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Noncompete clauses: Companies say they need them, research shows that’s not true

284 points by tekdude 4y ago

bediger4000 4y ago
So noncompetes are just a result of the human tendency to assert control wherever possible?
- JohnFen 4y ago
  Noncompetes are an attempt by companies to deny potential resources to their competitors. Nothing more or less than that. That's why they're unethical -- they're using a former employee as a kind of cannon fodder in a business war.
  - rgbrenner 4y ago
    If that’s all they were, then we would have never seen companies create broad non competes that deprive a person of their livelihood. I agree that’s one purpose, but I think another is to penalize the employee for leaving, discouraging them from doing so… and as a result increasing retention and/or reducing the pressure on the company to deliver increased benefits and wages in the future.
    - JohnFen 4y ago
      Yes, this is an excellent point. Interestingly, when I am presented with an employment contract, there are two things that often appear and that I always require to be removed: noncompete clauses and wording that assigns the rights to all of the work I do (even work that does not use my employer's time, resources, or knowledge) to my employer. I have never once had an employer refuse to remove or modify those terms, but a couple of times it took a bit of negotiation to get there.
  - sonotathrowaway 4y ago
    Jimmy John’s forced fast food employees to sign non-competes. The labor pool of potential fast food workers is so vast, and the number of employees is so vast that it’s very clear these non competes were intended to threaten workers and suppress wages.
- deleted 4y ago
  [deleted]
- moosey 4y ago
  This tendency is not necessarily human. There are enormous numbers of humans disinterested in control of others, or their environment, etc. Those who want control might suggest otherwise, and they might actually believe it, but that's just lack of creativity (thinking of other possible worldviews) or empathy (realizing that others might see things differently).
  - Buttons840 4y ago
    Yup. In a group of 100 people, if only one wants control, guess who will probably get control? Paradoxically, it's probably the last person you want having control.
- yamtaddle 4y ago
  More like—if you can do something that's very, very unlikely to benefit you, but also costs you nothing and cannot hurt you, you may as well do it (unless you care about, like, ethics or any of that mumbo-jumbo)
olliej 4y ago
noncompetes that don't include full compensation for the period of the noncompete are purely a tool for wage suppression. That uncompensated noncompetes are legal, let alone a thing that companies do, is abhorrent.
- madsbuch 4y ago
  they are not in Denmark. in Denmark you can only enforce a non compete, if you compensate (not 100% salary though)
  - deleted 4y ago
    [deleted]
  - ghaff 4y ago
    Garden leave is a pretty imperfect mechanism. Given bonuses/RSUs and benefits, even 100% base salary could represent a 50% compensation cut plus the potential cost of taking a year break mid-career. Sure, some would be happy to sign up but a lot wouldn't really want to be in that position.
    - madsbuch 4y ago
      I am not entirely sure if you juxtapose the legal framework for Danish non-competes and garden leave. But assuming you do: In Denmark you are formally not employed, and you are free (actually obligated) to look for other job opportunities. You just can't, well, compete. So you can not take employment in a competitors company etc.
      - tedajax 4y ago
        OK so... I can't work in my chosen field now? Seems pretty stupid.
        madsbuch 4y ago
        Yes, for a maximum of 6 months, which is the maximum time you can enforce a non-compete in Denmark.
DesiLurker 4y ago
what else is new, companies also said child labor laws will wreck business.
- fabianhjr 4y ago
  s/said/say/ And along with the GOP are working to remove those laws/restrictions. https://businessinsider.mx/fair-labor-standards-act-hiring-child-laws-worker-shortage-iowa-minnesota-2023-2/ https://businessinsider.mx/fair-labor-standards-act-hiring-c...
  - twiddling 4y ago
    When you can't bring in sufficient numbers through immigration, you expand the labor pool in other ways.
    - rgbrenner 4y ago
      There are sufficient numbers… they expand the labor pool to reduce pressure on employers to increase pay and benefits. Need people desperate if you want to keep paying $7.25/hr. The bottom end of the labor market has the most slack… it’s the last place in the labor market where you need additional supply.
  - gabereiser 4y ago
    Somebody has to work the BBQ pit for $8/hr… Teens want $20/hr and don’t work. I bet we could get their little brother to do it for $8. /s
    - nerdponx 4y ago
      You're being sarcastic, but other people aren't.
    - sonotathrowaway 4y ago
      Actually, they’re using kids to clean slaughterhouses and assemble cars.
