10 ms·

The FTC plans to curtail the use of non-compete clauses

190 points by thomas_hn 4y ago

bushbaba 4y ago
This would be a big blow to California. One of the reasons I didn’t move to Washington was that my employer was known to sue for breaking the non compete if you headed to a competitor. Being employed in California protected me from said lawsuit.
- ghaff 4y ago
  While I'm all for making non-competes for employees unenforceable in general, I think their role is overplayed notwithstanding your anecdote. Otherwise you'd have a tech industry in Oklahoma and wouldn't have one in Massachusetts, which until fairly recently fully allowed for non-competes. (EMC in particular fought against legislative change but there's now a somewhat weak garden leave requirement--but it at least makes companies put skin in the game.)
  - iancmceachern 4y ago
    The tech industry in Mass us there because of the universities. It doesn't have to do with non competition agreements. Also, the tech industry in California is an order of magnitude larger than that in Mass.
    - neilv 4y ago
      I don't know whether it's true, but I've often heard the theory that California's no-noncompetes is what made it so startup-friendly originally. Once the dotcom boom started, people were saying go to the SF Bay Area for startups, because that's where the investors are. MIT graduates with computer-y degrees seemed to be fleeing Cambridge/Boston as soon as they could.
      - ghaff 4y ago
        As someone who was there at the time, the reasons were complicated. The Route 128 computer industry was in pretty significant decline and nothing had really come in to replace them. And the metro itself saw an outflow of population until the late nineties. When Teradyne moved out of Boston that was probably the last significant tech company in the city proper at the time. And the whole biotech and pharma boom in Kendall Square didn't happen until later. (As well as the establishment of major offices for firms HQd on the west coast.)
        neilv 4y ago
        At the time of Web boom, I didn't understand some of the foot-dragging by West Coast tech companies, on setting up offices Cambridge/Boston, to get more of the talent fresh out of the universities, and the research university partnerships. But maybe they (correctly) thought that most of new grads would come to them. In the case of Google, I thought there might also have been a Stanford-vs.-MIT factor. MIT was known as very strong-minded and self-assured. (And Stanford and California have their own stereotypes.) Were I trying to craft a particular culture, starting either around Stanford or MIT, there's no way I'd open a major office on the other coast until the HQ culture had really gelled, and I thought I could get the distant people to meet us more than halfway (rather than them carbon-copying what they already know from MIT or California).
        ghaff 4y ago
        Arguably, it took young college-educated professionals increasingly wanting to live in cities to make the change. Which in Cambridge/Boston's case led in part to the development of Kendall Square and the Seaport. Before that, pretty much all the technology-related companies in MA were out in the suburbs and I can imagine new grads thinking if there were going to be out in a suburban office park anyway, why not be in California? And, yes, historically there have been east coast vs. west coast stereotypes that doubtless have some basis in reality.
    - ghaff 4y ago
      >The tech industry in Mass us there because of the universities. It doesn't have to do with non competition agreements. That's pretty much my point. The presence of non-competes did not prevent the development of a tech industry in MA. And, while VC funding is about 20% of CA's, MA+NY+CA have far more VC than any other states--and NY and MA together have more than half of CAs funding. Those two states collectively also have a lot of different kinds of "tech" that are far less represented in CA such as fintech and biotech/pharma.
      - MAGZine 4y ago
        i think the point GP is making is that Mass's tech sector might be actively hindered because of non-competes, and that without the universities, who knows if it would exist at all.
        ghaff 4y ago
        Oh, I think it's obvious that, absent a concentration of world-class research universities, MA would not have developed the sort of concentration of technology-oriented companies that it's had over the years. I'll just add that I'm not sure how common non-competes actually were in the MA computer industry. I certainly never saw one until the company I was with was acquired by EMC in about 2000. What is true is that people tended to stay with companies a long time but I don't have any evidence that non-competes played a big role in that.
blendergeek 4y ago
The headline here is deceptive. Nothing in the article mentions any plans by "America's trustbusters to curtail the use of non-compete clauses". Rather, this is a short essay about non-competes, explaining why they are a bad idea. The article ends with a call-to-action: > California, the global hq of disruptive innovation, goes a step further and bans non-competes altogether. The FTC should do the same, on the grounds that they are anticompetitive.
- toomuchtodo 4y ago
  https://www.ftc.gov/news-events/news/press-releases/2023/01/ftc-proposes-rule-ban-noncompete-clauses-which-hurt-workers-harm-competition https://www.ftc.gov/news-events/news/press-releases/2023/01/... https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/ https://www.whitehouse.gov/briefing-room/presidential-action... https://mattstoller.substack.com/p/antitrust-enforcers-to-ban-indentured https://mattstoller.substack.com/p/antitrust-enforcers-to-ba... https://www.nytimes.com/2023/01/09/opinion/linakhan-ftc-noncompete.html https://www.nytimes.com/2023/01/09/opinion/linakhan-ftc-nonc... https://threadreaderapp.com/thread/1611025895388577792.html https://threadreaderapp.com/thread/1611025895388577792.html
