9 ms·

Non-Compete Clause Rule (NPRM)

142 points by downrightmike 4y ago

downrightmike 4y ago
more discussion https://www.reddit.com/r/cscareerquestions/comments/116oo6o/ftc_has_proposed_banning_noncompete_agreements/ https://www.reddit.com/r/cscareerquestions/comments/116oo6o/...
whiddershins 4y ago
I would like this with a salary floor (or ceiling, whatever) I think below some certain salary, non competes are obviously terrible. I also think if I pay enough whatever enough is, I should damn well be able to make sure the person I hire doesn’t take everything they learned from me and turn around and play for another team. This is off the cuff. I have no idea what that ceiling would even be, or whether this is a terrible idea.
- jostmey 4y ago
  Sure, you can pay that person enough so that they won’t leave. You can retain people without a non-compete
- TylerE 4y ago
  No need for that complexity. You want to keep me from working for someone else? Keep me in payroll.
  - tptacek 4y ago
    That's typical in finance, right? They want a 1-year noncompete, so you get "garden leave": can't work for a competitor, but still on the payroll.
- wewtyflakes 4y ago
  Who is to say that they learned it from you, though? Presumably you hired a high-salary person because they knew what they were doing.
- OkayPhysicist 4y ago
  You can do that by paying more than the competition is willing to. Not that complicated.
- ideamotor 4y ago
  Should a doctor who learned a lot about perfecting a surgery in one job not be able to apply that at a new job? They shouldn’t be able to steal equipment for example, but learning through your career is exactly what you should do and is what makes you valuable.
  - mlyle 4y ago
    There's some edge cases. E.g. a type rating for a business jet might cost $150k or more to obtain. If a firm pays for a type rating for a pilot, that pilot is immediately more valuable to every other employer with that jet. The optimal strategy from a game theoretical point of view would be to let another employer pay for the rating, and then pay the pilot say $40k/year more than the original employer could afford to pay. So reasonable terms that require repayment of pro-rata portion of genuine training, etc, for some small number of years can make sense.
    - JohnFen 4y ago
      If that's a real issue, the firm can just not pay for type rating training, and pay a higher salary to keep the job desirable despite the higher bar of entry. Or, be honest about the whole deal and make it an overt loan to the pilot. That's how it works with my employer -- if I want to get trained in a specialty that benefits my employer, they will partially cover the cost and extend me a loan for the rest. If I leave employment before I've repaid the loan, I'm still on the hook to repay it -- but I have not been turned into an indentured servant.
      - mlyle 4y ago
        > Or, be honest about the whole deal and make it an overt loan to the pilot. That's how it works with my employer -- if I want to get trained in a specialty that benefits my employer, they will partially cover the cost and extend me a loan for the rest. Sure-- these terms have to be disclosed to be binding. So you can say-- we'll pay for your type rating but if you voluntarily leave within 3 years you must pay back the pro-rata portion of the training. (This is better for the employee than a straight loan because if they are e.g. laid off they can just walk away).
- SteveNuts 4y ago
  Can you articulate why though? My kneejerk reaction is that I disagree but I can't explain why and that's not a good enough reason. Maybe more people should be contractors and this would be written in as part of the agreement.
  - ziftface 4y ago
    I think it's just crossing a line to expect to own someone for a given amount of time because of invested training, despite the economic implications. I think it comes down to a personal freedom thing. I think it probably is more beneficial economically to have these noncompetes but it comes down to what values you prioritize.
- lolinder 4y ago
  Why are nondisclosure agreements not sufficient for this kind of concern? If the concern is taking what they learned from you, why do you need a non-compete instead of requiring them not to share what they learned? To me it seems that non-competes are a very blunt instrument to lazily solve problems that could be solved more focused solutions.
  - duskwuff 4y ago
    Because an NDA can only prevent the disclosure of proprietary information. You can't place general knowledge under an NDA. For example, let's say a company hires an employee and pays for them to learn how to drive a forklift (or whatever). They can't place "how to drive a forklift" under NDA to prevent that employee from driving a forklift at another company.
    - lolinder 4y ago
      Okay, but I'm quite unsympathetic to trying to protect "I taught him to drive a forklift" with a non-compete. If there is substantial training involved you could require them to pay back a chunk of their training costs, but if it's incidental then I think it's just the cost of doing business.
- Province1108 4y ago
  You can do a paid non-compete, which is basically X years garden leave w/ pay. Many finance / trading firms do this.
  - nuclearnice3 4y ago
    As far as I can tell, the regulation would ban all non-competes paid or unpaid. They do specifically request comments on how to handle highly paid or highly skilled workers.
- esotericimpl 4y ago
  [dead]
- elbigbad 4y ago
  It is illegal to steal software or proprietary technology, and will continue to be. Outside of this, anting to stop someone from using skills they acquired to practice their desired profession is an awful take.
- luckylion 4y ago
  > I also think if I pay enough whatever enough is, I should damn well be able to make sure the person I hire doesn’t take everything they learned from me and turn around and play for another team. I agree in general, but it should probably be in X% of reasonably achievable total compensation (i.e. at least the blocked industry's average, or matching the offer if the former employee has one), where X >= 100, since you'd be essentially blocking someone from working in the industry they're experienced in.
