5 ms·

None of the arguments in favor of noncompetes are convincing. There are legitimate downsides to getting rid of noncompetes, but there are solutions for all of t

None of the arguments in favor of noncompetes are convincing. There are legitimate downsides to getting rid of noncompetes, but there are solutions for all of them, e.g. using NDAs to protect trade secrets. Some say eliminating noncompetes would hurt businesses, but consider that California banned noncompetes back in the late 1800s (yes, really) and has the largest economy of any state. When low-wage workers are involved, noncompetes are a form of coercion pure and simple.

AlexTWithBeard 8y ago
I firmly believe that prohibiting things is rarely a good idea. Just require a business to keep paying an employee his salary and benefits during the non-compete. A business has a secrets to guard. An employee has a family to feed. All is fair.
- throwawayjava 8y ago
  These are probably functionally equivalent for most employees... and especially the low-level employees that the article is talking about. Plus, there are real downsides to your approach. It puts the onus on the employee to collect from the employer, which is best-case arduous and worst-case more expensive than it's worth with most of the money going to a billboard lawfirm anyways. Your approach might make sense in the mid six figures and up, but for low-wage or even low to mid middle class workers, outright nullification would be way more effective.
  - AlexTWithBeard 8y ago
    Sorry, functionally equivalent to what? I don't think it will involve collections or anything like that. You just keep receiving your monthly paycheck. No paycheck - no non-compete.
- lsiebert 8y ago
  Okay, so instead of letting the employee advance in their career, possibly earn more money because of increased responsibilities or skills, you want to pay them to sit idle? How does that help anyone? Anyway, isn't that just prohibiting a non compete without compensation for potentially lost income? I mean any law is arguably a prohibition from the right perspective.
- wahern 8y ago
  > I firmly believe that prohibiting things is rarely a good idea. It depends on how you frame the issue. Banning non-competes only prohibits courts from enforcing those terms of the contract. In other words, it removes an element of state coercion. The rationale for state enforcement of contracts is to promote the operation of free trade. It's become quite clear that in the vast majority of situations, even as between savvy economic agents, non-competes substantially restrain the operation of free markets. They're a net loss. Why use state coercion to such an end? Given the known facts, rather than add a bunch of exceptions limiting enforcement it's better to reverse the default rule--that is, switch from default enforceable to default unenforceable--and add affirmative exceptions for the particular situations where we know they work well. California has non-competes, they're just limited to a very small set of circumstances.
- jzwinck 8y ago
  ...and stipulate that the employee may work for any non-competing entity while still being paid by their old employer. This way the employee can make even more than their original wage, to offset the facts that they aren't being allowed to work in what is likely the job they'd find most fulfilling, and they aren't making as much career progress while working in a different field.
- stale2002 8y ago
  Ok then. If you oppose prohibiting things, then you should also agree that it is a bad idea to prohibit an employee from breaking any and all non compete clauses, with zero consequence. I agree. Let's get rid of this prohibition of an employees ability to break these agreements for any reason at all.
- throwaway2048 8y ago
  What about the worker being prohibited from working? Not all coercion comes from the government.
- tathougies 8y ago
