4 ms·

How would a company "pay for the privilege" of preventing you from transferring their trade secrets without being able to enforce non-competes?

by nickff 10y ago

bryanlarsen 10y ago
With a severance package. Non-competes should not be allowed to last any longer than the severance package. P.S. Non-competes should have nothing to do with trade secrets; those should be covered by an NDA.
- nickff 10y ago
  So the company should keep paying an employee's full salary without any guarantee that the employee won't 'quit' the severance to work for a competitor? This is basically guaranteeing that nobody who has valuable knowledge can be fired for cause or laid off. NDAs are nice, but there is no way to know whether a trade secret has been transferred to a competitor (if the competitor keeps their secrets secret). The other problem with allowing NDAs but disallowing non-competes is that it provides a huge loophole, where businesses can classify all non-public information as trade secrets, thereby preventing the former employee from implementing any competing system (which will inevitably contain some non-public process from the previous employer).
  - throw_away_777 10y ago
    No, the point is the non-compete keeps the employee from working for a competitor, so the employer pays the salary to prevent the employee from working for a competitor. The employer chooses to either pay the salary of the employee or free them to find work elsewhere. Why is it fair that an employer can fire someone or lay someone off and keep that person from working for a year?
    - nickff 10y ago
      Why is it fair that an employee can stop working at their job or commit fraud, then immediately sell all the non-public information they have to a competitor?
      - aikah 10y ago
        > Why is it fair that an employee can stop working at their job or commit fraud, then immediately sell all the non-public information they have to a competitor? Then sue if you have proof. What is not fair is to reduce a worker's opportunity to work when he isn't on your payroll.
        nickff 10y ago
        You can sue people for not working at their job? There are many people who simply stop accomplishing tasks when they want to be laid off or fired. The parent's logic would say that if someone does this, the only way to stop this 'bad employee' from selling all your non-public information is to pay (at least) their full salary indefinitely.
        aikah 10y ago
        > You can sue people for not working at their job? There are many people who simply stop accomplishing tasks when they want to be laid off or fired. Then let them quit and go somewhere else. NDA cover corporate secrets, non-compete are anti freedom, anti competition and should be illegal. If your employee stops working then perhaps you should question the way you do business and how you manage your work environment. Usually it's a clear sign you treat your employees like shit. They should have all the rights to go work in a better environment whether it is at a competitor or not doesn't matter.
        nickff 10y ago
        The parent was commenting on fairness, I was positing a situation that was unfair to the employer. Please stop fighting the hypothetical, it is unproductive to the discussion.[1] [1] http://lesswrong.com/lw/bwp/please_dont_fight_the_hypothetical/ http://lesswrong.com/lw/bwp/please_dont_fight_the_hypothetic...
  - bryanlarsen 10y ago
    In my understanding, you can't unilaterally quit the severance to terminate your non-compete.
    - nickff 10y ago
      My understanding is that severance is usually terminated when the former employee accepts a new position; I am not sure how a former employer could prevent the former employee from accepting a position from a competitor without use of a non-compete. Do you agree that NDAs are flawed in the ways I described?
      - throw_away_777 10y ago
        The non-compete keeps someone from signing a position with a competitor. But in order for a non-compete to be legal, the company should have to pay the employees salary (or a significant fraction of the salary) for the duration of the non-compete contract.
      - bryanlarsen 10y ago
        Most severance I've witnessed was paid out in a lump sum. Severance that wasn't paid out in a lump sum generally did not end when the former employee accepted a new job. However, I have heard of some that does. But that's irrelevant. The severance and non-compete contracts were two separate contracts, not linked in any way. The fact they had the same length wasn't a coincidence, but after they were signed it may as well have been. And no, I don't agree that NDA's are flawed in the way you describe. If a former employee is willing to commit criminal fraud or theft then the choice of paper you make them sign isn't going to make any difference.
- greglindahl 10y ago
  And in California, it has to be a full salary, not $1. I'm not sure why nickff is mentioning trade secrets, when that's a separate issue, covered by NDA.
- taneq 10y ago
  The thing is, they're used by companies as a way of trying to stop their competitors from getting access to insider information even when it wouldn't qualify as a trade secret and would be difficult to protect with an NDA. Which is insane, because they only hire you for your experience and skills, which came from doing similar jobs for other employers, and yet they somehow expect to own any new experience you gain while working for them.
throw_away_777 10y ago
If a company is preventing me from working, and doing so is actually important to the company above and beyond a tool to keep me working for them, they can afford to pay a salary for the duration of the non-compete. The fact that companies aren't willing to do so reveals that the companies want non-competes so they don't have to pay market wages and to restrict freedom of movement of employees. It is a terrible standard to have non-competes for at-will employees. I have actually refused a job offer because the terms of the non-compete were so one-sided for the employer. The contract had things like one-way attorney fees, applied everywhere in the US for a year, wasn't limited to what the company actually worked on, and other employer favored terms. This was for at-will employment, and apparently I was the first person to refuse the job offer due to the contract. I wish more people would refuse to sign such biased contracts, as it stands companies can get away with the practice because too many workers allow them to do so.
- nickff 10y ago
  The fact that companies are unwilling to pay you to avoid harming them after you no longer work for them proves very little in my view. I understand that a non-compete could reduce potential future earnings, but prospective employees should take that into account, as you seem to have done. I commend you for looking out for your long-term self interests, and agree that more people should carefully scrutinize their employment agreements. This does not bring me to conclude that non-compete terms should be banned, as they are simply one of many terms of the contract which should be priced appropriately.
  - throw_away_777 10y ago
    The problem is that there is an asymmetric bargaining power between companies and potential employees. I had a family friend who is a lawyer I could talk to, most people don't have that luxury and don't have the time to educate themselves about non-competes. Talking to people reveals most (wrongly, for most states in the US) think non-competes are unenforceable. Companies use non-competes to avoid paying a fair market wage. The fact that companies resist paying severance in accordance with non-competes reveals the true motive companies have for non-competes - to keep workers at their company while paying below market rates. In situations where companies don't have unequal bargaining power, but still want non-competes (top level executives), these contracts almost always include a large severance package.
oxide 10y ago
Isn't that what the Non-Disclosure Agreement is for? I don't understand how a non-compete keeps trade secrets safe, it's not like you can't transfer a trade secret a year later, or however long the non-compete lasts.
- nickff 10y ago
  My comment from a child: <<"NDAs are nice, but there is no way to know whether a trade secret has been transferred to a competitor (if the competitor keeps their secrets secret)." <<"The other problem with allowing NDAs but disallowing non-competes is that it provides a huge loophole, where businesses can classify all non-public information as trade secrets, thereby preventing the former employee from implementing any competing system (which will inevitably contain some non-public process from the previous employer)." I am unsure what you mean by the following quote: >"it's not like you can't"