- twblalock 4y ago
  Silicon Valley has worked fine without noncompetes. (Actually, the California economy as a whole has done fine without them, to the extent that it is one of the largest in the world.) People leaving to play for other teams has led to beneficial competition and innovation, starting from the very beginning with Fairchild spawning AMD, Intel, and a ton of other companies. You don't buy people and you don't own their skills. You pay them enough to stay, or you let them leave. Stealing trade secrets is already illegal and that isn't going to change.
- d4mi3n 4y ago
  I'm not sure the salary matters much in practice here. What we should avoid are scenarios that force folks out of their livelihood when they're subject to a non-compete through lawsuit or threat of one. I'd love to see them go the way of the Dodo, but failing that I'd at least like for some hard requirements on what forms non-competes may take so that they could be more equitable for employees: 1. Require non-competes compensate the employee for the salary they've been denied when enforced. If someone with key knowledge is a big enough issue to sue over and an organization hasn't done the work to retain said employee, the employee shouldn't have to bear the burden of extended unemployment for valuable skills or knowledge they may have. 2. Require non-competes have maximum durations. A non-compete for more than 6 - 12 months is likely excessive and can used to discourage job mobility. 3. Require non-competes be scoped to knowlege, know-how, or skills specific to that employee. Many non-competes I've seen say something along the lines of "you can't work for a competitor" without elaboration. If you work at a large organization or one with subsidiaries in multiple industries, "competitor" becomes a large swathe of potential industries you could feasibly work at. This also prevents one from working at a similar company in a completely different role. I get the desire to discourage job hopping, but that is rarely what these agreements are used to do in effect and there are better ways to take legal action in cases where proprietary info or know-how is stolen.
  - OkayPhysicist 4y ago
    Noncompetes have no good reason to exist. If you want to pay me to do nothing, you can outbid other employers. That is to say, you're employing me with my job duties being "do whatever I want, except work for a competitor" subject to the exact kind of at-will employment that companies fought so hard to achieve.
- JohnFen 4y ago
  I'm with the others here. Noncompetes are just bad. Nondisclosures should cover you for any knowledge unique to your business. General skill improvement, though? Not so much. Noncompetes don't really address that anyway. It's not like the employee will have forgotten what they've learned by the end of the noncompete, and it's not like the noncompete compensates you. It's just a bit spiteful. Also, every employer benefits from what their employees have learned at the companies prior anyway. Presumably, that's part of why experienced people command higher salaries. So in that view, it's a bit of a wash.
- steele 4y ago
  Free agency shouldn't be salary dependent. No amount of compensation turns employees into chattel.
- michaelmrose 4y ago
  Society as a whole is worse off if we let you buy or rent people. So badsically society shouldn't care what you want.
- jen20 4y ago
  That already exists: it’s called gardening leave and it must be compensated.
- OkayPhysicist 4y ago
  Noncompetes are already illegal in California. Facebook, Google, Apple, Intel and the rest of the 14% of the country's GDP demonstrate that you can innovate and build a business just fine without them. Using noncompetes is a sign of a lousy business, that doesn't deserve to survive the market.
  - lovich 4y ago
    Massachusetts also has them illegal without having garden leave, which in practice means they don't happen 99% of the time. Just to bump up that GDP percentage for your argument
shagie 4y ago
> In addition to non-compete clauses, other types of contractual provisions restrict what a worker may do after they leave their job. These other types of provisions include, among others: > ... > Training-repayment agreements (TRAs), a type of liquidated damages provision in which the worker agrees to pay the employer for the employer’s training expenses if the worker leaves their job before a certain date. [35] > 35 See, e.g., Norman D. Bishara, Kenneth J. Martin, and Randall S. Thomas, An Empirical Analysis of Non-Competition Clauses and Other Restrictive Post-Employment Covenants, 68 Vand. L. Rev. 1, 13 (2015); Uniform Law Comm’n, Uniform Restrictive Employment Agreement Act, Draft For Approval (2021) at § 2. ---- That should impact companies like Revature which have a notorious repayment of "training".
- maximilianroos 4y ago
  OTOH it also reduces employers' incentives to provide training. Notably US employers provide far _less_ training than employers in Europe do. Likely that's driven by employees moving jobs more frequently in the US; something this would worsen. Even if you think the proposal is a good one, there are second-order downsides...
  - someotherperson 4y ago
    > Likely that's driven by employees moving jobs more frequently in the US; something this would worsen Perhaps a third-order incentive is that US employers will now start offering better working conditions, including higher pay and better PTO, to stop people from moving so frequently.
    - NateEag 4y ago
      As a US citizen, this strikes me as hilarious. I think businesses around here that want to retain employees already make an effort in the form of generous PTO and healthcare policies. Most don't.
  - JohnFen 4y ago
    > something this would worsen. I'm not so sure this would have a large effect. Employer-provided training tends to be focused on the specific skills that employer requires. People who want to expand their skillset would usually have to change jobs to do it anyway.
Laaas 4y ago
Is there any downside wrt. how this would affect the GDP? Intuitively, this means more competition and higher GDP.
- hervature 4y ago