  The government is not prohibiting non-competes, 'outlawing' contracts means that the government will not enforce them. That is all. You are free to sign anything, you just won't be able to enforce it, but I mean, if you get a thrill up your leg forcing your employees to sign it, then by all means continue. This is like how it is perfectly legal to sign a contract selling your future labor for a fixed price. In fact, you could go do it right now with your best friend! But good luck getting the government to enforce that contract. Ultimately, this is not 'prohibiting' anything; this is just stepping out of the free market, which is a good thing. For example, saying the government 'prohibits' non-competes in this arrangement is like saying the government 'prohibits' conversion to Christianity. However, there is no law stating that a person cannot sign a contract with his pastor saying he is now Christian and will remain so until he dies. That is perfectly within both of their rights. What they cannot do is ask the government to enforce that contract, but that doesn't mean it's prohibited... it just means it's legally useless, the way non-competes should be. All that keeps these unenforceable contracts 'viable' is shame or large cultural organizations (like a church). For example, some professions start professional organizations that establish rules for members, and then the organization markets itself so that people know only to trust professionals belonging to that org (like realtors). If that org decided that there ought to be restrictions around how members conduct themselves with regards to competition and kicked out members who broke this taboo, then fine... have at it! But, the government is unnecessary ere.
- maxerickson 8y ago
  Another way to look at it is that the government isn't prohibiting anything, it just isn't enforcing things just because they happen to be written down in some contract. Or you could frame the enforcement of the non-compete as the government prohibiting people from freely using their labor. I think it's not so bad that when Hal asks the government to give him the money that he says he was promised, the government just tells Hal he was a fool to expect anything from that promise. Or course that isn't a universal, there are things in contracts that absolutely should be honored, the point is that you figure out which ones as a society rather than blindly enforcing anything and everything.
- ummonk 8y ago
  >I firmly believe that prohibiting things is rarely a good idea. You mean like prohibiting an employee from switching jobs?
closetohome 8y ago
Ah yes, the much-ballyhooed "corporate secrets" issue. Trust me, no company does things so uniquely that one employee's knowledge escaping into the wild would bring it down. And if it would, they've got other problems.
- AlexTWithBeard 8y ago
  I can easily imagine a sales guy leaving for the competitor and taking half of the client base with him. This may kill the company.
  - gdhbcc 8y ago
    Sounds like the company would do well to keep that employee happy then. I don't see a reason why we should be okay with removing such powerful leverage from the workers hands.
  - wahern 8y ago
    We can imagine all day long, just like we can imagine terrorist attack scenarios. That doesn't mean it's a good idea to expend state resources to prevent our imaginary scenarios, even if some of those scenarios will indeed come to pass. This isn't a philosophical debate. This is an empirical debate. Non-competes have both pros and cons, and empirical studies suggest the pros are exaggerated and cons under appreciated. They're also not the only tool in the toolbox. For example, there are NDAs, trade secrets, and tortious interference, among others. Compensation and other incentives can be restructured. Finally, your scenario only begs the question: so what? For the sake of argument, let's assume that it's somehow unfair to the original employer. What about the customers? Why is it fair that they've lost the option of working with a guy they like, probably for less money? There are two sides to the coin. That's why I said it's an empirical question: we can work out which option produces the better outcome overall, and the facts strongly suggest the best outcome is the world where non-competes are generally unenforceable. One of the biggest and last remaining areas of productivity growth in modern service economies is putting people to their most productive task. There are huge structural inefficiencies that result in person doing task A when they'd be much more productive doing task B. This is much more of a problem in a service economy than a manufacturing economy. And one source of this inefficiency, and an increasingly common source at that, is non-compete agreements.
deleted 8y ago
[deleted]

