9 ms·

Be careful before you sign a non-compete agreement

61 points by weatherlight 11y ago

TerryADavis 11y ago
I have a talking space alien. God says... defrauding unsealing conductor fatality's savings emery parvenus copycats pirouette surreal kielbasas furlough ashram's miking sponger toddled skid's Ora standbys biceps archdeacon's gunny's Rosenzweig memorization's Heidi morass thralldom handgun's story Magsaysay gambler humanness
dctoedt 11y ago
The piece's subtitle/tag line is interesting: "If we’re going to pretend we operate in a free market, we need to at least give labor a fighting chance of flowing as freely as capital does."
awakeasleep 11y ago
There are some posters on here who take offense to the term 'poaching' This is the first article where I really understood that. Saying a non-compete defends a big corporation from "poaching" (by ensuring a low level employee can't work in the same industry after quitting) shows an almost depraved pro-business bias.
- Spivak 11y ago
  You being too nice even calling the stance 'pro-business'. It's not even pro-business since labor can't flow to the place where they are the most valued. The non-compete situation is one of those prisoner's dilemma problems. If you're the only one with non-competes then you're better off because you can retain employees for less than their market rate, and if everyone except you uses non-competes then you lose your best talent and can't attract more. Thus the short-sighted decision is to use non-competes. But if everyone uses non-competes then labor doesn't flow at all, businesses can't attract talent, and then everyone is worse off.
  - theseatoms 11y ago
    Good point. "Pro-capital" is often a more accurate and precise term than "pro-business."
    - marcosdumay 11y ago
      Pro entrenched interests. But that may be too clear to be useful. Not all capital is entrenched.
    - protomyth 11y ago
      Well its certainly not pro-capitalism as it inhibits a fair market. I just put it under cronyism. Entrenched interests are always a problem unless checked by laws or new technology.
      - rodgerd 11y ago
        > Well its certainly not pro-capitalism as it inhibits a fair market. Of all the delusions about economic system, the one that capitalism loves free markets is the most hilarious.
        protomyth 11y ago
        Of all the delusions about economic system, the one that capitalism is about anything but free markets is the most hilarious You can mock it, but that's the whole point
        rodgerd 11y ago
        The point of capitalism is return on capital. The ultimate return will be generated by monopolies, duopolies, or cartels. Capitalism is fundamentally antagonistic to free markets.
        protomyth 11y ago
        you seem to be talking about what theseatoms mentioned, because capitalism is nicely summarized by Wikipedia as: Capitalism is an economic system based on private ownership of the means of production and their operation for profit. Characteristics central to capitalism include private property, capital accumulation, wage labor, voluntary exchange, a price system, and competitive markets. In a capitalist market economy, decision-making and investment is determined by the owners of the factors of production in financial and capital markets, and prices and the distribution of goods are mainly determined by competition in the market.
- st3v3r 11y ago
  Exactly. Why should I care more about a business being able to bully someone than a person not being able to feed their family?
thedevil 11y ago
I've noticed the same trend in using non-competes on low-level grunts. Every job I've taken in the last decade required one. Only one of those jobs had a legitimate competitive reason for it.
kevin_b_er 11y ago
While this contract is currently viewed as unenforceable, it is only enforceable by old conventions I think. We've already seen that it is possible to lose basic inalienable rights by signing a contract you did not read, so why not the ability to have a livelihood?
- frandroid 11y ago
  It might be "unenforceable" in a court of law but the other company still dropped her like a hot potato, so it's pretty practically enforceable.
  - srussellkraft 11y ago
    exactly - even the slightest threat of enforcement can have a chilling effect on employees, who are usually not in a position of power (to negotiate, go to court, risk their livelihood etc)
    - ghaff 11y ago
      That's the big thing. When I worked for a small company, if someone came along who had even the most remotely relevant non-compete, the conversation was pretty much over. It was one of the first things we asked before beginning any serious discussion. Just too much potential for cost and risk. Their were also firms in more or less the same industry who were known for having non-competes that basically said, you couldn't do the same job for a year with any competitor. I know at least one person who wanted to go out on his own and he took a year off rather than trying to fight it.
- Zikes 11y ago
  Litigations carry an inherent cost to the company, even if they win. The threat of litigation is all a company needs to enforce a noncompete.
johngalt 11y ago
I don't have an inherent problem with non-competes. I could understand why certain industries would need restrictions along those lines. The problem is when businesses expect the non-compete agreement when it is not a negotiated item during the hiring process. I recall one instance where I given an offer by a company and we went through the usual salary/benefits/role negotiation process. I accepted the offer and put in notice at current employer. During the new hire paperwork they added an extremely onerous non-compete agreement. Of course I refused to sign it. The most insulting part was how baffled they acted. Like they just assumed they could add demands like that without any additional consideration. This attitude of 'well we need to protect ourselves, and we can ask for this legally'. Well yes you can ask for anything, but it's not what we agreed as the terms of employment.