  Higher competition doesn't translate to higher GDP. In fact, monopolies produce more profits at the expense of consumers. If enough of your consumers are international, the national GDP would rise. If you are talking about competition for workers would increase costs and therefore prices would go up - that's inflation and should be discounted for in real GDP. If this is a meta argument that higher competition drives innovation which drives real GDP growth, then maybe.
  - sclarisse 4y ago
    Monopolies earn their economic profits by raising prices beyond what a free market would charge, which suppresses supply, reducing the quantity produced below the efficient amount. That does reduce (real) GDP. (You might measure it wrong and end up with an increase to GDP if it’s not in your market basket.)
    - hervature 4y ago
      You raise a good point. I will have to think about this but my gut says that it would demand on the elasticities and probably only true in some linear version of supply and demand curves.
- downrightmike 4y ago
  It would probably raise GDP since we wouldn't have people locked out of work for an unreasonable amount of time because of intimidation forced on them.
chrisco255 4y ago
This isn't the FTC's job and shouldn't be legal. If there are to be such laws, they should exist at the state level. And if they are to exist at the federal level, then it is Congress's job to do: not the FTC's.
- rkagerer 4y ago
  I thought it was odd as well that this is coming from the FTC. Does it stem from their authority with regard to antitrust legislation?
  - chrisco255 4y ago
    That's their argument in this proposal, but it's quite a dubious one that I suspect even if they issue it, will get litigated all the way to the Supreme Court.
- qbasic_forever 4y ago
  Congress created the FTC and gave it power to act so they didn't have to deal with these issues constantly. So you're wrong, this is explicitly the FTC's domain as specified by the congressional bill about 100 years ago that created them: https://ballotpedia.org/Federal_Trade_Commission_Act_of_1914 https://ballotpedia.org/Federal_Trade_Commission_Act_of_1914
  - chrisco255 4y ago
    They created the FTC to enforce antitrust law and then subsequently granted it expanded enforcement authority under the amended statutes you list there. It did not, and cannot delegate the ability to invalidate local state laws which explicitly allow for non-compete agreements.
- FireBeyond 4y ago
  Why? I live in State A. I work for an employer who has little or no presence in State A, and they are based in State B. I leave them and go to work for a new employer in State C, all while still remotely working from home. Why should I be beholden to the laws of State B, that I've never resided in, as it determines my ability to conduct TRADE with a company in State C from State A? And that's also why the FTC is involved. My professional work output is the service I have to offer. And I offer it in trade for an income. The FTC oversees more than just 'sale of consumer goods and product'.
endisneigh 4y ago
non-competes should be banned, yes. another interesting question is - should contracts that [disallow simultaneous full time employment] or [ban moonlighting/side projects] be allowed?
- duxup 4y ago
  I think an employer should be able to require that. Expecting the attention of someone 40 hours a week seems reasonable. Beyond that it is another matter IMO.
  - chabons 4y ago
    > Expecting the attention of someone 40 hours a week seems reasonable Why should the company be able to restrict your ability to do other work beyond the ability to fire you for cause if it's interfering with your ability to do your job?
    - duxup 4y ago
      Would it then matter if they are a competitor?
      - chabons 4y ago
        You raise a good point, that both moonlighting and non-compete clauses provides employers the ability to fire employees to mitigate risks associated with simultaneous work for a competitor (theft of trade secrets, corporate espionage, etc...). I'm not sure what the correct answer here is, but I'd err towards the burden of proof being more on the employer to show that the employee contributed to a direct competitor using insider information than the blanket clauses we have now.
    - cj 4y ago
      I find it funny that there’s a group of people who say “20-30 hour work weeks result in major productivity gains” meanwhile others say “I want to work 2x 40 hour jobs!” In other words, should an employer require you to have work life balance by not having more than 8 hours of work obligation per day? The common answer to this is “it doesn’t matter as long as the work gets done” but I don’t buy it. Engineering isn’t like flipping burgers at McDonald’s. Output is impacted by overworking.
itcrowd 4y ago
[flagged]
- deleted 4y ago
  [deleted]
- nuclearnice3 4y ago
  The page shows 5925 comments in the last 90 days. Just like our famous orange-colored VC-backed forum posts, most of the comments do not reflect any serious reading or digesting of the source material. https://www.regulations.gov/document/FTC-2023-0007-0001/comment https://www.regulations.gov/document/FTC-2023-0007-0001/comm...
IG_Semmelweiss 4y ago
Very curious what's going to happen outside of Technology. There are many service Industries that implement noncompetes. For example - doctors. Banning non competes Will add an additional cost to established practices to bring on a new fellow or recently licenced doctor. Most new doctors are a loss for the new independent practice for the first 2 years. If noncompetes were abolished, the money losing doctor would simply open a new practice once he has a steady book of patients. I predict lack of noncompetes would push many independent doctors to not hire as many new licenced doctors. Those doctors have to work somewhere, and that means hospitals. The inevitable results seems to be higher Healthcare costs for all americans
- the_d3f4ult 4y ago