JohnFen 4y ago
> Employers say they need noncompete clauses in order to protect their trade secrets and confidential information. Which is such a clear and obvious lie that I'm amazed they even bother to say it out loud. There already exist several contractual and legal mechanisms that do a much better job of protecting trade secrets and confidential information. Noncompetes aren't needed for this, and are only marginally useful for this at best.
- tibbon 4y ago
  Surely some CEO here, or someone who has worked in HR can illuminate us on how they believe this is true. I once caught a company I worked for in the lie about this. I was advocating for a new employee who didn't want to sign the no-compete clause. They say they needed it. I asked what problems they had in California, and how it was impacting their business - they replied there were no problems. So I was like, "Ok, so if it isn't impacting you in CA, why do you think it will impact elsewhere?" In the end, they did hire that person, and did not make them sign the non-compete.
  - ryandrake 4y ago
    Companies don't "believe" things. They will amorally advocate for whatever is remotely favorable to the company. There is no financial incentive for them to say "We don't need noncompetes" or even "You know, it really doesn't affect our bottom line either way." So instead they will always say "Of course we need it." There's no downside.
    - AlexandrB 4y ago
      > Companies don't "believe" things. They will amorally advocate for whatever is remotely favorable to the company. I think this makes companies seem much more rational than they actually are. Plenty of companies do things because other players (especially larger players) in the space do it, regardless of cost/benefit to themselves. Where do you think the phrase "no one got fired for buying IBM" comes from?
      - 4y ago
CatWChainsaw 4y ago
Pair this story with the other one that made the front page - about Meta paying employees not to work, but not to work for their rival FAANGs. And yet I'd be surprised if there weren't a horde of lawyers that go to bat on behalf of employees trying to hop to a different Big Name but have to deal with noncompetes. It's a weird world in the Valley. When you put those two approaches side by side, you're almost forced to say Meta did it better, simply because if an employee bound by a noncompete can't work for a rival, at least Meta was paying them not to.
- paxys 4y ago
  > And yet I'd be surprised if there weren't a horde of lawyers that go to bat on behalf of employees trying to hop to a different Big Name but have to deal with noncompetes. It's a weird world in the Valley. The difference is that non-competes are (mostly) illegal in California, so silicon valley tech companies don't use them at all. Meta has no choice but to employ and pay developers if they want to stop Google from having them.
  - CatWChainsaw 4y ago
    Right, right, the California Exception to Everything... At a past job, there was a 2-year noncompete clause that stated I could not work with any company, anywhere in the world, who currently competes or might someday compete with the company I was at. I'm in the biotech industry, so I was unimpressed when I first read that. I can only imagine it was designed to intimidate people who would take that clause at its word, not realizing it was so broad and vague that it would be unenforceable.
throw_m239339 4y ago
You can't have a society that claims that "the right to work" is a thing while disallowing workers to go work for the competition if the competition offers a better compensation. NDA already exist for trade secrets.
- thwayunion 4y ago
  Of course you can! It's what we have in the US. Don't confuse capitalism -- the ideology of capital -- with marketism or competitionism or dynamism. If you take it as an axiom that capitalism is an ideology designed to acreed economic activity to holders of capital -- and you should, it's literally in the name -- then "right to work means union busting and strong non-competes that sacrifice the right to work on the alter of return to capital" makes perfect sense
  - AlexandrB 4y ago
    Reminds me of how "economic freedom" metrics usually include[1] how easy it is to fire people, but not how restricted employees are by non-competes and other measures that make changing jobs harder. This seems to hinge on the idea that employer-employee relationships are non-coercive and potential employees can always "vote with their feet". However, employees usually depend on having a job to live and - whether through collusion or herd mentality - employers in an industry tend to converge on a common set of restrictions on their workers. [1] https://www.fraserinstitute.org/economic-freedom/approach https://www.fraserinstitute.org/economic-freedom/approach > Many types of labor-market regulation infringe on the economic freedom of employees and employers. Among the more prominent are minimum wages, dismissal regulations, centralized wage setting, extension of union contracts to nonparticipating parties, and conscription. The labor-market component (5B) is designed to measure the extent to which these restraints upon economic freedom are present. In order to earn high marks in the component rating regulation of the labor market, a country must allow market forces to determine wages and establish the conditions of hiring and firing, and refrain from the use of conscription.