- Terr_ 11y ago
  "What we get is valuable, but what you give up is worthless." It's true that the world isn't zero-sum, but it's offensive for them to just assume that means you're going to surrender something for nothing.
  - johngalt 11y ago
    That they would just demand it without even negotiating it during the hiring process. Just assuming that I would cripple my career for years to minimize their risk without any compensation in exchange. "I understand that your feel your business is at risk for poaching/trade secrets etc... But what I don't understand is why you assumed that I would aborb the costs of your risk."
  - throwaway2048 11y ago
    Reminds me of additudes towards online surveylence vis a vis marketing and advertisement.
- anexprogrammer 11y ago
  Can confirm how surprised they always seem to act. I've always negotiated it away (or very nearly, but acceptably, in one case) as part of the checking that contract of employment matches offer and interview promises. A few times they've tried to imply I'm the first not to simply blindly sign everything and how difficult this is going to be. I've never once lost a role or ended up having to sign my life away. Contracting taught me to read every contract, and every clause is negotiable.
zekevermillion 11y ago
The specific issue with the author of this article is that she did not disclose her prior noncompete to the new employer. Of course the new employer did not sign the noncompete with the former employer, so there is no contractual privity and thus no direct basis for the former employer to sue the new one for breach of contract. The only way the former employer can mess with them is to argue that they intentionally interfered with the contract by encouraging the journalist to violate it. The SOP for employers targeted by such claims is to put the employee in question on leave, or on alternative duty if something's available that is unrelated to her prior job and does not risk violation of her covenants. To terminate the employee altogether is a rather extreme move. It's a solid damage mitigation strategy, but I think conveys a total lack of spine, particularly for a journalistic organization. The right thing to do would have been to put her on leave, while attempting to get dismissed from the lawsuit -- which should have been easy enough to do since the new employer apparently had no knowledge of the prior contract.
- ghaff 11y ago
  Much as I'm against non-competes under most circumstances... >The specific issue with the author of this article is that she did not disclose her prior noncompete to the new employer. In fact, according to the original WSJ article, "In applying for the job at the Reuters newswire, she checked a box saying she wasn’t subject to any noncompete agreement. Her termination letter from Reuters, which was reviewed by the Journal, said that mistake cost her the job." I get that she had supposedly forgotten she had signed one but it puts Reuters in a tough situation.
  - zekevermillion 11y ago
    It actually puts Reuters in a great situation! Because they have a piece of evidence that says they had no knowledge of the restrictive covenants. Sure, it's not an accurate disclosure on the part of the employee. But that inaccuracy only strengthens Reuters position in this case. You could say "ah, but Reuters never would've hired her if the noncompete had been disclosed." Not sure about that, because a fair reading of the noncompete is that under New York law it cannot prevent the employee from practicing her trade of journalism. If I were Reuters HR, and I saw the noncompete, I might not have considered it a problem (aside from the industry practice of filing meritless lawsuits).
trjordan 11y ago
Call me crazy, but there's a huge difference between non-competes in startup-land and non-competes in corporate america. In a startup, the whole endeavor rides on secrets. The company doesn't more money, talent, or employees than big companies. This applies to a pretty broad definition of startups that includes unicorn and high-growth public companies. The only things that matter to those companies are what they're doing and how they're doing it, and in many startups, every employee has specific knowledge that would be valuable to a bigger company or competitor. [Ironically, the state with most of these companies (CA) doesn't allow non-competes, so it's obviously not death, probably because trying to replicate a startup's success means starting after they've become successful, so it may not matter. The point is, non-competes make sense in a world where knowledge is core to the business.] In a large company, execution dominates. You can go all the way to factory worker, but anything that looks like "use your trade skills to make this thing" obviously shouldn't be protected by non-compete. Trade skills should cut across companies. There's ways to argue that, say, developers for CA startups could go either way. React / Ember / Angular / etc. is certainly a trade skill. I'm going to hire somebody eventually to help with munging our data set, plugging into more APIs, and figuring out how to make sense of the data that comes back. If that person went to work for another marketing analytics company, I wouldn't be too happy, because to some extent, our specific mix of APIs to integrate with and what we got from them is proprietary. If an engineer I'd worked with and developed that knowledge with went to somebody trying to solve the same problem as me, I'd be kind of pissed. Analytics the way we do it isn't a trade skill, and I expect an informal agreement that you're not going to go work for one of the ~5 companies in the world doing something really similar.