  I am a surgeon currently employed by a private equity group and bound by an absurd non-compete. None of your points are accurate here from my perspective. Personally, I was profitable within 3 months of my hiring. The longest I've heard of it taking for a physician to become profitable is around 6 months and that's going completely independent. The idea that a doctor is a money-loser for 2 years is absurd. The need for physicians so greatly outstrips demand that I don't see this applying even in large metropolitan areas. To your second point. The way private practice used to work was a new physician would take a low initial salary in order to be offered the opportunity to become a partner in the practice. The assumption being that for the first few years the new physician is making the partners money. There are a lot of advantages to being a partner in a practice rather than being completely independent and it was worth a few years of a depressed salary in order to be able to purchase equity in an established practice. What's much more common now is for senior partners to recruit young physicians and then flip their practice to an equity firm after binding them with a non-compete, essentially canibalizing the future of independent private practices in order to ensure themselves a nicer retirement. Relevant to the discussion is the fact that equity firms, and to a lesser degree hospitals, must chase growth at all costs - inevitably driving up the cost of healthcare. I think this is something that we agree on. The short answer is that non-competes take power away from independent physicians and give it to equity firms and hospitals. If you sincerely want to see independent physicians flourish then these need to go away as soon as possible. If you read the comments submitted to the FTC you'll see that my perspective is common.
blueyes 4y ago
If I'm reading it right, the recent National Labor Board ruling also outlaws anti-disparagement clauses in severance agreements: https://www.natlawreview.com/article/nlrb-confidentiality-and-non-disparagement-provisions-are-unlawful https://www.natlawreview.com/article/nlrb-confidentiality-an...
- downrightmike 4y ago
  Too many abuse employees and lock them into not being able to tell the truth.
olliej 4y ago
If you’re a business requiring a non-compete you should be required to provide compensation the period of non compete that is the maximum of the employees current total compensation package or any job offers they receive, at the end of the period if they can demonstrate that they missed out on other gains (say a startup IPOs or whatever) you should then also be required to cover that as well. Any delays in compensation should be charged interest at the median credit card interest charge. That will separate “legitimate” non competes from bs wage reduction contracts.
- asah 4y ago
  This does not reimburse the employee for lost job experience and career advancement.
  - olliej 4y ago
    Yeah, but I didn't feel like trying to quantify a "premium" or what have you, so the goal is purely make it sufficiently expensive that the BS non-compete by default go away. But yes, I would want to say +X% loss of experience + advancement but no idea what X would be, but again the goal is to stop it just being a free wage suppression lunch.
binarymax 4y ago
It is a wondrous mechanic of capitalism, that innovation will naturally bloom and flourish, when the incentives and opportunities are available to the innovators. Hence this proposal shall indeed lift the burden of many, and new products and services of glorious nature shall grow.
- downrightmike 4y ago
  And then we end up in a dystopian cyberpunk timeline...
wingmanjd 4y ago
Does anyone know how the following situation would be addressed: Company Alice buys out Company Bob, along with all of Bob's clients. Bob's CEO "retires", but then just starts a new company and calls up his old clients and starts poaching them back, essentially double dipping on the company purchase price. This totally theoretical situation may or may not be occurring to a friend of mine who is in Company Alice, and I wondered how a banishment of non-compete clauses would affect acquisitions.
- ska 4y ago
  Acquisition deals often include clauses to address exactly these sort of things, they include both carrots (e.g. earn out details) and sticks (specific prohibitions).
- deleted 4y ago
  [deleted]
- hobotime 4y ago
  Company Alice should amend their contracts with it's clients to preclude working with ex-employees - including Bob.
- JumpCrisscross 4y ago
  > Company Alice buys out Company Bob “The proposed rule would include a limited exception for non-compete clauses between the seller and buyer of a business“ [1]. [1] https://downloads.regulations.gov/FTC-2023-0007-0001/content.pdf https://downloads.regulations.gov/FTC-2023-0007-0001/content... page 5
- mgerdts 4y ago
  > As the Commission explains below, the definition of non-compete clause would generally not include other types of restrictive employment covenants—such as non-disclosure agreements (“NDAs”) and client or customer non-solicitation agreements—because these covenants generally do not prevent a worker from seeking or accepting employment with a person or operating a business after the conclusion of the worker’s employment with the employer. However, under the proposed definition of “non-compete clause,” such covenants would be considered non-compete clauses where they are so unusually broad in scope that they function as such.9F
stevespang 4y ago
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r3trohack3r 4y ago
I’ve never understood non-competes and comment on them every time I see a contract with one. You’re paying me for my experience. I’ve gotten that experience at a previous employer, that’s how the market works. I didn’t get to this point in my career doing it for free in my spare time. So if I’m willing to sign this broad non-compete right now, it means I can’t use the experience I get here again in the near future. But you know I’m going to get a job doing this thing, look at my work history. This thing you want me to sign away, it’s all I do. Which means if I’m willing to sign this without a compensation package that compensates me for not working during the non-compete, you know I’m going to break it. Further, by signing this clause that’s fairly common, you can be fairly sure I’ve probably seen and signed a similar agreement already in my career that I’m breaking now. So, again, unless you’re going to bake the value of the non-compete into this contract, you really can’t trust any employee that was willing to sign it.