How would a company "pay for the privilege" of preventing you from transferring their trade secrets without being able to enforce non-competes?

by nickff 10y ago

How would a company "pay for the privilege" of preventing you from transferring their trade secrets without being able to enforce non-competes?

bryanlarsen 10y ago

With a severance package. Non-competes should not be allowed to last any longer than the severance package. P.S. Non-competes should have nothing to do with trade secrets; those should be covered by an NDA.

nickff 10y ago
So the company should keep paying an employee's full salary without any guarantee that the employee won't 'quit' the severance to work for a competitor? This is basically guaranteeing that nobody who has valuable knowledge can be fired for cause or laid off. NDAs are nice, but there is no way to know whether a trade secret has been transferred to a competitor (if the competitor keeps their secrets secret). The other problem with allowing NDAs but disallowing non-competes is that it provides a huge loophole, where businesses can classify all non-public information as trade secrets, thereby preventing the former employee from implementing any competing system (which will inevitably contain some non-public process from the previous employer).
- throw_away_777 10y ago
  No, the point is the non-compete keeps the employee from working for a competitor, so the employer pays the salary to prevent the employee from working for a competitor. The employer chooses to either pay the salary of the employee or free them to find work elsewhere. Why is it fair that an employer can fire someone or lay someone off and keep that person from working for a year?
  - nickff 10y ago
    Why is it fair that an employee can stop working at their job or commit fraud, then immediately sell all the non-public information they have to a competitor?
    - aikah 10y ago
      > Why is it fair that an employee can stop working at their job or commit fraud, then immediately sell all the non-public information they have to a competitor? Then sue if you have proof. What is not fair is to reduce a worker's opportunity to work when he isn't on your payroll.
      - nickff 10y ago
        You can sue people for not working at their job? There are many people who simply stop accomplishing tasks when they want to be laid off or fired. The parent's logic would say that if someone does this, the only way to stop this 'bad employee' from selling all your non-public information is to pay (at least) their full salary indefinitely.
        aikah 10y ago
        > You can sue people for not working at their job? There are many people who simply stop accomplishing tasks when they want to be laid off or fired. Then let them quit and go somewhere else. NDA cover corporate secrets, non-compete are anti freedom, anti competition and should be illegal. If your employee stops working then perhaps you should question the way you do business and how you manage your work environment. Usually it's a clear sign you treat your employees like shit. They should have all the rights to go work in a better environment whether it is at a competitor or not doesn't matter.
        nickff 10y ago
        The parent was commenting on fairness, I was positing a situation that was unfair to the employer. Please stop fighting the hypothetical, it is unproductive to the discussion.[1] [1] http://lesswrong.com/lw/bwp/please_dont_fight_the_hypothetical/ http://lesswrong.com/lw/bwp/please_dont_fight_the_hypothetic...
- bryanlarsen 10y ago
  In my understanding, you can't unilaterally quit the severance to terminate your non-compete.
  - nickff 10y ago
    My understanding is that severance is usually terminated when the former employee accepts a new position; I am not sure how a former employer could prevent the former employee from accepting a position from a competitor without use of a non-compete. Do you agree that NDAs are flawed in the ways I described?
    - throw_away_777 10y ago
      The non-compete keeps someone from signing a position with a competitor. But in order for a non-compete to be legal, the company should have to pay the employees salary (or a significant fraction of the salary) for the duration of the non-compete contract.
    - bryanlarsen 10y ago