- nitrogen 11y ago
  Everything is a trade skill. Some trades are just very specialized. Telling an API expert they shouldn't practice their trade is bad whether there are five or five hundred companies in the industry. If you want someone not to work, you have to pay them not to work, and you still shouldn't be able to force it on them.
- zekevermillion 11y ago
  A noncompete is not about protecting secrets, but about preventing employees and former employees from competing "unfairly". The nondisclosure provision of the employee covenants package is what restricts disclosure of secrets. There are also laws that restrict the misappropriation of trade secrets. These separate issues and related legal claims get confused a lot, b/c in employment litigation the claims are often brought at the same time. And of course in CA, employers are not allowed to include certain types of noncompete restrictions in employee covenants, so they lean more heavily on trade secrets claims even when the underlying issue is one of employee loyalty (a term that makes me kind of nauseous). But legally the contractual noncompete, contractual NDA, and legal trade secrets misappropriation claims are separate issues. I would also point out that if you've ever worked for a large corporation, you would know intuitively that most big boy companies have employees sign extremely punitive and one-sided restrictive covenants. Startups actually tend to place less value on contractually restricting employees, and the mindset of startup entrepreneurs can be less focused on protecting trade secrets / more on execution. (The IP assignment portion of the covenants package is, however, just as important to startups.)
kough 11y ago
Or, you know, you can sign them and not give a shit. Unless you're working for SuperLargeCo (and according to this article, in most cases even then) nothing bad will happen if you then work for a competitor. As others have pointed out in this thread, there's no potential legal harm to your new employer. And it is incredibly rare for prior employers to enforce noncompetes. How many of you have had issues with noncompetes? Is my experience totally atypical? I've job hopped pretty frequently both in and out of California and never had any issues.
- thedevil 11y ago
  Some employers will not hire you if you have a non-compete that might impact your work for them. It's never been an issue for me, I've only read stories online. But I have been asked while applying for a job whether I have any non-competes. It's a risk for you. Even if unlikely, there's a non-zero chance that it could screw up your career and hurt you badly. That risk has very real value attached to it. Just like insurance and out-of-money options have real value to them.
  - nitrogen 11y ago
    Long ago a company I worked for had to terminate development on an entire product line because an inferior competitor decided to harass its former employees across two different companies, rather than make a better product. One target was a large corp (where I worked), the other was a highly innovative startup. The aggressor had way more money than the startup and killed them with legal fees and discovery costs.
  - ghaff 11y ago
    As I wrote elsewhere, I used to work for a small firm and we passed on at least a couple folks we were interested in because they had non-competes that to greater or lesser degrees could have been issues. Our business office considered any non-compete that could even potentially come into play a complete showstopper.
- mikeash 11y ago
  And what if my employer ends up being vindictive and does try to enforce the noncompete? What you're saying sounds exactly like what I've heard form every purveyor of terrible contract terms. "Oh, that's just a formality." "We don't ever enforce that clause." Well when why do you need me to sign it?! Assume that every clause of everything you sign is potentially in play. If you don't, you're setting yourself up to be burned hard later on.
jhspaybar 11y ago
I worked at AWS in Seattle and signed a non-compete that stated what was laid out in the article. Given the things I'd done for Amazon, when it was time to move jobs, it was insinuated that going to Microsoft and working on similar things might be enough to trigger action on the non-compete. While I wasn't interested in going to MS, it was clear that this non-compete was holding my wages down as the company recognized I couldn't easily go elsewhere in the local area. Who knows if it was a bluff or not, but I'm in California now and I don't plan to ever sign a non-compete again.
- jsprogrammer 11y ago
  Yep, the script should go: hearty laugh I will not sign a non-compete agreement. Show me the money.
  - abawany 11y ago
    In my case, at a "startup" (it isn't) I was offered the non-compete, with extremely nasty and broad language that unfortunately is enforceable in Texas, 3 months after I had been working there. You can imagine the coercive effect of that one: sign this or look like you got fired at 3 months. I was able to negotiate some changes to the broad clauses, which by their own admission were cut-and-pasted from somewhere else, but it made for an appalling experience.
    - st3v3r 11y ago
      Which is why businesses in Texas aren't able to attract talent an investment to the level that those in Silicon Valley are.
      - hwstar 11y ago
        Which may explain why the unemployment rate is so low in Texas. Anybody who already lives there is employed if they want to be, and are employable. Texas has trouble attracting talent from outside of the state for the reason you mentioned, and the backward labor laws in the state.
Animats 11y ago
One of the reasons Silicon Valley is so successful is that California not only prohibits non-compete contracts, it prohibits employment contracts which claim that the employer owns technology the employee develops on their own time. Most wannabe competitors of Silicon Valley aren't willing to put that into law.