Mizoguchi 4y ago
In my experience, at least with startups, non compete agreements are often pushed and drafted by the legal team of the entities investing in the business. Investors want to be protected and their attorneys will do anything that's necessary to make sure there aren't loopholes left open for ideas to be stolen. The result is poorly drafted and ridiculously broad non compete clauses that would not be enforceable in most if not all states. However even when they may not be enforceable (and you will hear the hiring manager saying that 100 times), non competes can still hurt candidates big time once they go back to the job market because many companies actually have provisions to disqualify those coming in with the extra baggage of a non compete. If candidate A and B have very similar skills and experience and A has a non compete and B doesn't, why would anyone bother with A? So it is true, non competes are in most cases non enforceable but they can still reduce your chances of getting a (better) job. I declined offers after months of negotiations because of non competes and I would advise others to refuse to sign them, unless you desperately need the job, the compensation package is amazing or there are provisions or amendments to the clause, like a reasonable garden leave, that compensates you for having to carry a stinky non compete agreement on your forehead for an entire year or more if things don't work out. If they want the non compete, make them pay for it, don't pick up the tab yourself.
- thwayunion 4y ago
  > non competes can still hurt candidates big time once they go back to the job market because many companies actually have provisions to disqualify those coming in with the extra baggage of a non compete. Get a lawyer, ensure it's not enforcable, then sign it. If you're in CA, sign it. If you're in MA and there is no garden leave clause, sign it. Then do what you want. When a hiring company asks if you have a non-compete, specify: "I am not bound by an enforceable non-compete". If they ask for specifics, explain and mention the law firm you consulted. This has always worked for me. I suppose you could also just say you're not bound by a non-compete, and leave it at that, as that's also not a lie. If I sell myself into slavery in the USA, then I can -- without lying -- tell everyone I'm definitely not a slave. Because I'm definitely, absolutely, not. Non-competes are no different: if it's prime facie unenforceable, then you are NOT bound by a non-compete, full stop, end of story. But I like to be a bit more up-front. > If candidate A and B have very similar skills and experience and A has a non compete and B doesn't, why would anyone bother with A? I've admittedly never been in this situation -- at least as far as I know -- because my skill-set is pretty niche (ie, I am pretty sure that I have always known all the other people in the world who are interchangeable with me for a particular position when I get to the stage of negotiating the offer).
BrandoElFollito 4y ago
Are non-compete one-way in the US? Here in France we can have them as well but there is a counterpart: if I want to go to a company which is a competitor, my current employer can say no but they have to pay me for that for the time of the non-compete (something like 75% of the salary). This is the law and they have no choice (short of not enforcing it)
- galdor 4y ago
  French here. The exact amount is negotiated (aka decided by the employer) and written in the contract. I had multiple work contracts where the indemnity would have been 30% of my annual salary, never more (which is actually pretty bad because you still have to find a job without breaching the non-complete). Non-compete clauses must also be limited in scope (geography and profession) and must not stop employees to live from their trade. As a result companies rarely exercise non-compete clauses since they are regularly thrown away by courts ("conseil des prud'hommes" in french). Still they are part of the so called "standard work countract". I imagine most companies just get their base contract copy-pasted from the same template.
  - BrandoElFollito 4y ago
    Thanks for the details. The amount also depends on the employee (some employees can actually negotiate if they have the upper hand, others as you mention get what is in the contract). On top of that there may be provisions in the collective agreement (convention collective). An example is the collective agreement for metallurgy (CC Métallurgie - this is a French thing and the name is historical) where the lowest compensation is 50% of the salary computed over 12 months.
- deleted 4y ago
  [deleted]
- red-iron-pine 4y ago
  That is a thing in other countries as well, and is usually what makes the non-compete enforceable. It's the idea of "consideration" -- in that the other party is getting paid in exchange for not working in that industry. You see it in Oil & Gas a lot. Take 2 years off w/ a 80% pay, teach at a local community college or something for a minute, then back to the industry, etc. etc.
tombert 4y ago
I certainly understand why companies do this, but often these non-competes are so overly broad to a point of being farcical. When I was at Apple, in my free time, I started hacking on a clone of Plex Server. I had gotten multiple emails around the time saying that open-source policies have changed, and every open source contribution needs to be approved by the VP of technology, which sufficiently scared me. I managed to get a meeting with the VP of tech when I was in California, and while he was extremely polite, his response was that because my project dealt with video, and Apple sells video, it's therefore competitive, so I need to immediately stop working on it. [1] It honestly kind of soured my opinion of the company, and I subsequently became a kind of crappy worker, because I stopped really caring if I made Apple better. I stayed on for about 1.5 years after that, and accomplished very little in the aftermath. If he had just let me open source my stupid project that, lets be honest, would not have diverted a single dollar away from Apple, I think they would have gotten much better work from me by the end of my time there. [1] Yes, obviously I could work on it in secret, and maybe it was a fools errand to ask permission on this, but I really didn't think Apple was going to be so overly broad with their definition of "competitive".