142 points by downrightmike 4y ago

more discussion https://www.reddit.com/r/cscareerquestions/comments/116oo6o/ftc_has_proposed_banning_noncompete_agreements/ https://www.reddit.com/r/cscareerquestions/comments/116oo6o/...

whiddershins 4y ago

I would like this with a salary floor (or ceiling, whatever) I think below some certain salary, non competes are obviously terrible. I also think if I pay enough whatever enough is, I should damn well be able to make sure the person I hire doesn’t take everything they learned from me and turn around and play for another team. This is off the cuff. I have no idea what that ceiling would even be, or whether this is a terrible idea.

jostmey 4y ago
Sure, you can pay that person enough so that they won’t leave. You can retain people without a non-compete
TylerE 4y ago
No need for that complexity. You want to keep me from working for someone else? Keep me in payroll.
- tptacek 4y ago
  That's typical in finance, right? They want a 1-year noncompete, so you get "garden leave": can't work for a competitor, but still on the payroll.
wewtyflakes 4y ago
Who is to say that they learned it from you, though? Presumably you hired a high-salary person because they knew what they were doing.
OkayPhysicist 4y ago
You can do that by paying more than the competition is willing to. Not that complicated.
ideamotor 4y ago
Should a doctor who learned a lot about perfecting a surgery in one job not be able to apply that at a new job? They shouldn’t be able to steal equipment for example, but learning through your career is exactly what you should do and is what makes you valuable.
- mlyle 4y ago
  There's some edge cases. E.g. a type rating for a business jet might cost $150k or more to obtain. If a firm pays for a type rating for a pilot, that pilot is immediately more valuable to every other employer with that jet. The optimal strategy from a game theoretical point of view would be to let another employer pay for the rating, and then pay the pilot say $40k/year more than the original employer could afford to pay. So reasonable terms that require repayment of pro-rata portion of genuine training, etc, for some small number of years can make sense.
  - JohnFen 4y ago
    If that's a real issue, the firm can just not pay for type rating training, and pay a higher salary to keep the job desirable despite the higher bar of entry. Or, be honest about the whole deal and make it an overt loan to the pilot. That's how it works with my employer -- if I want to get trained in a specialty that benefits my employer, they will partially cover the cost and extend me a loan for the rest. If I leave employment before I've repaid the loan, I'm still on the hook to repay it -- but I have not been turned into an indentured servant.
    - mlyle 4y ago
      > Or, be honest about the whole deal and make it an overt loan to the pilot. That's how it works with my employer -- if I want to get trained in a specialty that benefits my employer, they will partially cover the cost and extend me a loan for the rest. Sure-- these terms have to be disclosed to be binding. So you can say-- we'll pay for your type rating but if you voluntarily leave within 3 years you must pay back the pro-rata portion of the training. (This is better for the employee than a straight loan because if they are e.g. laid off they can just walk away).
SteveNuts 4y ago
Can you articulate why though? My kneejerk reaction is that I disagree but I can't explain why and that's not a good enough reason. Maybe more people should be contractors and this would be written in as part of the agreement.
- ziftface 4y ago
  I think it's just crossing a line to expect to own someone for a given amount of time because of invested training, despite the economic implications. I think it comes down to a personal freedom thing. I think it probably is more beneficial economically to have these noncompetes but it comes down to what values you prioritize.
lolinder 4y ago
Why are nondisclosure agreements not sufficient for this kind of concern? If the concern is taking what they learned from you, why do you need a non-compete instead of requiring them not to share what they learned? To me it seems that non-competes are a very blunt instrument to lazily solve problems that could be solved more focused solutions.
- duskwuff 4y ago
  Because an NDA can only prevent the disclosure of proprietary information. You can't place general knowledge under an NDA. For example, let's say a company hires an employee and pays for them to learn how to drive a forklift (or whatever). They can't place "how to drive a forklift" under NDA to prevent that employee from driving a forklift at another company.
  - lolinder 4y ago
    Okay, but I'm quite unsympathetic to trying to protect "I taught him to drive a forklift" with a non-compete. If there is substantial training involved you could require them to pay back a chunk of their training costs, but if it's incidental then I think it's just the cost of doing business.
Province1108 4y ago
You can do a paid non-compete, which is basically X years garden leave w/ pay. Many finance / trading firms do this.
- nuclearnice3 4y ago
  As far as I can tell, the regulation would ban all non-competes paid or unpaid. They do specifically request comments on how to handle highly paid or highly skilled workers.
esotericimpl 4y ago
[dead]
elbigbad 4y ago
It is illegal to steal software or proprietary technology, and will continue to be. Outside of this, anting to stop someone from using skills they acquired to practice their desired profession is an awful take.
luckylion 4y ago
> I also think if I pay enough whatever enough is, I should damn well be able to make sure the person I hire doesn’t take everything they learned from me and turn around and play for another team. I agree in general, but it should probably be in X% of reasonably achievable total compensation (i.e. at least the blocked industry's average, or matching the offer if the former employee has one), where X >= 100, since you'd be essentially blocking someone from working in the industry they're experienced in.
twblalock 4y ago
Silicon Valley has worked fine without noncompetes. (Actually, the California economy as a whole has done fine without them, to the extent that it is one of the largest in the world.) People leaving to play for other teams has led to beneficial competition and innovation, starting from the very beginning with Fairchild spawning AMD, Intel, and a ton of other companies. You don't buy people and you don't own their skills. You pay them enough to stay, or you let them leave. Stealing trade secrets is already illegal and that isn't going to change.
d4mi3n 4y ago
I'm not sure the salary matters much in practice here. What we should avoid are scenarios that force folks out of their livelihood when they're subject to a non-compete through lawsuit or threat of one. I'd love to see them go the way of the Dodo, but failing that I'd at least like for some hard requirements on what forms non-competes may take so that they could be more equitable for employees: 1. Require non-competes compensate the employee for the salary they've been denied when enforced. If someone with key knowledge is a big enough issue to sue over and an organization hasn't done the work to retain said employee, the employee shouldn't have to bear the burden of extended unemployment for valuable skills or knowledge they may have. 2. Require non-competes have maximum durations. A non-compete for more than 6 - 12 months is likely excessive and can used to discourage job mobility. 3. Require non-competes be scoped to knowlege, know-how, or skills specific to that employee. Many non-competes I've seen say something along the lines of "you can't work for a competitor" without elaboration. If you work at a large organization or one with subsidiaries in multiple industries, "competitor" becomes a large swathe of potential industries you could feasibly work at. This also prevents one from working at a similar company in a completely different role. I get the desire to discourage job hopping, but that is rarely what these agreements are used to do in effect and there are better ways to take legal action in cases where proprietary info or know-how is stolen.
- OkayPhysicist 4y ago
  Noncompetes have no good reason to exist. If you want to pay me to do nothing, you can outbid other employers. That is to say, you're employing me with my job duties being "do whatever I want, except work for a competitor" subject to the exact kind of at-will employment that companies fought so hard to achieve.
JohnFen 4y ago
I'm with the others here. Noncompetes are just bad. Nondisclosures should cover you for any knowledge unique to your business. General skill improvement, though? Not so much. Noncompetes don't really address that anyway. It's not like the employee will have forgotten what they've learned by the end of the noncompete, and it's not like the noncompete compensates you. It's just a bit spiteful. Also, every employer benefits from what their employees have learned at the companies prior anyway. Presumably, that's part of why experienced people command higher salaries. So in that view, it's a bit of a wash.
steele 4y ago
Free agency shouldn't be salary dependent. No amount of compensation turns employees into chattel.
michaelmrose 4y ago
Society as a whole is worse off if we let you buy or rent people. So badsically society shouldn't care what you want.
jen20 4y ago
That already exists: it’s called gardening leave and it must be compensated.
OkayPhysicist 4y ago
Noncompetes are already illegal in California. Facebook, Google, Apple, Intel and the rest of the 14% of the country's GDP demonstrate that you can innovate and build a business just fine without them. Using noncompetes is a sign of a lousy business, that doesn't deserve to survive the market.
- lovich 4y ago
  Massachusetts also has them illegal without having garden leave, which in practice means they don't happen 99% of the time. Just to bump up that GDP percentage for your argument