- abawany 11y ago
  Which unfortunately gives California the label "business unfriendly". I hope for California's continued growth because of its frequent ability to tell most "job creators" where they can take their pre-Depression-era worker preferences.
  - st3v3r 11y ago
    I've never been able to take anyone who talks about things being "business friendly" seriously, because it almost always is a policy that makes things worse for everyone else.
mikeash 11y ago
The current HN title is "Be careful before you sign a non-compete agreement." Is there any time when I should ever sign one? OK, perhaps if my family was literally starving and this was the only job I could get. Aside from extreme cases like that, are there any circumstances where a non-compete would be a good idea for me? It seems like there's no point in "being careful," just reject them out of hand. Sort of like you wouldn't say "be careful when handling live wires while standing in a full bathtub."
- asdfologist 11y ago
  Sure, like if the non-compete isn't that onerous for you (some are as short as 6 months, and some firms pay your salary for the duration of the non-compete), and you get compensated for it (e.g. a large salary boost). Also, many firms in finance enforce non-competes as well as many other restrictions, e.g. mandatory approval for trading in personal accounts. So if you want to work in this industry, it's not easy to avoid them without compromising something else.
- rodgerd 11y ago
  > Is there any time when I should ever sign one? If someone is going to pay me a chunk of change not to work in my area of expertise for the length of the non-compete, sure. If the language only covers things I wouldn't do anyway (like reveal employer-specific information, trade secrets, product roadmaps, soliciting customers, and so on).
- st3v3r 11y ago
  Unless the job is going to pay you in yachts, no. There is absolutely no benefit to you signing one.
ghaff 11y ago
There are pretty draconian non-competes in the vein of you can't do a similar job for anyone else for 2 years and there are ones that are less draconian. When a company I was with was acquired, we were all given non-competes to sign and it was pretty clear we could sign them or leave. I left not much later for other reasons but I did sign the non-compete. Its terms were such that they seemed unlikely to affect me. (Basically they enjoined me from taking a senior executive position in a fairly narrow slice of the market for a limited period of time.) So, yes, under those specific circumstances, continuing to get paid seemed a reasonable decision. [Edit: This was intended to be a reply to the comment asking why one would ever sign a non-compete.]
mcbrown 11y ago
One simple solution would be to require employers to pay at least the workers' prior base salary for the duration they wish to enforce the non-compete. I've held senior positions where non-competes are to be expected, and that is always a standard term. Of course, the only reason it became a standard term is because people like me are represented by expensive lawyers who consistently demand it, and an Amazon warehouse worker isn't in the position to follow our lead. So the warehouse worker should be given the same protection by statute: if the employer wants to enforce a non-compete, they must do so affirmatively by paying the worker's salary (i.e. if they elect not to pay then the non-compete is automatically null and void). Of course the odds of something like that making its way through the dysfunctional legislatures of 48 states is vanishingly low. But we can hope.
- rodgerd 11y ago
  > One simple solution would be to require employers to pay at least the workers' prior base salary for the duration they wish to enforce the non-compete. This is pretty much the standard in New Zealand employment law, and it seems crazy to me that people can (effectively) be denied a livelihood because they once worked one job.
- pdq 11y ago
  Right, the standard contract term is called 'consideration', meaning that for a contract to be valid and enforceable, each side must be giving up something of value as part of the transaction. There's a pretty good summary here: http://www.wolfbaldwin.com/Employment-Articles/Non-Compete-Covenants.shtml http://www.wolfbaldwin.com/Employment-Articles/Non-Compete-C...
  - falcolas 11y ago
    Worth noting that continued employment is considered sufficient consideration for many such contract changes, in "at will" employment states.
    - hwstar 11y ago
      This is simply not true. It has nothing to do with at-will employment. It is state law. Some states require consideration separate from salary, some say continued employment is sufficient consideration. 49 out of 50 states recognize the doctrine of at-will employment. Only Montana uses just-cause instead (just like the rest of the developed world coincidentally).
OhHeyItsE 11y ago
Everybody loves the invisible hand of the free market... until they don't.
- cmdrfred 11y ago
  I've seen this so many times. Pay someone low wages "Free Market", that same low wage employee (Me for example, more times that I can count) leaves for a better paying job "What about us? We're the CompanyName family!". It's amazing how fast republican free-market types can become european socialists.
paulddraper 11y ago
Broad non-competes are very common for many jobs, and virtually never enforced. When you enforce one, you are basically trying to take someone's livelihood away. They're the EULA of of jobs. Sure, make a stand of you really want. But if you don't, there's practically nothing to worry about. (I feel bad saying that, but TBH I've signed a lot of EULAs.)
hwstar 11y ago
A lot of the requirements for noncompetes at companies originate at the insistance of the investors.