  - blendergeek 4y ago
    I would prefer that those things would be mentioned _in the article_. As it stands, I came away from the article not having been enlightened on any of the topics you just linked.
    - toomuchtodo 4y ago
      Did the links I provide help with context? I am attempting to be helpful.
      - blendergeek 4y ago
        Absolutely. Thank you.
epicureanideal 4y ago
It’s a good start! Plenty more things to continue fixing after this. Plenty of one sided terms in employment contracts, severance agreements, etc.
munk-a 4y ago
In the instance this change doesn't go through it is important to be aware that non-competes don't survive hardship tests. There is an extreme burden on the employer to prove that there are appropriate jobs available to the former employee that wouldn't violate the non-compete or (and this is much more common for "serious" non-competes in the modern world) provide partial compensation to the employee for the term of the non-compete. Additionally, for the survivability requirements above non-competes need to be extremely specific you can't ask a software dev not to use a computer or even ask an aerospace engineer to find a job outside of a defense contractor (since that's an overwhelming proportion of the available jobs - a more appropriate restriction might be prohibiting them from working on a list of specific projects that are direct competitors with the project they were working on for you). I wouldn't be sad to see the later form survive to be honest - there are a few situations where non-competes may be justified from a business perspective... but I think it's fair for companies to be on the hook for continued compensation at some proportion of the employee's former wage to actually exercise the privilege to deny the employee work in a specific field. But hey - better non-competes die than we allow the current chilling-effect bullshit of overly vague and broad non-competes that are never intended to see the inside of a courtroom.
- leoc 4y ago
  I'm not an expert, but IIUC the financial industry tends to pay full "garden leave" for employees serving out their noncompete terms https://en.wikipedia.org/wiki/Garden_leave https://en.wikipedia.org/wiki/Garden_leave , presumably partly for this reason.
  - sozin 4y ago
    This is correct — very common practice in trading (I am currently sitting out one now!). Generally they are 3-12 months in duration, although recently we are seeing much longer ones (24 months) from firms such as Citadel. You generally draw full base salary, and healthcare comes from COBRA. US-wide ban of non competes is good for hiring firms (they get the talent immediately), bad (allegedly) for firms from whom the talent is leaving, and mixed for the workers themselves (for whom the garden leave can be sometimes received as a paid sabbatical). It will be a really big change.
alexfromapex 4y ago
Can we please do mandatory arbitration agreements next?
- granzymes 4y ago
  Not through FTC rulemaking. Mandatory arbitration is permissible under the Federal Arbitration Act. You'd have to get Congress to pass a law banning them.
neilwilson 4y ago
Non-competes should fail under restraint of trade. Always.
- 3pt14159 4y ago
  No they shouldn't. For non-classified contexts, they should be properly regulated. For example, there should be a term limit that is something reasonable, like 18 months, and there should be a provision that the duration of their enforcement is paired with ongoing compensation at the same terms as during employment. So if you made $200k cash plus $100k Stock options per year, on the moment your employment contract ends if they want to make you unhirable from their competitors it should cost them ongoing money. For classified contexts, it should be a longer term for some fields based on national security concerns and ongoing renumeration should not be provided, given it is literally national security. This nonsense where British pilots were training non-allies on UK flight tactics right after leaving the RAF is bananas.
granzymes 4y ago
Banning (most) non-competes is likely good policy, particularly agreements that do not provide for payment during the period of enforcement. But you also have to ask whether the FTC is the right part of government to make this decision. The States have 50 different approaches written into their laws on how to deal with non-competes. Some ban them entirely, while others curtail their scope or shift the burden to employers to justify them, and many do not regulate non-competes at all. A rule by the FTC that preempts the laws of every state for all non-competes regardless of scope without any specific statutory authority is the wrong approach. The FTC is justifying this under Section 5 of the FTC act, which in relevant part prohibits "unfair or deceptive acts or practices in or affecting commerce." This kind of wholesale preemption of state law regardless of context seems like an awfully big change for such a broad and vague statute. Underscoring this point, the FTC has not historically used Section 5 in this way. Expect to see this challenged in court.
- Retric 4y ago
  Non competes have a direct impact on interstate commerce so the Federal government has a clear mandate from the constitution. Non competes are rarely enforceable as written, so the FTC has a clear mandate from both the unfair and deceptive standpoint.
  - granzymes 4y ago