shagie 4y ago

> In addition to non-compete clauses, other types of contractual provisions restrict what a worker may do after they leave their job. These other types of provisions include, among others: > ... > Training-repayment agreements (TRAs), a type of liquidated damages provision in which the worker agrees to pay the employer for the employer’s training expenses if the worker leaves their job before a certain date. [35] > 35 See, e.g., Norman D. Bishara, Kenneth J. Martin, and Randall S. Thomas, An Empirical Analysis of Non-Competition Clauses and Other Restrictive Post-Employment Covenants, 68 Vand. L. Rev. 1, 13 (2015); Uniform Law Comm’n, Uniform Restrictive Employment Agreement Act, Draft For Approval (2021) at § 2. ---- That should impact companies like Revature which have a notorious repayment of "training".

maximilianroos 4y ago
OTOH it also reduces employers' incentives to provide training. Notably US employers provide far _less_ training than employers in Europe do. Likely that's driven by employees moving jobs more frequently in the US; something this would worsen. Even if you think the proposal is a good one, there are second-order downsides...
- someotherperson 4y ago
  > Likely that's driven by employees moving jobs more frequently in the US; something this would worsen Perhaps a third-order incentive is that US employers will now start offering better working conditions, including higher pay and better PTO, to stop people from moving so frequently.
  - NateEag 4y ago
    As a US citizen, this strikes me as hilarious. I think businesses around here that want to retain employees already make an effort in the form of generous PTO and healthcare policies. Most don't.
- JohnFen 4y ago
  > something this would worsen. I'm not so sure this would have a large effect. Employer-provided training tends to be focused on the specific skills that employer requires. People who want to expand their skillset would usually have to change jobs to do it anyway.