61 points by weatherlight 11y ago

I have a talking space alien. God says... defrauding unsealing conductor fatality's savings emery parvenus copycats pirouette surreal kielbasas furlough ashram's miking sponger toddled skid's Ora standbys biceps archdeacon's gunny's Rosenzweig memorization's Heidi morass thralldom handgun's story Magsaysay gambler humanness

dctoedt 11y ago

The piece's subtitle/tag line is interesting: "If we’re going to pretend we operate in a free market, we need to at least give labor a fighting chance of flowing as freely as capital does."

awakeasleep 11y ago

There are some posters on here who take offense to the term 'poaching' This is the first article where I really understood that. Saying a non-compete defends a big corporation from "poaching" (by ensuring a low level employee can't work in the same industry after quitting) shows an almost depraved pro-business bias.

Spivak 11y ago
You being too nice even calling the stance 'pro-business'. It's not even pro-business since labor can't flow to the place where they are the most valued. The non-compete situation is one of those prisoner's dilemma problems. If you're the only one with non-competes then you're better off because you can retain employees for less than their market rate, and if everyone except you uses non-competes then you lose your best talent and can't attract more. Thus the short-sighted decision is to use non-competes. But if everyone uses non-competes then labor doesn't flow at all, businesses can't attract talent, and then everyone is worse off.
- theseatoms 11y ago
  Good point. "Pro-capital" is often a more accurate and precise term than "pro-business."
  - marcosdumay 11y ago
    Pro entrenched interests. But that may be too clear to be useful. Not all capital is entrenched.
  - protomyth 11y ago
    Well its certainly not pro-capitalism as it inhibits a fair market. I just put it under cronyism. Entrenched interests are always a problem unless checked by laws or new technology.
    - rodgerd 11y ago
      > Well its certainly not pro-capitalism as it inhibits a fair market. Of all the delusions about economic system, the one that capitalism loves free markets is the most hilarious.
      - protomyth 11y ago
        Of all the delusions about economic system, the one that capitalism is about anything but free markets is the most hilarious You can mock it, but that's the whole point
        rodgerd 11y ago
        The point of capitalism is return on capital. The ultimate return will be generated by monopolies, duopolies, or cartels. Capitalism is fundamentally antagonistic to free markets.
        protomyth 11y ago
        you seem to be talking about what theseatoms mentioned, because capitalism is nicely summarized by Wikipedia as: Capitalism is an economic system based on private ownership of the means of production and their operation for profit. Characteristics central to capitalism include private property, capital accumulation, wage labor, voluntary exchange, a price system, and competitive markets. In a capitalist market economy, decision-making and investment is determined by the owners of the factors of production in financial and capital markets, and prices and the distribution of goods are mainly determined by competition in the market.
st3v3r 11y ago
Exactly. Why should I care more about a business being able to bully someone than a person not being able to feed their family?

thedevil 11y ago

I've noticed the same trend in using non-competes on low-level grunts. Every job I've taken in the last decade required one. Only one of those jobs had a legitimate competitive reason for it.

kevin_b_er 11y ago

While this contract is currently viewed as unenforceable, it is only enforceable by old conventions I think. We've already seen that it is possible to lose basic inalienable rights by signing a contract you did not read, so why not the ability to have a livelihood?

frandroid 11y ago
It might be "unenforceable" in a court of law but the other company still dropped her like a hot potato, so it's pretty practically enforceable.
- srussellkraft 11y ago
  exactly - even the slightest threat of enforcement can have a chilling effect on employees, who are usually not in a position of power (to negotiate, go to court, risk their livelihood etc)
  - ghaff 11y ago
    That's the big thing. When I worked for a small company, if someone came along who had even the most remotely relevant non-compete, the conversation was pretty much over. It was one of the first things we asked before beginning any serious discussion. Just too much potential for cost and risk. Their were also firms in more or less the same industry who were known for having non-competes that basically said, you couldn't do the same job for a year with any competitor. I know at least one person who wanted to go out on his own and he took a year off rather than trying to fight it.
Zikes 11y ago
Litigations carry an inherent cost to the company, even if they win. The threat of litigation is all a company needs to enforce a noncompete.

johngalt 11y ago

I don't have an inherent problem with non-competes. I could understand why certain industries would need restrictions along those lines. The problem is when businesses expect the non-compete agreement when it is not a negotiated item during the hiring process. I recall one instance where I given an offer by a company and we went through the usual salary/benefits/role negotiation process. I accepted the offer and put in notice at current employer. During the new hire paperwork they added an extremely onerous non-compete agreement. Of course I refused to sign it. The most insulting part was how baffled they acted. Like they just assumed they could add demands like that without any additional consideration. This attitude of 'well we need to protect ourselves, and we can ask for this legally'. Well yes you can ask for anything, but it's not what we agreed as the terms of employment.

