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Banning noncompete agreements is something California has been doing right since 1872 when they were first banned. Another thing California does right is refus

Banning noncompete agreements is something California has been doing right since 1872 when they were first banned. Another thing California does right is refusing to honor noncompete agreements from other states.

paxys 8y ago
And I'd argue that this is one of the biggest reasons why the area was able to evolve from a couple of semiconductor companies into the world's most valuable business ecosystem. Most other states are too beholden to a few big companies and don't see how following suit will only help them over the long term.
- dunpeal 8y ago
  There's research that credits the fact that SV is in California and not, for example, near Cambridge MA, to the fact that non-competes aren't enforceable in California.
  - kccqzy 8y ago
    I've also heard a theory from a friend that one reason SV companies develop new technology so quickly is because the free movement of employees between companies is essentially the de facto transfer of technology between companies. Of course things like trade secrets won't be transferred, but the general skills, ideas and know-how can quickly spread from company to company. In contrast, in regions with non-competes, companies are effectively more siloed.
    - dunpeal 8y ago
      Of course. It also encourages competition, especially from new startups. Imagine Facebook had to wait for a couple of years to be able to hire any senior engineers with the knowledge and skills to scale their services. They would lose momentum, and quite possibly fail as their service would be constrained by severe scaling and reliability issues. The reason Facebook and other unicorns were able to thrive in SV is because they were able to poach dozens of experienced engineers from other companies, that are all arguably its competitors. If you like startups, non-competes are some of your worst enemies.
      - EliRivers 8y ago
        Didn't some of them (Apple, Intel, Google and more) get busted for agreeing under the counter to not hire each others employees? https://www.cnet.com/news/apple-google-others-settle-anti-poaching-lawsuit-for-415-million/ https://www.cnet.com/news/apple-google-others-settle-anti-po... https://www.reuters.com/article/us-apple-lawsuit/steve-jobs-told-google-to-stop-poaching-workers-idUSTRE80Q27420120127 https://www.reuters.com/article/us-apple-lawsuit/steve-jobs-...
        atq2119 8y ago
        Yes, but they did so at a time when none of them could reasonably have been described as startups. GP's point was about startups.
        deleted 8y ago
        [deleted]
- EliRivers 8y ago
  Pure anecdote in support of your argument, from the top of my head, but you have to wonder how things would have gone if Shockley's traitorous eight could never have come into existence due to non-competes. No Fairchild? No FairChildren? Basically, no Silicon Valley. According to an Endeavor Insight report: in 2014 of the more than 130 Bay Area tech companies trading on the NASDAQ or the New York Stock Exchange, “70 percent of these firms can be traced directly back to the founders and employees of Fairchild. The 92 public companies that can be traced to Fairchild are now worth about $2.1 trillion, which is more than the annual GDP of Canada, India, or Spain.”
  - atq2119 8y ago
    Your point is a good one which I fully support, but the comparison of company value to GDP which you quote bugs me. Company value is a stock, while GDP is a flow. Comparing them is like comparing velocity and acceleration.
  - johnnycab 8y ago
    >you have to wonder how things would have gone if Shockley's traitorous eight could never have come into existence due to non-competes You also have to wonder how litigious the society was at the time; the legal framework and protection available was probably not mature enough in a industry going through renaissance. However, it is certainly different today and the poignancy is encapsulated in this quote by Tom Gallo: When you get sued by a big corporation, you lose no matter what https://www.wired.com/story/book-excerpt-science-of-ultra-pure-silicon/ https://www.wired.com/story/book-excerpt-science-of-ultra-pu...
77pt77 8y ago
> since 1872 I knew California had banned them but I though it had happened a few decades ago at most.
- twblalock 8y ago
  I can't find any historical reason noncompetes were banned. I assume it happened because California was a new state and people coming there to work did not want to get stuck with the first employer they happened to end up with. There also would not have been a heavily established business lobby with enough power to prevent a ban, as there was on the east coast. California was writing a new legal code, so there was not an established precedent of noncompete agreements in state law. If noncompetes hadn't been banned when California was such a young state, they probably never would have been. It was a time when a lot of things lined up to make it possible.
  - currymj 8y ago
    It wasn't a conscious choice -- they were drafting their laws from a set of model statutes called the Field Code and simply didn't even think about changing the provision. Interestingly, this also happened in North Dakota. https://www.noncompetereport.com/2013/01/north-dakota-non-compete-law-shares-history-with-california/ https://www.noncompetereport.com/2013/01/north-dakota-non-co...
    - twblalock 8y ago
      Excellent, this is great information that is difficult to find!
    - njarboe 8y ago
      Interesting fact filled article with an obvious employer bias slipping in at the end. "Employers wishing to protect themselves from unfair competition in North Dakota should tread carefully." It would be great to get these laws prohibitions of non-competes in more states. It is one of the main reasons I still live in the high cost of living/high taxed state of California.
everdev 8y ago
You can still enter into a legally binding non-compete in California resulting from the acquisition of a company or IP.
- oppositelock 8y ago
  This is true, but they must compensate you for the time you aren't allowed to compete. No such thing here in CA as a free non-compete.
- airstrike 8y ago
  That seems reasonable if the goal is to not pose an impossible hurdle to any potential acquisitions involving companies with employees in California. Seems more reasonable than locking employees up as part of hiring
- ummonk 8y ago
  Only if you're one of the executives.
- cortesoft 8y ago
  Yeah, the big difference is that they pay for that time, and the time is a known quantity when you make the agreement. The banned non-competes are the ones where they say, “if you decide to leave at any point in the future, you can’t compete with us for x number of years”... but they won’t give you extra money during that time.
  - everdev 8y ago
    Yes, it's "valuable consideration" usually included in the sale price. It doesn't have to come in the form of a monthly payment or a salary.
- User23 8y ago
  California has a lot of questionable legislation, but they really did nail this one. It's extremely well thought out and the exceptions where non-competes can be enforced all make perfect sense. For example, a non-compete is legally binding in California is if you sell your business to someone else. Then they can enforce an agreement against your starting a new business competing against the business you just sold them.
burtonator 8y ago
We nailed it... Also, as a workers rights issue, always ask yourself if the company would do the same for you. If they ask you to sign a contract saying to give six weeks notice or something silly ask if they would give you six weeks notice of a layoff or termination. In the case of non-competes you should ask if they don't hire from their competitors too... If they're going to reduce YOUR compensation because of competition from engineers working at other companies it's not a fair claim.
- Legogris 8y ago
  > something silly 1-3 months mutual notice period is common practice in many countries. In France 3 months is standard.
  - jib 8y ago
    My French contract had 2 months notice and a non compete option for the employer, where they had the option to pay me 75% of the salary for 2 years to enforce the non compete. That kind of non competes I don’t mind.
    - twblalock 8y ago
      I would mind it a lot, because when I leave a company I'll be making more than I do now, not 75% of what I do now.
      - snovv_crash 8y ago
        Getting 75% of your salary to do nothing for 2 years is the opportunity of a lifetime - travel the world, get a Masters degree, find a low CoL area and bank 90% of it while contributing to open source projects, the options are endless.
        mavelikara 8y ago
        > Getting 75% of your salary to do nothing for 2 years is the opportunity of a lifetime The examples you listed makes me ask this. Imagine your parents, while raising you, given this option of having their pay reduced by 25%. How likely would the options you listed have been an "opportunity of a lifetime" to them?
loeg 8y ago
> Another thing California does right is refusing to honor noncompete agreements from other states. They might refuse but the originating state companies have caught on and claim jurisdiction out of CA.