Laaas 4y ago

Is there any downside wrt. how this would affect the GDP? Intuitively, this means more competition and higher GDP.

hervature 4y ago
Higher competition doesn't translate to higher GDP. In fact, monopolies produce more profits at the expense of consumers. If enough of your consumers are international, the national GDP would rise. If you are talking about competition for workers would increase costs and therefore prices would go up - that's inflation and should be discounted for in real GDP. If this is a meta argument that higher competition drives innovation which drives real GDP growth, then maybe.
- sclarisse 4y ago
  Monopolies earn their economic profits by raising prices beyond what a free market would charge, which suppresses supply, reducing the quantity produced below the efficient amount. That does reduce (real) GDP. (You might measure it wrong and end up with an increase to GDP if it’s not in your market basket.)
  - hervature 4y ago
    You raise a good point. I will have to think about this but my gut says that it would demand on the elasticities and probably only true in some linear version of supply and demand curves.
downrightmike 4y ago
It would probably raise GDP since we wouldn't have people locked out of work for an unreasonable amount of time because of intimidation forced on them.

chrisco255 4y ago

This isn't the FTC's job and shouldn't be legal. If there are to be such laws, they should exist at the state level. And if they are to exist at the federal level, then it is Congress's job to do: not the FTC's.

rkagerer 4y ago
I thought it was odd as well that this is coming from the FTC. Does it stem from their authority with regard to antitrust legislation?
- chrisco255 4y ago
  That's their argument in this proposal, but it's quite a dubious one that I suspect even if they issue it, will get litigated all the way to the Supreme Court.
qbasic_forever 4y ago
Congress created the FTC and gave it power to act so they didn't have to deal with these issues constantly. So you're wrong, this is explicitly the FTC's domain as specified by the congressional bill about 100 years ago that created them: https://ballotpedia.org/Federal_Trade_Commission_Act_of_1914 https://ballotpedia.org/Federal_Trade_Commission_Act_of_1914
- chrisco255 4y ago
  They created the FTC to enforce antitrust law and then subsequently granted it expanded enforcement authority under the amended statutes you list there. It did not, and cannot delegate the ability to invalidate local state laws which explicitly allow for non-compete agreements.
FireBeyond 4y ago
Why? I live in State A. I work for an employer who has little or no presence in State A, and they are based in State B. I leave them and go to work for a new employer in State C, all while still remotely working from home. Why should I be beholden to the laws of State B, that I've never resided in, as it determines my ability to conduct TRADE with a company in State C from State A? And that's also why the FTC is involved. My professional work output is the service I have to offer. And I offer it in trade for an income. The FTC oversees more than just 'sale of consumer goods and product'.

endisneigh 4y ago

non-competes should be banned, yes. another interesting question is - should contracts that [disallow simultaneous full time employment] or [ban moonlighting/side projects] be allowed?

duxup 4y ago
I think an employer should be able to require that. Expecting the attention of someone 40 hours a week seems reasonable. Beyond that it is another matter IMO.
- chabons 4y ago
  > Expecting the attention of someone 40 hours a week seems reasonable Why should the company be able to restrict your ability to do other work beyond the ability to fire you for cause if it's interfering with your ability to do your job?
  - duxup 4y ago
    Would it then matter if they are a competitor?
    - chabons 4y ago
      You raise a good point, that both moonlighting and non-compete clauses provides employers the ability to fire employees to mitigate risks associated with simultaneous work for a competitor (theft of trade secrets, corporate espionage, etc...). I'm not sure what the correct answer here is, but I'd err towards the burden of proof being more on the employer to show that the employee contributed to a direct competitor using insider information than the blanket clauses we have now.
  - cj 4y ago
    I find it funny that there’s a group of people who say “20-30 hour work weeks result in major productivity gains” meanwhile others say “I want to work 2x 40 hour jobs!” In other words, should an employer require you to have work life balance by not having more than 8 hours of work obligation per day? The common answer to this is “it doesn’t matter as long as the work gets done” but I don’t buy it. Engineering isn’t like flipping burgers at McDonald’s. Output is impacted by overworking.

itcrowd 4y ago

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nuclearnice3 4y ago
The page shows 5925 comments in the last 90 days. Just like our famous orange-colored VC-backed forum posts, most of the comments do not reflect any serious reading or digesting of the source material. https://www.regulations.gov/document/FTC-2023-0007-0001/comment https://www.regulations.gov/document/FTC-2023-0007-0001/comm...