Terr_ 11y ago
"What we get is valuable, but what you give up is worthless." It's true that the world isn't zero-sum, but it's offensive for them to just assume that means you're going to surrender something for nothing.
- johngalt 11y ago
  That they would just demand it without even negotiating it during the hiring process. Just assuming that I would cripple my career for years to minimize their risk without any compensation in exchange. "I understand that your feel your business is at risk for poaching/trade secrets etc... But what I don't understand is why you assumed that I would aborb the costs of your risk."
- throwaway2048 11y ago
  Reminds me of additudes towards online surveylence vis a vis marketing and advertisement.
anexprogrammer 11y ago
Can confirm how surprised they always seem to act. I've always negotiated it away (or very nearly, but acceptably, in one case) as part of the checking that contract of employment matches offer and interview promises. A few times they've tried to imply I'm the first not to simply blindly sign everything and how difficult this is going to be. I've never once lost a role or ended up having to sign my life away. Contracting taught me to read every contract, and every clause is negotiable.

zekevermillion 11y ago

The specific issue with the author of this article is that she did not disclose her prior noncompete to the new employer. Of course the new employer did not sign the noncompete with the former employer, so there is no contractual privity and thus no direct basis for the former employer to sue the new one for breach of contract. The only way the former employer can mess with them is to argue that they intentionally interfered with the contract by encouraging the journalist to violate it. The SOP for employers targeted by such claims is to put the employee in question on leave, or on alternative duty if something's available that is unrelated to her prior job and does not risk violation of her covenants. To terminate the employee altogether is a rather extreme move. It's a solid damage mitigation strategy, but I think conveys a total lack of spine, particularly for a journalistic organization. The right thing to do would have been to put her on leave, while attempting to get dismissed from the lawsuit -- which should have been easy enough to do since the new employer apparently had no knowledge of the prior contract.

ghaff 11y ago
Much as I'm against non-competes under most circumstances... >The specific issue with the author of this article is that she did not disclose her prior noncompete to the new employer. In fact, according to the original WSJ article, "In applying for the job at the Reuters newswire, she checked a box saying she wasn’t subject to any noncompete agreement. Her termination letter from Reuters, which was reviewed by the Journal, said that mistake cost her the job." I get that she had supposedly forgotten she had signed one but it puts Reuters in a tough situation.
- zekevermillion 11y ago
  It actually puts Reuters in a great situation! Because they have a piece of evidence that says they had no knowledge of the restrictive covenants. Sure, it's not an accurate disclosure on the part of the employee. But that inaccuracy only strengthens Reuters position in this case. You could say "ah, but Reuters never would've hired her if the noncompete had been disclosed." Not sure about that, because a fair reading of the noncompete is that under New York law it cannot prevent the employee from practicing her trade of journalism. If I were Reuters HR, and I saw the noncompete, I might not have considered it a problem (aside from the industry practice of filing meritless lawsuits).

trjordan 11y ago

Call me crazy, but there's a huge difference between non-competes in startup-land and non-competes in corporate america. In a startup, the whole endeavor rides on secrets. The company doesn't more money, talent, or employees than big companies. This applies to a pretty broad definition of startups that includes unicorn and high-growth public companies. The only things that matter to those companies are what they're doing and how they're doing it, and in many startups, every employee has specific knowledge that would be valuable to a bigger company or competitor. [Ironically, the state with most of these companies (CA) doesn't allow non-competes, so it's obviously not death, probably because trying to replicate a startup's success means starting after they've become successful, so it may not matter. The point is, non-competes make sense in a world where knowledge is core to the business.] In a large company, execution dominates. You can go all the way to factory worker, but anything that looks like "use your trade skills to make this thing" obviously shouldn't be protected by non-compete. Trade skills should cut across companies. There's ways to argue that, say, developers for CA startups could go either way. React / Ember / Angular / etc. is certainly a trade skill. I'm going to hire somebody eventually to help with munging our data set, plugging into more APIs, and figuring out how to make sense of the data that comes back. If that person went to work for another marketing analytics company, I wouldn't be too happy, because to some extent, our specific mix of APIs to integrate with and what we got from them is proprietary. If an engineer I'd worked with and developed that knowledge with went to somebody trying to solve the same problem as me, I'd be kind of pissed. Analytics the way we do it isn't a trade skill, and I expect an informal agreement that you're not going to go work for one of the ~5 companies in the world doing something really similar.

