3 ms·

Good article, except for the strange conflation of non-compete with debt. Debt implies an asset of value was received by the debtor at some point. No such thing

Good article, except for the strange conflation of non-compete with debt. Debt implies an asset of value was received by the debtor at some point. No such thing takes place with a non-compete. Employment itself is a contract, not an asset. That's the reasoning behind CA's ban of these clauses.

jhauris 9y ago
I thought it was an interesting way to look at it, and while I see your point I still think there's value in the company store comparison.
beagle3 9y ago
Depends on jurisdiction. Turns out that in Israel, for example, where non-compete agreements require material specific pay, a non-compete lasting 3 years or more, is generally considered an asset sale and is taxed as a capital gain transaction (25% instead of the ordinary income which has brackets that go as high as 55%).
- lr4444lr 9y ago
  where non-compete agreements require material specific pay That's materially different. Anywhere in the United States, AFAIK, non-compete is not part of a "golden parachute" with continued post-severance pay except for C-suite people - sometimes. Employment is at-will on both sides in the United States in the vast majority of private labor.
  - beagle3 9y ago
    Employment in Israel is (if there's no union involved) mostly at-will as well, even if not quite as at-will as the US. However, it is my understanding that e.g. California is similar. It's not that asking someone to sign a non-compete clause is illegal; what is illegal is not properly compensating them for it. That is, a clause like "in the event of lawful termination of employment by either side, for a period of up to (at the employer's discretion) 12 months, you will continue to receive your salary and will not be allowed to compete with employer". Such a clause is legal in Israel, and indeed it is how binding non-competes are implemented. I haven't had employees in California in almost 20 years now, but AFAIK it is similar there. It is probably worded differently because of how the non-compete laws on the books are written, but I've heard of cases where something to that effect was deemed legal and enforceable.

jhauris 9y ago

I thought it was an interesting way to look at it, and while I see your point I still think there's value in the company store comparison.

beagle3 9y ago

Depends on jurisdiction. Turns out that in Israel, for example, where non-compete agreements require material specific pay, a non-compete lasting 3 years or more, is generally considered an asset sale and is taxed as a capital gain transaction (25% instead of the ordinary income which has brackets that go as high as 55%).

lr4444lr 9y ago
where non-compete agreements require material specific pay That's materially different. Anywhere in the United States, AFAIK, non-compete is not part of a "golden parachute" with continued post-severance pay except for C-suite people - sometimes. Employment is at-will on both sides in the United States in the vast majority of private labor.
- beagle3 9y ago
  Employment in Israel is (if there's no union involved) mostly at-will as well, even if not quite as at-will as the US. However, it is my understanding that e.g. California is similar. It's not that asking someone to sign a non-compete clause is illegal; what is illegal is not properly compensating them for it. That is, a clause like "in the event of lawful termination of employment by either side, for a period of up to (at the employer's discretion) 12 months, you will continue to receive your salary and will not be allowed to compete with employer". Such a clause is legal in Israel, and indeed it is how binding non-competes are implemented. I haven't had employees in California in almost 20 years now, but AFAIK it is similar there. It is probably worded differently because of how the non-compete laws on the books are written, but I've heard of cases where something to that effect was deemed legal and enforceable.