6 ms·

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.
ummonk 8y ago
Then the company clearly isn't paying him his full value. If the client base is loyal to him rather than the company then the company is just stealing value from him.
tathougies 8y ago
Then, the company should pay the sales guy the fair market value his contact database? I mean... this is not rocket science. Only someone supporting a large, overarching government to enforce these non-competes can possible see them as a good thing.
twblalock 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. That doesn't seem to happen in California where noncompetes are banned. This is one of those things that seems like it might be a problem but doesn't actually happen very often.
- monocasa 8y ago
  Rolodexes are trade secrets are why. Hell, there's case law that a myspace friend list can be a trade secret under the right circumstances. https://en.wikipedia.org/wiki/Christou_v._Beatport,_LLC https://en.wikipedia.org/wiki/Christou_v._Beatport,_LLC
ralph84 8y ago
This doesn't happen as often as you'd think. Most good salespeople jump to companies that are in adjacent but not directly competitive markets. That way they can leverage their client base without coming off as disingenuous by pitching a product they were saying was crap last week.
lsllc 8y ago
This is a free-market capitalist economy no? Too bad. Either pay your sales guy better so they won't leave, or give your customers a better deal so they won't switch.
analog31 8y ago
As I understand it, knowledge of a company's client base is protected by NDA.
barry-cotter 8y ago
Didn’t Ross Perot leave IBM because they changed his commission schedule because he was so ludicrously good at sales? I can’t find a source for that particular story quickly but it lines up with his Wikipedia article. https://en.wikipedia.org/wiki/Ross_Perot https://en.wikipedia.org/wiki/Ross_Perot > After he left the Navy in 1957, Perot became a salesman for IBM. He quickly became a top employee (one year, he fulfilled his annual sales quota in a mere two weeks)[10] and tried to pitch his ideas to supervisors, who largely ignored him.[11] He left IBM in 1962 to found Electronic Data Systems (EDS) in Dallas, Texas, and courted large corporations for his data processing services. Perot was refused 77 times before he was given his first contract. EDS received lucrative contracts from the U.S. government in the 1960s, computerizing Medicare records. EDS went public in 1968 and the stock price rose from $16 a share to $160 within days. Fortune called Perot the "fastest, richest Texan" in a 1968 cover story.[12] In 1984 General Motors bought controlling interest in EDS for $2.4 billion.

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.

ummonk 8y ago

Then the company clearly isn't paying him his full value. If the client base is loyal to him rather than the company then the company is just stealing value from him.

tathougies 8y ago

Then, the company should pay the sales guy the fair market value his contact database? I mean... this is not rocket science. Only someone supporting a large, overarching government to enforce these non-competes can possible see them as a good thing.

twblalock 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. That doesn't seem to happen in California where noncompetes are banned. This is one of those things that seems like it might be a problem but doesn't actually happen very often.

monocasa 8y ago
Rolodexes are trade secrets are why. Hell, there's case law that a myspace friend list can be a trade secret under the right circumstances. https://en.wikipedia.org/wiki/Christou_v._Beatport,_LLC https://en.wikipedia.org/wiki/Christou_v._Beatport,_LLC

ralph84 8y ago

This doesn't happen as often as you'd think. Most good salespeople jump to companies that are in adjacent but not directly competitive markets. That way they can leverage their client base without coming off as disingenuous by pitching a product they were saying was crap last week.

lsllc 8y ago

This is a free-market capitalist economy no? Too bad. Either pay your sales guy better so they won't leave, or give your customers a better deal so they won't switch.

analog31 8y ago

As I understand it, knowledge of a company's client base is protected by NDA.

barry-cotter 8y ago

Didn’t Ross Perot leave IBM because they changed his commission schedule because he was so ludicrously good at sales? I can’t find a source for that particular story quickly but it lines up with his Wikipedia article. https://en.wikipedia.org/wiki/Ross_Perot https://en.wikipedia.org/wiki/Ross_Perot > After he left the Navy in 1957, Perot became a salesman for IBM. He quickly became a top employee (one year, he fulfilled his annual sales quota in a mere two weeks)[10] and tried to pitch his ideas to supervisors, who largely ignored him.[11] He left IBM in 1962 to found Electronic Data Systems (EDS) in Dallas, Texas, and courted large corporations for his data processing services. Perot was refused 77 times before he was given his first contract. EDS received lucrative contracts from the U.S. government in the 1960s, computerizing Medicare records. EDS went public in 1968 and the stock price rose from $16 a share to $160 within days. Fortune called Perot the "fastest, richest Texan" in a 1968 cover story.[12] In 1984 General Motors bought controlling interest in EDS for $2.4 billion.