paxys 8y ago

And I'd argue that this is one of the biggest reasons why the area was able to evolve from a couple of semiconductor companies into the world's most valuable business ecosystem. Most other states are too beholden to a few big companies and don't see how following suit will only help them over the long term.

dunpeal 8y ago
There's research that credits the fact that SV is in California and not, for example, near Cambridge MA, to the fact that non-competes aren't enforceable in California.
- kccqzy 8y ago
  I've also heard a theory from a friend that one reason SV companies develop new technology so quickly is because the free movement of employees between companies is essentially the de facto transfer of technology between companies. Of course things like trade secrets won't be transferred, but the general skills, ideas and know-how can quickly spread from company to company. In contrast, in regions with non-competes, companies are effectively more siloed.
  - dunpeal 8y ago
    Of course. It also encourages competition, especially from new startups. Imagine Facebook had to wait for a couple of years to be able to hire any senior engineers with the knowledge and skills to scale their services. They would lose momentum, and quite possibly fail as their service would be constrained by severe scaling and reliability issues. The reason Facebook and other unicorns were able to thrive in SV is because they were able to poach dozens of experienced engineers from other companies, that are all arguably its competitors. If you like startups, non-competes are some of your worst enemies.
    - EliRivers 8y ago
      Didn't some of them (Apple, Intel, Google and more) get busted for agreeing under the counter to not hire each others employees? https://www.cnet.com/news/apple-google-others-settle-anti-poaching-lawsuit-for-415-million/ https://www.cnet.com/news/apple-google-others-settle-anti-po... https://www.reuters.com/article/us-apple-lawsuit/steve-jobs-told-google-to-stop-poaching-workers-idUSTRE80Q27420120127 https://www.reuters.com/article/us-apple-lawsuit/steve-jobs-...
      - atq2119 8y ago
        Yes, but they did so at a time when none of them could reasonably have been described as startups. GP's point was about startups.
      - deleted 8y ago
        [deleted]
EliRivers 8y ago
Pure anecdote in support of your argument, from the top of my head, but you have to wonder how things would have gone if Shockley's traitorous eight could never have come into existence due to non-competes. No Fairchild? No FairChildren? Basically, no Silicon Valley. According to an Endeavor Insight report: in 2014 of the more than 130 Bay Area tech companies trading on the NASDAQ or the New York Stock Exchange, “70 percent of these firms can be traced directly back to the founders and employees of Fairchild. The 92 public companies that can be traced to Fairchild are now worth about $2.1 trillion, which is more than the annual GDP of Canada, India, or Spain.”
- atq2119 8y ago
  Your point is a good one which I fully support, but the comparison of company value to GDP which you quote bugs me. Company value is a stock, while GDP is a flow. Comparing them is like comparing velocity and acceleration.
- johnnycab 8y ago
  >you have to wonder how things would have gone if Shockley's traitorous eight could never have come into existence due to non-competes You also have to wonder how litigious the society was at the time; the legal framework and protection available was probably not mature enough in a industry going through renaissance. However, it is certainly different today and the poignancy is encapsulated in this quote by Tom Gallo: When you get sued by a big corporation, you lose no matter what https://www.wired.com/story/book-excerpt-science-of-ultra-pure-silicon/ https://www.wired.com/story/book-excerpt-science-of-ultra-pu...