    Obviously the Federal government is constitutionally authorized to regulate non-competes. That's not my argument at all. And the FTC is not banning unenforceable non-competes, the proposed rule bans all non-competes. Regardless of which non-competes they choose to ban, however, the fact remains that this is the first time that the FTC is attempting to use Section 5 in this manner. It is very unclear that they have the authority to issue the proposed rule. My opinion is that they do not, and I think the courts will agree with me.
    - EMIRELADERO 4y ago
      Can you explain why they don't have that authority? Do you think Congress can't delegate its power through a statute? Or do you think that it hasn't done so in this speciifc (Section 5) instance?
epicureanideal 4y ago
What changed to get the politicians on board with this?
- Longlius 4y ago
  Non-competes have positively flourished in the tight labor market. I know a guy who works in PR who moved across the country to work for a company serving a completely different industry who dealt with aggressive emails from his former employer's legal team about enforcing the non-compete he signed.
  - iancmceachern 4y ago
    I know a guy who was wrongfully persecuted for his non compete, it didn't even apply, but his former employers had friends in high places amd proceeded anyway. He lost his new job and it completely upended his families life.
- runarberg 4y ago
  Probably lobby money. A new congress that hasn’t received as many gifts from the powers that want to keep this. And probably the proportion of upper management of the FTC that has gotten such gifts is getting lower (or the gifts are getting weaker).
- deleted 4y ago
  [deleted]
- lostdog 4y ago
  The "radical left" finally got some power. The head of the FTC is known to be someone who wants to enact progressive policies. For her and her staff, limiting noncompetes is driven by idealism that workers should have more rights. I believe that these changes are echoes of Bernie and other progressives getting lots of votes since 2016. They are now insiders in the government rather than outsiders, so they advocate for progressives to lead departments.
  - claytongulick 4y ago
JustSomeNobody 4y ago
If this passes, I'm convinced the final version will have so many holes in it nothing will change.
- topspin 4y ago
  Correct.
baron816 4y ago
When I first tried to transition into tech, I had a really hard time getting someone to hire me. I had a lot of potential, but no one wanted to take a risk on someone without experience. I still needed some training, and no one wanted to train me, just to see me leave in a few years. That seems to be an argument for keeping non-compete clauses--allow firms to hire people on the condition that they'll stay a few years once they've be trained and can at least recoup the cost of training. Something like that would've been in my favor. Maybe a better solution would be something like the government will pay a company if an employee leaves within some time frame after getting hired (2 years or so) if that employee gets a higher paying job in a similar role. It'd be tricky to structure correctly, but the whole idea is that what the government is really paying for is job training insurance. It mitigates the risk for firms for hiring people, thus making hiring faster and keeping people out of unemployment.
- neilv 4y ago
  > allow firms to hire people on the condition that they'll stay a few years once they've be trained and can at least recoup the cost of training I favor training, loyalty, seeing a system through a lifecycle (rather than job-hopping before you see both cause and effect), etc., but... Requiring an employee to stay at a company, especially in our current not-very-scrupulous business culture, sounds like a recipe for indentured servitude.
  - baron816 4y ago
    Read my last paragraph. I'm suggesting a way that would allow employees to leave whenever they want, but to derisk training for companies so that they still have an incentive to hire and train untested people.
- lotsofpulp 4y ago
  > That seems to be an argument for keeping non-compete clauses That was an argument that the labor buyers you were negotiating with were perceiving an excess supply of labor that they wanted relative to demand at that time. Your solution would have been to try to sell to other labor buyers or change the type of labor you were selling to something that was in sufficient demand such that buyers would not have a choice other than to train you, and treat you well enough such that you are incentivized to stick around.
xhkkffbf 4y ago
I realize that there are many times when non-compete clauses are examples of big companies punching down at low-level workers, but I've also watched them work out well for the low-level workers too. At least two of my friends have been good enough to be poached by competitors who were willing to pay them to take a 4-8 month vacation until the non-compete ran out. They loved the long vacation. All things being equal, a fluid marketplace with many options is best for all sides. Businesses that are too strict with their non-competes also risk driving away potential workers. In my experience, the businesses only ask for the non-competes when they're giving someone a significant amount of responsibility.
- wpietri 4y ago
  Nah. If your friends are that valuable they could have negotiated for the extra comp either way. And then taken a long vacation on their terms. Also, your experience here is perhaps limited. Non-compete clauses are being given to janitors and sandwich-makers. E.g.: https://www.nytimes.com/2014/10/15/upshot/when-the-guy-making-your-sandwich-has-a-noncompete-clause.html https://www.nytimes.com/2014/10/15/upshot/when-the-guy-makin...
6stringmerc 4y ago