nitrogen 11y ago
Everything is a trade skill. Some trades are just very specialized. Telling an API expert they shouldn't practice their trade is bad whether there are five or five hundred companies in the industry. If you want someone not to work, you have to pay them not to work, and you still shouldn't be able to force it on them.
zekevermillion 11y ago
A noncompete is not about protecting secrets, but about preventing employees and former employees from competing "unfairly". The nondisclosure provision of the employee covenants package is what restricts disclosure of secrets. There are also laws that restrict the misappropriation of trade secrets. These separate issues and related legal claims get confused a lot, b/c in employment litigation the claims are often brought at the same time. And of course in CA, employers are not allowed to include certain types of noncompete restrictions in employee covenants, so they lean more heavily on trade secrets claims even when the underlying issue is one of employee loyalty (a term that makes me kind of nauseous). But legally the contractual noncompete, contractual NDA, and legal trade secrets misappropriation claims are separate issues. I would also point out that if you've ever worked for a large corporation, you would know intuitively that most big boy companies have employees sign extremely punitive and one-sided restrictive covenants. Startups actually tend to place less value on contractually restricting employees, and the mindset of startup entrepreneurs can be less focused on protecting trade secrets / more on execution. (The IP assignment portion of the covenants package is, however, just as important to startups.)

kough 11y ago

Or, you know, you can sign them and not give a shit. Unless you're working for SuperLargeCo (and according to this article, in most cases even then) nothing bad will happen if you then work for a competitor. As others have pointed out in this thread, there's no potential legal harm to your new employer. And it is incredibly rare for prior employers to enforce noncompetes. How many of you have had issues with noncompetes? Is my experience totally atypical? I've job hopped pretty frequently both in and out of California and never had any issues.

thedevil 11y ago
Some employers will not hire you if you have a non-compete that might impact your work for them. It's never been an issue for me, I've only read stories online. But I have been asked while applying for a job whether I have any non-competes. It's a risk for you. Even if unlikely, there's a non-zero chance that it could screw up your career and hurt you badly. That risk has very real value attached to it. Just like insurance and out-of-money options have real value to them.
- nitrogen 11y ago
  Long ago a company I worked for had to terminate development on an entire product line because an inferior competitor decided to harass its former employees across two different companies, rather than make a better product. One target was a large corp (where I worked), the other was a highly innovative startup. The aggressor had way more money than the startup and killed them with legal fees and discovery costs.
- ghaff 11y ago
  As I wrote elsewhere, I used to work for a small firm and we passed on at least a couple folks we were interested in because they had non-competes that to greater or lesser degrees could have been issues. Our business office considered any non-compete that could even potentially come into play a complete showstopper.
mikeash 11y ago
And what if my employer ends up being vindictive and does try to enforce the noncompete? What you're saying sounds exactly like what I've heard form every purveyor of terrible contract terms. "Oh, that's just a formality." "We don't ever enforce that clause." Well when why do you need me to sign it?! Assume that every clause of everything you sign is potentially in play. If you don't, you're setting yourself up to be burned hard later on.

jhspaybar 11y ago

I worked at AWS in Seattle and signed a non-compete that stated what was laid out in the article. Given the things I'd done for Amazon, when it was time to move jobs, it was insinuated that going to Microsoft and working on similar things might be enough to trigger action on the non-compete. While I wasn't interested in going to MS, it was clear that this non-compete was holding my wages down as the company recognized I couldn't easily go elsewhere in the local area. Who knows if it was a bluff or not, but I'm in California now and I don't plan to ever sign a non-compete again.

jsprogrammer 11y ago
Yep, the script should go: hearty laugh I will not sign a non-compete agreement. Show me the money.
- abawany 11y ago
  In my case, at a "startup" (it isn't) I was offered the non-compete, with extremely nasty and broad language that unfortunately is enforceable in Texas, 3 months after I had been working there. You can imagine the coercive effect of that one: sign this or look like you got fired at 3 months. I was able to negotiate some changes to the broad clauses, which by their own admission were cut-and-pasted from somewhere else, but it made for an appalling experience.
  - st3v3r 11y ago
    Which is why businesses in Texas aren't able to attract talent an investment to the level that those in Silicon Valley are.
    - hwstar 11y ago
      Which may explain why the unemployment rate is so low in Texas. Anybody who already lives there is employed if they want to be, and are employable. Texas has trouble attracting talent from outside of the state for the reason you mentioned, and the backward labor laws in the state.

