learn that the new supreme court nominee has worked as a public defender.
From the article it looks like that a "contract for the protection of trade secrets" is permitted to have a non-compete clause. Does anyone feel that is a easy excuse for a Colorado employer to legally have a non-compete?
They may be able to argue that a software or hardware engineer would need a non-compete as they are exposed to confidental IP and don't want them bringing it to another company. Same for a line cook that has knowledge of "secret" recipes or techniques.
A judge will end up judging cases involving this and deciding whether the trade secret seems reasonable and it seems like a huge gamble to risk jail over getting cute with it
People here frequently seem to interpret the law like it's a videogame that always executes in a reliable way and can therefore be gamed through obvious loopholes, rather than being a series of guidelines that give the people enforcing them a useful/terrifying latitude in both interpretation and enforcement.
> it seems like a huge gamble to risk jail over getting cute with it
That seems very naive. Judges don’t usually jail companies for labor issues.
At best the company would have to pay comp’ for the non-compete, though realistically the most that’d happen is the non-compete gets struck down and the employee gets saddled with the bills.
And that’s if you don’t get a “business friendly” judge who decides some nonsense like the ratio of water to secret sauce syrup is a trade secret so the NCC is valid and you can’t work in any place of eating for 5 years.
> contracts with executive and management personnel and employees who constitute professional staff to executive and management personnel.
Has anyone looked into what "professional staff to executive and management personnel" means in practice? The broadest reading could include software engineers as "professionals" who report to "management personnel" (their engineering managers). That seems broad enough to make this basically useless, so I assume I'm missing something.
There are loopholes everywhere. Non-compete contracts for healthcare providers were already illegal in Colorado, but our pediatrician had to locate her new practice ~20 miles away from where she wanted because of a non-compete with her previous practice. She had already had a lawyer look into it and he assured her there was enough precedent that she couldn't win, despite the law being very clear, IMO.
One thing that folks seem to forget about noncompetes, is that there are already (and have been, for decades), laws on the books, covering theft of services, industrial espionage, etc.
These aren’t “We’ll sue you!” laws. They’re “You’re getting a cell, dude!” laws. They also cover the new employer, who would solicit and use this information.
It’s just that proving that an engineer who went to a competitor, then provided privileged information, is difficult, expensive, and time-consuming.
It’s much easier to just prevent the employee from going to a company, where they could casually reveal the information, and the new company could dilute it, making it harder to prove they got it.
And, one way to avoid a lot of these problems, is to simply pay your employees well, and treat them with respect, so they aren’t tempted to head for greener pastures.
That seems to be too big an ask, for most corporations.
Stiff penalties including jail time - that is key, because it creates a meaningful incentive to not simply try what they can get away with.
If a company sees that they'll probably get away with something because nobody will have the patience/resources to sue and win, and even in the worst case they'll pay X million/billion which may be less than they gain through their illegal behavior, they're very much incentivized to just try. And the managers making and implementing the decision have no skin in the game, so they'll happily play along.
If a person is at risk of going to jail for it, they're suddenly very much incentivized to not participate in that.
I'm not against non-competes, but I think that you should be compensated for any harm they cause. If I get fired, non-compete should be invalid. If I get a job offer, my company should get a right of first refusal to match compensation.
Why should the company get the right if first refusal?
Why do you assume compensation is the only motivation? Countless studies show that bad management is the primary reason for leaving.
By your argument, if I’m being sexually harassed at work in such a way that I can’t likely win in court (never done in front of others), as long as my current company matches any offer I get, I’m not allowed to leave?
Why does the company get the benefit? If I can’t go to a new company, why can you fire me? It’s absolutely impossible to prove every infraction that could be done by the company or employee.
> I'm not against non-competes, but I think that you should be compensated for any harm they cause. If I get fired, non-compete should be invalid. If I get a job offer, my company should get a right of first refusal to match compensation.
I dunno about the right of first refusal, but the firing thing should absolutely make non-competes invalid.
If you don't want someone to work for you anymore, then that's your problem when they work for someone else.
Think about normal relationships - anyone who left their partner and then insisted that their ex cannot start a new relationship would be considered insane by everyone party to the conversation.
And yet, when it comes to something even more important, like making a living, we totally allow it, tolerate it and normalise it!