I got an NDA from XXXXX (insert engineering firm name there) that basically is unenforceable unless they want to sue me for more than the $4,400 they paid me off when firing me. Quite a tough lesson to learn that Arkansas hillbillies make shitty leaders.
- deleted 4y ago
  [deleted]
tjbiddle 4y ago
Everyone seems to be focusing on non-competes for the employee/employer relationship. In my experience, I've only used them when acquiring a business. I always like that there is a 3-5 year non-compete so the previous owner doesn't just setup shop again immediately after selling their business to me.
scottshea 4y ago
The one non-compete clause that I signed was very permissive. There was a short list of companies I could not sign with for a year. I felt it was pretty fair to be honest. Otherwise, I do not sign them.
indymike 4y ago
Outside of trade secret level engineering, pharma and biotech, I've never seen a non-compete enforced because the employer was actually worried about real competitive advantage. I have seen plenty where some Junior Vice President got angry at someone for quitting, and decided to sue to make that person's life hell. I've made several hires (sales, marketing, engineering, even executive) where the JRVP calls and tries to threaten my company with a lawsuit. My answer is, send over what it will cost to hypothetically settle, and we'll talk. Never once have I been given a number or sued. I assume this is because, A) they know the non-compete is unenforceable or B) the non-compete doesn't exist, or C) it's punitive with no real harm in the marketplace from the hire.
- Supermancho 4y ago
  I've both seen non-competes for software development and been sued in the last 10 years. I was partnered with someone who had signed one when we founded a company, which I immediately withdrew from. No need to get involved in a project that has legal problems before a revenue stream.
- starwind 4y ago
  Trade secrets already get legal protections so the non-competes aren't relevant there anyway
- topspin 4y ago
  > I've never seen a non-compete enforced I have. Tiny company had a coder go off to another company in another state that they were approximately in competition with. They sued. Don't know the outcome, but I know it when to court.
jonnycomputer 4y ago
More evidence that Biden just might be the best President of the last 50 years or so.
Simon_O_Rourke 4y ago
I had a non-compete and a host of other completely unenforceable (I thought at least) stipulations in a previous employer. They even tried to put in some three-month notice period, which I thought was way over the top, but ended up working for two months after I gave my notice and left it at that. My view was, they have absolutely tiny chances of finding out where I was joining next, unless I go publishing it on LinkedIn. So I left it at that. And I'm sure my former employer wasn't going to go to the trouble of tracking me down, so that was my decision made. Here's the thing I wonder about (especially in tech) - who's to say where you currently work except what you may reveal in LinkedIn or on social media?
- isthisthingon99 4y ago
  There is a website that employers are using to verify background which includes current employers. I believe it's run by idp.
- kibwen 4y ago
  > who's to say where you currently work except what you may reveal in LinkedIn or on social media Companies sell this information to credit bureaus and background check agencies, who then sell it back to other companies. It's not secret.
merricksb 4y ago
https://archive.ph/oOJeb https://archive.ph/oOJeb
adamcharnock 4y ago
Does anyone know how non-compete agreements are enforced in the care of non-USA citizens? I’m based in Europe (Portugal) and working for a USA company. This isn’t a serious concern, just curious.
josephcsible 4y ago
Here's how non-competes could work that would be perfectly fair to employees: When you get a new job offer, you tell your old employer about it. Your old employer then has two choices: either let you take the new job, or pay you a salary and other benefits equal to what the new job would have paid, for the duration of the noncompete, except without you having to do any work. Then companies would only require noncompetes when it's actually really important.
- kika 4y ago
  Many jobs have pretty shitty base salaries (see traders above) and huge performance bonuses. These people would be at a disadvantage.
  - josephcsible 4y ago
    Okay, slight adjustment to fix that: the pay is the higher of the old job's pay (at its peak during your employment period there) or the new job's pay.
    - kika 4y ago
      huh. at the peak i was making $1M a year. now i’m not worse but im getting much less because have you seen the stock market? that’s the problem with government “regulations”: unintended consequences. and lack of personal responsibility: “ah, we didn’t think of that, well, sucks to be you”
dang 4y ago
The main threads: U.S. moves to bar noncompete agreements in labor contracts - https://news.ycombinator.com/item?id=34260577 https://news.ycombinator.com/item?id=34260577 - Jan 2023 (494 comments) FTC cracks down on companies that impose harmful noncompete restrictions - https://news.ycombinator.com/item?id=34254183 https://news.ycombinator.com/item?id=34254183 - Jan 2023 (176 comments) Also related: FTC intends to ban noncompete clauses that bind 30M US workers - https://news.ycombinator.com/item?id=34287441 https://news.ycombinator.com/item?id=34287441 - Jan 2023 (22 comments) FTC Proposes Banning Noncompete Clauses for Workers - https://news.ycombinator.com/item?id=34260696 https://news.ycombinator.com/item?id=34260696 - Jan 2023 (9 comments) Laws barring noncompete clauses spreading - https://news.ycombinator.com/item?id=33425934 https://news.ycombinator.com/item?id=33425934 - Nov 2022 (216 comments)