77pt77 8y ago

> since 1872 I knew California had banned them but I though it had happened a few decades ago at most.

twblalock 8y ago
I can't find any historical reason noncompetes were banned. I assume it happened because California was a new state and people coming there to work did not want to get stuck with the first employer they happened to end up with. There also would not have been a heavily established business lobby with enough power to prevent a ban, as there was on the east coast. California was writing a new legal code, so there was not an established precedent of noncompete agreements in state law. If noncompetes hadn't been banned when California was such a young state, they probably never would have been. It was a time when a lot of things lined up to make it possible.
- currymj 8y ago
  It wasn't a conscious choice -- they were drafting their laws from a set of model statutes called the Field Code and simply didn't even think about changing the provision. Interestingly, this also happened in North Dakota. https://www.noncompetereport.com/2013/01/north-dakota-non-compete-law-shares-history-with-california/ https://www.noncompetereport.com/2013/01/north-dakota-non-co...
  - twblalock 8y ago
    Excellent, this is great information that is difficult to find!
  - njarboe 8y ago
    Interesting fact filled article with an obvious employer bias slipping in at the end. "Employers wishing to protect themselves from unfair competition in North Dakota should tread carefully." It would be great to get these laws prohibitions of non-competes in more states. It is one of the main reasons I still live in the high cost of living/high taxed state of California.

everdev 8y ago

You can still enter into a legally binding non-compete in California resulting from the acquisition of a company or IP.

oppositelock 8y ago
This is true, but they must compensate you for the time you aren't allowed to compete. No such thing here in CA as a free non-compete.
airstrike 8y ago
That seems reasonable if the goal is to not pose an impossible hurdle to any potential acquisitions involving companies with employees in California. Seems more reasonable than locking employees up as part of hiring
ummonk 8y ago
Only if you're one of the executives.
cortesoft 8y ago
Yeah, the big difference is that they pay for that time, and the time is a known quantity when you make the agreement. The banned non-competes are the ones where they say, “if you decide to leave at any point in the future, you can’t compete with us for x number of years”... but they won’t give you extra money during that time.
- everdev 8y ago
  Yes, it's "valuable consideration" usually included in the sale price. It doesn't have to come in the form of a monthly payment or a salary.
User23 8y ago
California has a lot of questionable legislation, but they really did nail this one. It's extremely well thought out and the exceptions where non-competes can be enforced all make perfect sense. For example, a non-compete is legally binding in California is if you sell your business to someone else. Then they can enforce an agreement against your starting a new business competing against the business you just sold them.

burtonator 8y ago

We nailed it... Also, as a workers rights issue, always ask yourself if the company would do the same for you. If they ask you to sign a contract saying to give six weeks notice or something silly ask if they would give you six weeks notice of a layoff or termination. In the case of non-competes you should ask if they don't hire from their competitors too... If they're going to reduce YOUR compensation because of competition from engineers working at other companies it's not a fair claim.

Legogris 8y ago
> something silly 1-3 months mutual notice period is common practice in many countries. In France 3 months is standard.
- jib 8y ago
  My French contract had 2 months notice and a non compete option for the employer, where they had the option to pay me 75% of the salary for 2 years to enforce the non compete. That kind of non competes I don’t mind.
  - twblalock 8y ago
    I would mind it a lot, because when I leave a company I'll be making more than I do now, not 75% of what I do now.
    - snovv_crash 8y ago
      Getting 75% of your salary to do nothing for 2 years is the opportunity of a lifetime - travel the world, get a Masters degree, find a low CoL area and bank 90% of it while contributing to open source projects, the options are endless.
      - mavelikara 8y ago
        > Getting 75% of your salary to do nothing for 2 years is the opportunity of a lifetime The examples you listed makes me ask this. Imagine your parents, while raising you, given this option of having their pay reduced by 25%. How likely would the options you listed have been an "opportunity of a lifetime" to them?

loeg 8y ago

> Another thing California does right is refusing to honor noncompete agreements from other states. They might refuse but the originating state companies have caught on and claim jurisdiction out of CA.