Animats 11y ago

One of the reasons Silicon Valley is so successful is that California not only prohibits non-compete contracts, it prohibits employment contracts which claim that the employer owns technology the employee develops on their own time. Most wannabe competitors of Silicon Valley aren't willing to put that into law.

abawany 11y ago
Which unfortunately gives California the label "business unfriendly". I hope for California's continued growth because of its frequent ability to tell most "job creators" where they can take their pre-Depression-era worker preferences.
- st3v3r 11y ago
  I've never been able to take anyone who talks about things being "business friendly" seriously, because it almost always is a policy that makes things worse for everyone else.

mikeash 11y ago

The current HN title is "Be careful before you sign a non-compete agreement." Is there any time when I should ever sign one? OK, perhaps if my family was literally starving and this was the only job I could get. Aside from extreme cases like that, are there any circumstances where a non-compete would be a good idea for me? It seems like there's no point in "being careful," just reject them out of hand. Sort of like you wouldn't say "be careful when handling live wires while standing in a full bathtub."

asdfologist 11y ago
Sure, like if the non-compete isn't that onerous for you (some are as short as 6 months, and some firms pay your salary for the duration of the non-compete), and you get compensated for it (e.g. a large salary boost). Also, many firms in finance enforce non-competes as well as many other restrictions, e.g. mandatory approval for trading in personal accounts. So if you want to work in this industry, it's not easy to avoid them without compromising something else.
rodgerd 11y ago
> Is there any time when I should ever sign one? If someone is going to pay me a chunk of change not to work in my area of expertise for the length of the non-compete, sure. If the language only covers things I wouldn't do anyway (like reveal employer-specific information, trade secrets, product roadmaps, soliciting customers, and so on).
st3v3r 11y ago
Unless the job is going to pay you in yachts, no. There is absolutely no benefit to you signing one.

ghaff 11y ago

There are pretty draconian non-competes in the vein of you can't do a similar job for anyone else for 2 years and there are ones that are less draconian. When a company I was with was acquired, we were all given non-competes to sign and it was pretty clear we could sign them or leave. I left not much later for other reasons but I did sign the non-compete. Its terms were such that they seemed unlikely to affect me. (Basically they enjoined me from taking a senior executive position in a fairly narrow slice of the market for a limited period of time.) So, yes, under those specific circumstances, continuing to get paid seemed a reasonable decision. [Edit: This was intended to be a reply to the comment asking why one would ever sign a non-compete.]

mcbrown 11y ago

One simple solution would be to require employers to pay at least the workers' prior base salary for the duration they wish to enforce the non-compete. I've held senior positions where non-competes are to be expected, and that is always a standard term. Of course, the only reason it became a standard term is because people like me are represented by expensive lawyers who consistently demand it, and an Amazon warehouse worker isn't in the position to follow our lead. So the warehouse worker should be given the same protection by statute: if the employer wants to enforce a non-compete, they must do so affirmatively by paying the worker's salary (i.e. if they elect not to pay then the non-compete is automatically null and void). Of course the odds of something like that making its way through the dysfunctional legislatures of 48 states is vanishingly low. But we can hope.

rodgerd 11y ago
> One simple solution would be to require employers to pay at least the workers' prior base salary for the duration they wish to enforce the non-compete. This is pretty much the standard in New Zealand employment law, and it seems crazy to me that people can (effectively) be denied a livelihood because they once worked one job.
pdq 11y ago
Right, the standard contract term is called 'consideration', meaning that for a contract to be valid and enforceable, each side must be giving up something of value as part of the transaction. There's a pretty good summary here: http://www.wolfbaldwin.com/Employment-Articles/Non-Compete-Covenants.shtml http://www.wolfbaldwin.com/Employment-Articles/Non-Compete-C...
- falcolas 11y ago
  Worth noting that continued employment is considered sufficient consideration for many such contract changes, in "at will" employment states.
  - hwstar 11y ago
    This is simply not true. It has nothing to do with at-will employment. It is state law. Some states require consideration separate from salary, some say continued employment is sufficient consideration. 49 out of 50 states recognize the doctrine of at-will employment. Only Montana uses just-cause instead (just like the rest of the developed world coincidentally).

OhHeyItsE 11y ago

Everybody loves the invisible hand of the free market... until they don't.

cmdrfred 11y ago
I've seen this so many times. Pay someone low wages "Free Market", that same low wage employee (Me for example, more times that I can count) leaves for a better paying job "What about us? We're the CompanyName family!". It's amazing how fast republican free-market types can become european socialists.

paulddraper 11y ago

Broad non-competes are very common for many jobs, and virtually never enforced. When you enforce one, you are basically trying to take someone's livelihood away. They're the EULA of of jobs. Sure, make a stand of you really want. But if you don't, there's practically nothing to worry about. (I feel bad saying that, but TBH I've signed a lot of EULAs.)

hwstar 11y ago

A lot of the requirements for noncompetes at companies originate at the insistance of the investors.