190 points by thomas_hn 4y ago

This would be a big blow to California. One of the reasons I didn’t move to Washington was that my employer was known to sue for breaking the non compete if you headed to a competitor. Being employed in California protected me from said lawsuit.

ghaff 4y ago
While I'm all for making non-competes for employees unenforceable in general, I think their role is overplayed notwithstanding your anecdote. Otherwise you'd have a tech industry in Oklahoma and wouldn't have one in Massachusetts, which until fairly recently fully allowed for non-competes. (EMC in particular fought against legislative change but there's now a somewhat weak garden leave requirement--but it at least makes companies put skin in the game.)
- iancmceachern 4y ago
  The tech industry in Mass us there because of the universities. It doesn't have to do with non competition agreements. Also, the tech industry in California is an order of magnitude larger than that in Mass.
  - neilv 4y ago
    I don't know whether it's true, but I've often heard the theory that California's no-noncompetes is what made it so startup-friendly originally. Once the dotcom boom started, people were saying go to the SF Bay Area for startups, because that's where the investors are. MIT graduates with computer-y degrees seemed to be fleeing Cambridge/Boston as soon as they could.
    - ghaff 4y ago
      As someone who was there at the time, the reasons were complicated. The Route 128 computer industry was in pretty significant decline and nothing had really come in to replace them. And the metro itself saw an outflow of population until the late nineties. When Teradyne moved out of Boston that was probably the last significant tech company in the city proper at the time. And the whole biotech and pharma boom in Kendall Square didn't happen until later. (As well as the establishment of major offices for firms HQd on the west coast.)
      - neilv 4y ago
        At the time of Web boom, I didn't understand some of the foot-dragging by West Coast tech companies, on setting up offices Cambridge/Boston, to get more of the talent fresh out of the universities, and the research university partnerships. But maybe they (correctly) thought that most of new grads would come to them. In the case of Google, I thought there might also have been a Stanford-vs.-MIT factor. MIT was known as very strong-minded and self-assured. (And Stanford and California have their own stereotypes.) Were I trying to craft a particular culture, starting either around Stanford or MIT, there's no way I'd open a major office on the other coast until the HQ culture had really gelled, and I thought I could get the distant people to meet us more than halfway (rather than them carbon-copying what they already know from MIT or California).
        ghaff 4y ago
        Arguably, it took young college-educated professionals increasingly wanting to live in cities to make the change. Which in Cambridge/Boston's case led in part to the development of Kendall Square and the Seaport. Before that, pretty much all the technology-related companies in MA were out in the suburbs and I can imagine new grads thinking if there were going to be out in a suburban office park anyway, why not be in California? And, yes, historically there have been east coast vs. west coast stereotypes that doubtless have some basis in reality.
  - ghaff 4y ago
    >The tech industry in Mass us there because of the universities. It doesn't have to do with non competition agreements. That's pretty much my point. The presence of non-competes did not prevent the development of a tech industry in MA. And, while VC funding is about 20% of CA's, MA+NY+CA have far more VC than any other states--and NY and MA together have more than half of CAs funding. Those two states collectively also have a lot of different kinds of "tech" that are far less represented in CA such as fintech and biotech/pharma.
    - MAGZine 4y ago
      i think the point GP is making is that Mass's tech sector might be actively hindered because of non-competes, and that without the universities, who knows if it would exist at all.
      - ghaff 4y ago
        Oh, I think it's obvious that, absent a concentration of world-class research universities, MA would not have developed the sort of concentration of technology-oriented companies that it's had over the years. I'll just add that I'm not sure how common non-competes actually were in the MA computer industry. I certainly never saw one until the company I was with was acquired by EMC in about 2000. What is true is that people tended to stay with companies a long time but I don't have any evidence that non-competes played a big role in that.

blendergeek 4y ago

The headline here is deceptive. Nothing in the article mentions any plans by "America's trustbusters to curtail the use of non-compete clauses". Rather, this is a short essay about non-competes, explaining why they are a bad idea. The article ends with a call-to-action: > California, the global hq of disruptive innovation, goes a step further and bans non-competes altogether. The FTC should do the same, on the grounds that they are anticompetitive.