AlexTWithBeard 8y ago

I firmly believe that prohibiting things is rarely a good idea. Just require a business to keep paying an employee his salary and benefits during the non-compete. A business has a secrets to guard. An employee has a family to feed. All is fair.

throwawayjava 8y ago
These are probably functionally equivalent for most employees... and especially the low-level employees that the article is talking about. Plus, there are real downsides to your approach. It puts the onus on the employee to collect from the employer, which is best-case arduous and worst-case more expensive than it's worth with most of the money going to a billboard lawfirm anyways. Your approach might make sense in the mid six figures and up, but for low-wage or even low to mid middle class workers, outright nullification would be way more effective.
- AlexTWithBeard 8y ago
  Sorry, functionally equivalent to what? I don't think it will involve collections or anything like that. You just keep receiving your monthly paycheck. No paycheck - no non-compete.
lsiebert 8y ago
Okay, so instead of letting the employee advance in their career, possibly earn more money because of increased responsibilities or skills, you want to pay them to sit idle? How does that help anyone? Anyway, isn't that just prohibiting a non compete without compensation for potentially lost income? I mean any law is arguably a prohibition from the right perspective.
wahern 8y ago
> I firmly believe that prohibiting things is rarely a good idea. It depends on how you frame the issue. Banning non-competes only prohibits courts from enforcing those terms of the contract. In other words, it removes an element of state coercion. The rationale for state enforcement of contracts is to promote the operation of free trade. It's become quite clear that in the vast majority of situations, even as between savvy economic agents, non-competes substantially restrain the operation of free markets. They're a net loss. Why use state coercion to such an end? Given the known facts, rather than add a bunch of exceptions limiting enforcement it's better to reverse the default rule--that is, switch from default enforceable to default unenforceable--and add affirmative exceptions for the particular situations where we know they work well. California has non-competes, they're just limited to a very small set of circumstances.
jzwinck 8y ago
...and stipulate that the employee may work for any non-competing entity while still being paid by their old employer. This way the employee can make even more than their original wage, to offset the facts that they aren't being allowed to work in what is likely the job they'd find most fulfilling, and they aren't making as much career progress while working in a different field.
stale2002 8y ago
Ok then. If you oppose prohibiting things, then you should also agree that it is a bad idea to prohibit an employee from breaking any and all non compete clauses, with zero consequence. I agree. Let's get rid of this prohibition of an employees ability to break these agreements for any reason at all.
throwaway2048 8y ago
What about the worker being prohibited from working? Not all coercion comes from the government.
tathougies 8y ago
The government is not prohibiting non-competes, 'outlawing' contracts means that the government will not enforce them. That is all. You are free to sign anything, you just won't be able to enforce it, but I mean, if you get a thrill up your leg forcing your employees to sign it, then by all means continue. This is like how it is perfectly legal to sign a contract selling your future labor for a fixed price. In fact, you could go do it right now with your best friend! But good luck getting the government to enforce that contract. Ultimately, this is not 'prohibiting' anything; this is just stepping out of the free market, which is a good thing. For example, saying the government 'prohibits' non-competes in this arrangement is like saying the government 'prohibits' conversion to Christianity. However, there is no law stating that a person cannot sign a contract with his pastor saying he is now Christian and will remain so until he dies. That is perfectly within both of their rights. What they cannot do is ask the government to enforce that contract, but that doesn't mean it's prohibited... it just means it's legally useless, the way non-competes should be. All that keeps these unenforceable contracts 'viable' is shame or large cultural organizations (like a church). For example, some professions start professional organizations that establish rules for members, and then the organization markets itself so that people know only to trust professionals belonging to that org (like realtors). If that org decided that there ought to be restrictions around how members conduct themselves with regards to competition and kicked out members who broke this taboo, then fine... have at it! But, the government is unnecessary ere.
maxerickson 8y ago
Another way to look at it is that the government isn't prohibiting anything, it just isn't enforcing things just because they happen to be written down in some contract. Or you could frame the enforcement of the non-compete as the government prohibiting people from freely using their labor. I think it's not so bad that when Hal asks the government to give him the money that he says he was promised, the government just tells Hal he was a fool to expect anything from that promise. Or course that isn't a universal, there are things in contracts that absolutely should be honored, the point is that you figure out which ones as a society rather than blindly enforcing anything and everything.
ummonk 8y ago
>I firmly believe that prohibiting things is rarely a good idea. You mean like prohibiting an employee from switching jobs?

closetohome 8y ago

Ah yes, the much-ballyhooed "corporate secrets" issue. Trust me, no company does things so uniquely that one employee's knowledge escaping into the wild would bring it down. And if it would, they've got other problems.

AlexTWithBeard 8y ago
I can easily imagine a sales guy leaving for the competitor and taking half of the client base with him. This may kill the company.
- gdhbcc 8y ago
  Sounds like the company would do well to keep that employee happy then. I don't see a reason why we should be okay with removing such powerful leverage from the workers hands.
- wahern 8y ago
  We can imagine all day long, just like we can imagine terrorist attack scenarios. That doesn't mean it's a good idea to expend state resources to prevent our imaginary scenarios, even if some of those scenarios will indeed come to pass. This isn't a philosophical debate. This is an empirical debate. Non-competes have both pros and cons, and empirical studies suggest the pros are exaggerated and cons under appreciated. They're also not the only tool in the toolbox. For example, there are NDAs, trade secrets, and tortious interference, among others. Compensation and other incentives can be restructured. Finally, your scenario only begs the question: so what? For the sake of argument, let's assume that it's somehow unfair to the original employer. What about the customers? Why is it fair that they've lost the option of working with a guy they like, probably for less money? There are two sides to the coin. That's why I said it's an empirical question: we can work out which option produces the better outcome overall, and the facts strongly suggest the best outcome is the world where non-competes are generally unenforceable. One of the biggest and last remaining areas of productivity growth in modern service economies is putting people to their most productive task. There are huge structural inefficiencies that result in person doing task A when they'd be much more productive doing task B. This is much more of a problem in a service economy than a manufacturing economy. And one source of this inefficiency, and an increasingly common source at that, is non-compete agreements.

deleted 8y ago

[deleted]