I think unreasonable non competes could be prevented by requiring a company to match high end of market compensation (not just salary) + say 20% for the period of the non compete.
It would “work” for many jobs, via making the non compete clause totally economically unviable. Some holes for tech job moves with promotion (sometimes significantly more than 20% jumps), and sometimes middle managers (promotions to different companies can sometimes be much much larger for no apparent reason).
The issue for the worker is that the “high end” of their current position may not be near the median of the next position they want to move to.
For employers, there would be very very very few jobs where this was worth it. Which still might be “better” for them than a California style blanket ban on non compete.
> Some holes for tech job moves with promotion (sometimes significantly more than 20% jumps), and sometimes middle managers (promotions to different companies can sometimes be much much larger for no apparent reason).
The whole point of my market value comment was that if you can get an offer for $X total comp, then if your employer wants to enforce your non-compete, they would have to pay you a 20% (or whatever) premium on that. For the vast majority of employees companies would just stop having non-competes. For higher level employees it might even reduce the amount of stupid "I can get a better raise by switching company" cycle that currently exists.
For executive level folk in CA that is functionally how it works already
> Which still might be “better” for them than a California style blanket ban on non compete.
To my knowledge, companies in CA have the option to counter their former employee's offer from another company. If Company A really doesn't want their employee to work at Company B, they can offer them a fair amount of money to not work for a year.
I think that would be a fair middle ground that doesn't require non-competes.
They already have that - telling you current employer you're going to leave due to a better offer gives them the opportunity to provide a counter.
That's not a law, and doesn't need to be (I'm not even sure how you would make a law in which a company could not offer a raise to prevent you from leaving?). The alternative would be that you were legally required to accept an offer once it was made, which seems to be even more absurd than a non-compete.
Considering you will not be able to exercise your skills in your profession, and that skills rot, even a "paid year-long vacation" is not a good deal for the employee.
I do not exactly understand this though: "contracts with executive and management personnel and employees who constitute professional staff to executive and management personnel"
Why are they any different? Does it mean that let's say CFO of company A can not quit and be CFO of company B (assuming they do not disclose A's private data / secrets)?
General employees have minimal bargaining power, and while they may have knowledge of, or even be responsible for generating IP - overall they're not seen quite as important as senior executives who have knowledge of longer term plans.
Those senior executives may also have better bargaining power - so for instance they might accept a 2 year non-compete for the industry, but in return get a sizable payout upon departure to compensate for that.
It's basically to stop your C-Suites of FooCorp going to work for their direct competitor BarCorp and having direct internal knowledge of how you'd take down FooCorp.
Serious question, why do you (almost) feel sorry for employers? Absent this rule non-competes provide a literally zero-cost method to pay below market compensation.
That’s exactly what it’s supposed to mean. How big of a loophole it is remains to be seen. Would this loophole fit $300,000/year McKinsey consultants? Would it fit $75.000/year Accenture engineers?
The idea is that the CFO people are compensated so highly that they’re not substantially harmed by the existence of the non compete. Losing out on a $100 million opportunity when you made $10 million in the last 4 years is much, much less painful than losing out on a $130,000 opportunity when you made $70,000 last year.
Granted, a lot of CFOs are making $300,000 or sometimes even less. But they are seen as having a lot of power to destroy a business.
Another way this works is that people like Anthony Levandowski could get a “CTO” esque title to go along with their stratospheric salary so that the non compete is still strictly binding in Colorado, even absent proof of trade secret violations.
Businesses want some leeway to be able to bind high level employees who are most likely to have the industry connections and strategic knowledge to truly beat them using knowledge they gained during their employment.
General population finds the exceptions more palatable when the language can be presented to sound like it’s only binding deca-millionaires.
This language is a compromise solution, so contracting firms like Accenture will attempt to figure out what they can still get away with.
That's because of the salary listing. Colorado seems to be aggressive in saying this law applies to telework even if it says "no Colorado applicants accepted". I hope they manage to make it go nationwide.
I think the non competes shouldn't exist. But if they do the length should be shorter than the employment term. It should be nullified if the employee is fired or laid off. And it should only apply to people with higher salaries (dunno, 100k+ it something)