toomuchtodo 4y ago
https://www.ftc.gov/news-events/news/press-releases/2023/01/ftc-proposes-rule-ban-noncompete-clauses-which-hurt-workers-harm-competition https://www.ftc.gov/news-events/news/press-releases/2023/01/... https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/ https://www.whitehouse.gov/briefing-room/presidential-action... https://mattstoller.substack.com/p/antitrust-enforcers-to-ban-indentured https://mattstoller.substack.com/p/antitrust-enforcers-to-ba... https://www.nytimes.com/2023/01/09/opinion/linakhan-ftc-noncompete.html https://www.nytimes.com/2023/01/09/opinion/linakhan-ftc-nonc... https://threadreaderapp.com/thread/1611025895388577792.html https://threadreaderapp.com/thread/1611025895388577792.html
- blendergeek 4y ago
  I would prefer that those things would be mentioned _in the article_. As it stands, I came away from the article not having been enlightened on any of the topics you just linked.
  - toomuchtodo 4y ago
    Did the links I provide help with context? I am attempting to be helpful.
    - blendergeek 4y ago
      Absolutely. Thank you.

epicureanideal 4y ago

It’s a good start! Plenty more things to continue fixing after this. Plenty of one sided terms in employment contracts, severance agreements, etc.

munk-a 4y ago

In the instance this change doesn't go through it is important to be aware that non-competes don't survive hardship tests. There is an extreme burden on the employer to prove that there are appropriate jobs available to the former employee that wouldn't violate the non-compete or (and this is much more common for "serious" non-competes in the modern world) provide partial compensation to the employee for the term of the non-compete. Additionally, for the survivability requirements above non-competes need to be extremely specific you can't ask a software dev not to use a computer or even ask an aerospace engineer to find a job outside of a defense contractor (since that's an overwhelming proportion of the available jobs - a more appropriate restriction might be prohibiting them from working on a list of specific projects that are direct competitors with the project they were working on for you). I wouldn't be sad to see the later form survive to be honest - there are a few situations where non-competes may be justified from a business perspective... but I think it's fair for companies to be on the hook for continued compensation at some proportion of the employee's former wage to actually exercise the privilege to deny the employee work in a specific field. But hey - better non-competes die than we allow the current chilling-effect bullshit of overly vague and broad non-competes that are never intended to see the inside of a courtroom.

leoc 4y ago
I'm not an expert, but IIUC the financial industry tends to pay full "garden leave" for employees serving out their noncompete terms https://en.wikipedia.org/wiki/Garden_leave https://en.wikipedia.org/wiki/Garden_leave , presumably partly for this reason.
- sozin 4y ago
  This is correct — very common practice in trading (I am currently sitting out one now!). Generally they are 3-12 months in duration, although recently we are seeing much longer ones (24 months) from firms such as Citadel. You generally draw full base salary, and healthcare comes from COBRA. US-wide ban of non competes is good for hiring firms (they get the talent immediately), bad (allegedly) for firms from whom the talent is leaving, and mixed for the workers themselves (for whom the garden leave can be sometimes received as a paid sabbatical). It will be a really big change.

alexfromapex 4y ago

Can we please do mandatory arbitration agreements next?

granzymes 4y ago
Not through FTC rulemaking. Mandatory arbitration is permissible under the Federal Arbitration Act. You'd have to get Congress to pass a law banning them.

neilwilson 4y ago

Non-competes should fail under restraint of trade. Always.

3pt14159 4y ago
No they shouldn't. For non-classified contexts, they should be properly regulated. For example, there should be a term limit that is something reasonable, like 18 months, and there should be a provision that the duration of their enforcement is paired with ongoing compensation at the same terms as during employment. So if you made $200k cash plus $100k Stock options per year, on the moment your employment contract ends if they want to make you unhirable from their competitors it should cost them ongoing money. For classified contexts, it should be a longer term for some fields based on national security concerns and ongoing renumeration should not be provided, given it is literally national security. This nonsense where British pilots were training non-allies on UK flight tactics right after leaving the RAF is bananas.

granzymes 4y ago

Banning (most) non-competes is likely good policy, particularly agreements that do not provide for payment during the period of enforcement. But you also have to ask whether the FTC is the right part of government to make this decision. The States have 50 different approaches written into their laws on how to deal with non-competes. Some ban them entirely, while others curtail their scope or shift the burden to employers to justify them, and many do not regulate non-competes at all. A rule by the FTC that preempts the laws of every state for all non-competes regardless of scope without any specific statutory authority is the wrong approach. The FTC is justifying this under Section 5 of the FTC act, which in relevant part prohibits "unfair or deceptive acts or practices in or affecting commerce." This kind of wholesale preemption of state law regardless of context seems like an awfully big change for such a broad and vague statute. Underscoring this point, the FTC has not historically used Section 5 in this way. Expect to see this challenged in court.