      Most severance I've witnessed was paid out in a lump sum. Severance that wasn't paid out in a lump sum generally did not end when the former employee accepted a new job. However, I have heard of some that does. But that's irrelevant. The severance and non-compete contracts were two separate contracts, not linked in any way. The fact they had the same length wasn't a coincidence, but after they were signed it may as well have been. And no, I don't agree that NDA's are flawed in the way you describe. If a former employee is willing to commit criminal fraud or theft then the choice of paper you make them sign isn't going to make any difference.
greglindahl 10y ago
And in California, it has to be a full salary, not $1. I'm not sure why nickff is mentioning trade secrets, when that's a separate issue, covered by NDA.
taneq 10y ago
The thing is, they're used by companies as a way of trying to stop their competitors from getting access to insider information even when it wouldn't qualify as a trade secret and would be difficult to protect with an NDA. Which is insane, because they only hire you for your experience and skills, which came from doing similar jobs for other employers, and yet they somehow expect to own any new experience you gain while working for them.

throw_away_777 10y ago

If a company is preventing me from working, and doing so is actually important to the company above and beyond a tool to keep me working for them, they can afford to pay a salary for the duration of the non-compete. The fact that companies aren't willing to do so reveals that the companies want non-competes so they don't have to pay market wages and to restrict freedom of movement of employees. It is a terrible standard to have non-competes for at-will employees. I have actually refused a job offer because the terms of the non-compete were so one-sided for the employer. The contract had things like one-way attorney fees, applied everywhere in the US for a year, wasn't limited to what the company actually worked on, and other employer favored terms. This was for at-will employment, and apparently I was the first person to refuse the job offer due to the contract. I wish more people would refuse to sign such biased contracts, as it stands companies can get away with the practice because too many workers allow them to do so.

nickff 10y ago
The fact that companies are unwilling to pay you to avoid harming them after you no longer work for them proves very little in my view. I understand that a non-compete could reduce potential future earnings, but prospective employees should take that into account, as you seem to have done. I commend you for looking out for your long-term self interests, and agree that more people should carefully scrutinize their employment agreements. This does not bring me to conclude that non-compete terms should be banned, as they are simply one of many terms of the contract which should be priced appropriately.
- throw_away_777 10y ago
  The problem is that there is an asymmetric bargaining power between companies and potential employees. I had a family friend who is a lawyer I could talk to, most people don't have that luxury and don't have the time to educate themselves about non-competes. Talking to people reveals most (wrongly, for most states in the US) think non-competes are unenforceable. Companies use non-competes to avoid paying a fair market wage. The fact that companies resist paying severance in accordance with non-competes reveals the true motive companies have for non-competes - to keep workers at their company while paying below market rates. In situations where companies don't have unequal bargaining power, but still want non-competes (top level executives), these contracts almost always include a large severance package.

oxide 10y ago

Isn't that what the Non-Disclosure Agreement is for? I don't understand how a non-compete keeps trade secrets safe, it's not like you can't transfer a trade secret a year later, or however long the non-compete lasts.

nickff 10y ago
My comment from a child: <<"NDAs are nice, but there is no way to know whether a trade secret has been transferred to a competitor (if the competitor keeps their secrets secret)." <<"The other problem with allowing NDAs but disallowing non-competes is that it provides a huge loophole, where businesses can classify all non-public information as trade secrets, thereby preventing the former employee from implementing any competing system (which will inevitably contain some non-public process from the previous employer)." I am unsure what you mean by the following quote: >"it's not like you can't"