IG_Semmelweiss 4y ago

Very curious what's going to happen outside of Technology. There are many service Industries that implement noncompetes. For example - doctors. Banning non competes Will add an additional cost to established practices to bring on a new fellow or recently licenced doctor. Most new doctors are a loss for the new independent practice for the first 2 years. If noncompetes were abolished, the money losing doctor would simply open a new practice once he has a steady book of patients. I predict lack of noncompetes would push many independent doctors to not hire as many new licenced doctors. Those doctors have to work somewhere, and that means hospitals. The inevitable results seems to be higher Healthcare costs for all americans

the_d3f4ult 4y ago
I am a surgeon currently employed by a private equity group and bound by an absurd non-compete. None of your points are accurate here from my perspective. Personally, I was profitable within 3 months of my hiring. The longest I've heard of it taking for a physician to become profitable is around 6 months and that's going completely independent. The idea that a doctor is a money-loser for 2 years is absurd. The need for physicians so greatly outstrips demand that I don't see this applying even in large metropolitan areas. To your second point. The way private practice used to work was a new physician would take a low initial salary in order to be offered the opportunity to become a partner in the practice. The assumption being that for the first few years the new physician is making the partners money. There are a lot of advantages to being a partner in a practice rather than being completely independent and it was worth a few years of a depressed salary in order to be able to purchase equity in an established practice. What's much more common now is for senior partners to recruit young physicians and then flip their practice to an equity firm after binding them with a non-compete, essentially canibalizing the future of independent private practices in order to ensure themselves a nicer retirement. Relevant to the discussion is the fact that equity firms, and to a lesser degree hospitals, must chase growth at all costs - inevitably driving up the cost of healthcare. I think this is something that we agree on. The short answer is that non-competes take power away from independent physicians and give it to equity firms and hospitals. If you sincerely want to see independent physicians flourish then these need to go away as soon as possible. If you read the comments submitted to the FTC you'll see that my perspective is common.

blueyes 4y ago

If I'm reading it right, the recent National Labor Board ruling also outlaws anti-disparagement clauses in severance agreements: https://www.natlawreview.com/article/nlrb-confidentiality-and-non-disparagement-provisions-are-unlawful https://www.natlawreview.com/article/nlrb-confidentiality-an...

downrightmike 4y ago
Too many abuse employees and lock them into not being able to tell the truth.

olliej 4y ago

If you’re a business requiring a non-compete you should be required to provide compensation the period of non compete that is the maximum of the employees current total compensation package or any job offers they receive, at the end of the period if they can demonstrate that they missed out on other gains (say a startup IPOs or whatever) you should then also be required to cover that as well. Any delays in compensation should be charged interest at the median credit card interest charge. That will separate “legitimate” non competes from bs wage reduction contracts.

asah 4y ago
This does not reimburse the employee for lost job experience and career advancement.
- olliej 4y ago
  Yeah, but I didn't feel like trying to quantify a "premium" or what have you, so the goal is purely make it sufficiently expensive that the BS non-compete by default go away. But yes, I would want to say +X% loss of experience + advancement but no idea what X would be, but again the goal is to stop it just being a free wage suppression lunch.

binarymax 4y ago

It is a wondrous mechanic of capitalism, that innovation will naturally bloom and flourish, when the incentives and opportunities are available to the innovators. Hence this proposal shall indeed lift the burden of many, and new products and services of glorious nature shall grow.

downrightmike 4y ago
And then we end up in a dystopian cyberpunk timeline...

wingmanjd 4y ago

Does anyone know how the following situation would be addressed: Company Alice buys out Company Bob, along with all of Bob's clients. Bob's CEO "retires", but then just starts a new company and calls up his old clients and starts poaching them back, essentially double dipping on the company purchase price. This totally theoretical situation may or may not be occurring to a friend of mine who is in Company Alice, and I wondered how a banishment of non-compete clauses would affect acquisitions.

ska 4y ago
Acquisition deals often include clauses to address exactly these sort of things, they include both carrots (e.g. earn out details) and sticks (specific prohibitions).
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hobotime 4y ago
Company Alice should amend their contracts with it's clients to preclude working with ex-employees - including Bob.
JumpCrisscross 4y ago
> Company Alice buys out Company Bob “The proposed rule would include a limited exception for non-compete clauses between the seller and buyer of a business“ [1]. [1] https://downloads.regulations.gov/FTC-2023-0007-0001/content.pdf https://downloads.regulations.gov/FTC-2023-0007-0001/content... page 5
mgerdts 4y ago
> As the Commission explains below, the definition of non-compete clause would generally not include other types of restrictive employment covenants—such as non-disclosure agreements (“NDAs”) and client or customer non-solicitation agreements—because these covenants generally do not prevent a worker from seeking or accepting employment with a person or operating a business after the conclusion of the worker’s employment with the employer. However, under the proposed definition of “non-compete clause,” such covenants would be considered non-compete clauses where they are so unusually broad in scope that they function as such.9F

stevespang 4y ago

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r3trohack3r 4y ago

I’ve never understood non-competes and comment on them every time I see a contract with one. You’re paying me for my experience. I’ve gotten that experience at a previous employer, that’s how the market works. I didn’t get to this point in my career doing it for free in my spare time. So if I’m willing to sign this broad non-compete right now, it means I can’t use the experience I get here again in the near future. But you know I’m going to get a job doing this thing, look at my work history. This thing you want me to sign away, it’s all I do. Which means if I’m willing to sign this without a compensation package that compensates me for not working during the non-compete, you know I’m going to break it. Further, by signing this clause that’s fairly common, you can be fairly sure I’ve probably seen and signed a similar agreement already in my career that I’m breaking now. So, again, unless you’re going to bake the value of the non-compete into this contract, you really can’t trust any employee that was willing to sign it.