Retric 4y ago
Non competes have a direct impact on interstate commerce so the Federal government has a clear mandate from the constitution. Non competes are rarely enforceable as written, so the FTC has a clear mandate from both the unfair and deceptive standpoint.
- granzymes 4y ago
  Obviously the Federal government is constitutionally authorized to regulate non-competes. That's not my argument at all. And the FTC is not banning unenforceable non-competes, the proposed rule bans all non-competes. Regardless of which non-competes they choose to ban, however, the fact remains that this is the first time that the FTC is attempting to use Section 5 in this manner. It is very unclear that they have the authority to issue the proposed rule. My opinion is that they do not, and I think the courts will agree with me.
  - EMIRELADERO 4y ago
    Can you explain why they don't have that authority? Do you think Congress can't delegate its power through a statute? Or do you think that it hasn't done so in this speciifc (Section 5) instance?

epicureanideal 4y ago

What changed to get the politicians on board with this?

Longlius 4y ago
Non-competes have positively flourished in the tight labor market. I know a guy who works in PR who moved across the country to work for a company serving a completely different industry who dealt with aggressive emails from his former employer's legal team about enforcing the non-compete he signed.
- iancmceachern 4y ago
  I know a guy who was wrongfully persecuted for his non compete, it didn't even apply, but his former employers had friends in high places amd proceeded anyway. He lost his new job and it completely upended his families life.
runarberg 4y ago
Probably lobby money. A new congress that hasn’t received as many gifts from the powers that want to keep this. And probably the proportion of upper management of the FTC that has gotten such gifts is getting lower (or the gifts are getting weaker).
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lostdog 4y ago
The "radical left" finally got some power. The head of the FTC is known to be someone who wants to enact progressive policies. For her and her staff, limiting noncompetes is driven by idealism that workers should have more rights. I believe that these changes are echoes of Bernie and other progressives getting lots of votes since 2016. They are now insiders in the government rather than outsiders, so they advocate for progressives to lead departments.
- claytongulick 4y ago

JustSomeNobody 4y ago

If this passes, I'm convinced the final version will have so many holes in it nothing will change.

topspin 4y ago
Correct.

baron816 4y ago

When I first tried to transition into tech, I had a really hard time getting someone to hire me. I had a lot of potential, but no one wanted to take a risk on someone without experience. I still needed some training, and no one wanted to train me, just to see me leave in a few years. That seems to be an argument for keeping non-compete clauses--allow firms to hire people on the condition that they'll stay a few years once they've be trained and can at least recoup the cost of training. Something like that would've been in my favor. Maybe a better solution would be something like the government will pay a company if an employee leaves within some time frame after getting hired (2 years or so) if that employee gets a higher paying job in a similar role. It'd be tricky to structure correctly, but the whole idea is that what the government is really paying for is job training insurance. It mitigates the risk for firms for hiring people, thus making hiring faster and keeping people out of unemployment.

neilv 4y ago
> allow firms to hire people on the condition that they'll stay a few years once they've be trained and can at least recoup the cost of training I favor training, loyalty, seeing a system through a lifecycle (rather than job-hopping before you see both cause and effect), etc., but... Requiring an employee to stay at a company, especially in our current not-very-scrupulous business culture, sounds like a recipe for indentured servitude.
- baron816 4y ago
  Read my last paragraph. I'm suggesting a way that would allow employees to leave whenever they want, but to derisk training for companies so that they still have an incentive to hire and train untested people.
lotsofpulp 4y ago
> That seems to be an argument for keeping non-compete clauses That was an argument that the labor buyers you were negotiating with were perceiving an excess supply of labor that they wanted relative to demand at that time. Your solution would have been to try to sell to other labor buyers or change the type of labor you were selling to something that was in sufficient demand such that buyers would not have a choice other than to train you, and treat you well enough such that you are incentivized to stick around.

xhkkffbf 4y ago

I realize that there are many times when non-compete clauses are examples of big companies punching down at low-level workers, but I've also watched them work out well for the low-level workers too. At least two of my friends have been good enough to be poached by competitors who were willing to pay them to take a 4-8 month vacation until the non-compete ran out. They loved the long vacation. All things being equal, a fluid marketplace with many options is best for all sides. Businesses that are too strict with their non-competes also risk driving away potential workers. In my experience, the businesses only ask for the non-competes when they're giving someone a significant amount of responsibility.

wpietri 4y ago
Nah. If your friends are that valuable they could have negotiated for the extra comp either way. And then taken a long vacation on their terms. Also, your experience here is perhaps limited. Non-compete clauses are being given to janitors and sandwich-makers. E.g.: https://www.nytimes.com/2014/10/15/upshot/when-the-guy-making-your-sandwich-has-a-noncompete-clause.html https://www.nytimes.com/2014/10/15/upshot/when-the-guy-makin...

6stringmerc 4y ago

I got an NDA from XXXXX (insert engineering firm name there) that basically is unenforceable unless they want to sue me for more than the $4,400 they paid me off when firing me. Quite a tough lesson to learn that Arkansas hillbillies make shitty leaders.

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tjbiddle 4y ago

Everyone seems to be focusing on non-competes for the employee/employer relationship. In my experience, I've only used them when acquiring a business. I always like that there is a 3-5 year non-compete so the previous owner doesn't just setup shop again immediately after selling their business to me.

scottshea 4y ago

The one non-compete clause that I signed was very permissive. There was a short list of companies I could not sign with for a year. I felt it was pretty fair to be honest. Otherwise, I do not sign them.

indymike 4y ago

Outside of trade secret level engineering, pharma and biotech, I've never seen a non-compete enforced because the employer was actually worried about real competitive advantage. I have seen plenty where some Junior Vice President got angry at someone for quitting, and decided to sue to make that person's life hell. I've made several hires (sales, marketing, engineering, even executive) where the JRVP calls and tries to threaten my company with a lawsuit. My answer is, send over what it will cost to hypothetically settle, and we'll talk. Never once have I been given a number or sued. I assume this is because, A) they know the non-compete is unenforceable or B) the non-compete doesn't exist, or C) it's punitive with no real harm in the marketplace from the hire.

Supermancho 4y ago
I've both seen non-competes for software development and been sued in the last 10 years. I was partnered with someone who had signed one when we founded a company, which I immediately withdrew from. No need to get involved in a project that has legal problems before a revenue stream.
starwind 4y ago
Trade secrets already get legal protections so the non-competes aren't relevant there anyway
topspin 4y ago
> I've never seen a non-compete enforced I have. Tiny company had a coder go off to another company in another state that they were approximately in competition with. They sued. Don't know the outcome, but I know it when to court.

jonnycomputer 4y ago

More evidence that Biden just might be the best President of the last 50 years or so.

Simon_O_Rourke 4y ago

I had a non-compete and a host of other completely unenforceable (I thought at least) stipulations in a previous employer. They even tried to put in some three-month notice period, which I thought was way over the top, but ended up working for two months after I gave my notice and left it at that. My view was, they have absolutely tiny chances of finding out where I was joining next, unless I go publishing it on LinkedIn. So I left it at that. And I'm sure my former employer wasn't going to go to the trouble of tracking me down, so that was my decision made. Here's the thing I wonder about (especially in tech) - who's to say where you currently work except what you may reveal in LinkedIn or on social media?

isthisthingon99 4y ago
There is a website that employers are using to verify background which includes current employers. I believe it's run by idp.
kibwen 4y ago
> who's to say where you currently work except what you may reveal in LinkedIn or on social media Companies sell this information to credit bureaus and background check agencies, who then sell it back to other companies. It's not secret.

merricksb 4y ago

https://archive.ph/oOJeb https://archive.ph/oOJeb

adamcharnock 4y ago

Does anyone know how non-compete agreements are enforced in the care of non-USA citizens? I’m based in Europe (Portugal) and working for a USA company. This isn’t a serious concern, just curious.

josephcsible 4y ago

Here's how non-competes could work that would be perfectly fair to employees: When you get a new job offer, you tell your old employer about it. Your old employer then has two choices: either let you take the new job, or pay you a salary and other benefits equal to what the new job would have paid, for the duration of the noncompete, except without you having to do any work. Then companies would only require noncompetes when it's actually really important.

kika 4y ago
Many jobs have pretty shitty base salaries (see traders above) and huge performance bonuses. These people would be at a disadvantage.
- josephcsible 4y ago
  Okay, slight adjustment to fix that: the pay is the higher of the old job's pay (at its peak during your employment period there) or the new job's pay.
  - kika 4y ago
    huh. at the peak i was making $1M a year. now i’m not worse but im getting much less because have you seen the stock market? that’s the problem with government “regulations”: unintended consequences. and lack of personal responsibility: “ah, we didn’t think of that, well, sucks to be you”

dang 4y ago

The main threads: U.S. moves to bar noncompete agreements in labor contracts - https://news.ycombinator.com/item?id=34260577 https://news.ycombinator.com/item?id=34260577 - Jan 2023 (494 comments) FTC cracks down on companies that impose harmful noncompete restrictions - https://news.ycombinator.com/item?id=34254183 https://news.ycombinator.com/item?id=34254183 - Jan 2023 (176 comments) Also related: FTC intends to ban noncompete clauses that bind 30M US workers - https://news.ycombinator.com/item?id=34287441 https://news.ycombinator.com/item?id=34287441 - Jan 2023 (22 comments) FTC Proposes Banning Noncompete Clauses for Workers - https://news.ycombinator.com/item?id=34260696 https://news.ycombinator.com/item?id=34260696 - Jan 2023 (9 comments) Laws barring noncompete clauses spreading - https://news.ycombinator.com/item?id=33425934 https://news.ycombinator.com/item?id=33425934 - Nov 2022 (216 comments)