- Arch-TK 4y ago
  Really their policy on open source programming while working there is one of the main reasons I have never considered applying there.
  - tombert 4y ago
    Yeah, it’s infuriating; when I pushed back a bit on him claiming it was “competitive” he then said “we really want you focusing exclusively on Apple”. Confused, I said “but I would be doing this on my own time, not during work hours”. His response was to say that Apple pays its employees pretty well so there really isn’t a dichotomy between “my time” and “Apple time”.
GreedClarifies 4y ago
I've never fully understood the market failure here. Let's assume no Monopsony. Let's assume no collusion by employers, since this is explicitly illegal, indeed it did happen, but the tech firms were slapped on the wrist for it. Why do employees not attempt to strike out those portions of their contract? Why does no entrepreneur create a tech company with one of the innovations being a no "non-compete" clause and using that to woo employees? My guess is that employees do not actually dislike non-complete clauses that they would accept a lower wage in compensation for no "non-compete".
- nickff 4y ago
  Most people value compensation in the short term over the absence of a non-compete in the long term.
  - GreedClarifies 4y ago
    Yes. I agree. I think this is the root of the problem. They do not attempt to compute a price.
- mjevans 4y ago
  * A huge difference in power between the parties. * Lack of laws. Non-competes should be treated as an exclusive employment by the company, to expressly NOT work on any of the covered topics. They must be funded.
  - GreedClarifies 4y ago
    Who has more "power" in the arrangement seems to be a function of the business cycle. Employees, in tech (we are on hackernews), had far more power 1-2 years ago. Why does there need to be a law here? Why don't employees say: "If you want a non-compete you have to pay me $X/hr more" or conversely if non-competes are common : "you can pay me $X/hr less if there is no non-compete". That this doesn't happen, and that there isn't a wiley entrepreneur out there figuring out that "if everyone would take X less for non-compete job, I'll offer then X/2 and make bank!". Since this doesn't happen, this means that employees don't care much at all.
skeletal88 4y ago
In europe, in my country, the company that wants to enforce their non-compete has to pay the former employee their salary for the duration of the non-compete. I mean if i was working at a bank diing ordinsry software development like is done at all the banks then if they want me not to use my knowledge of payment schedule snd late fee calculations at other banks then they have to compensare for it. This change in the law killed all the non-competes for software developers, because it was ridiculous. If you wsnt me not to work then pay me for my time.
- ChuckNorris89 4y ago
  Interesting,. In my European country, non-competes are fully legal and one-way, with no compensation for the employee if the other party chooses to enforce it.
cronix 4y ago
That is the first thing I redline in any potential contract. I've never had serious push back beyond, "oh, um, that's just boilerplate from our legal team. You're the first person who has said anything." It's basically along the lines of, "we know you have talent in x niche, which is why we are hiring you. However, you will no longer be allowed to work in that niche if we part ways for whatever reason" Yeah, ok.
- hinkley 4y ago
  In the early days of the dotcom era someone thought "internet technology" was a niche and tried to make me sign an NC, after I moved to take the job. I said "I'm not signing this", they did the old it's not a big deal thing and I said if it's not a big deal you can change it. In theory he was supposed to give me a reworded NC, but he promptly forgot it. Un/fortunately for him they didn't have anything that I would compete with.
tristor 4y ago
My most upvoted comment on HN is from some time ago specifically about non-competes. In summary: fuck non-competes. I will not sign them. I will not work for any company that puts non-competes in their employment contracts. I will advocate that all of the people in my professional network (all of whom are top of their fields) do the same. I have never seen a single convincing argument for why companies need non-compete agreements for employees. Every single argument I have been provided, including the arguments in this article, are not even covered by non-compete agreements and are actually covered by non-solicitation or non-disclosure agreements instead. Non-competes are amoral, create a social and moral hazard that depresses wages and further imbalances the power relationship between employees and employers, and are on their face rather stupid. There is not, and never has been, any legitimate reason for any company to put a non-compete into their employment contract. The only reason companies do this is because they're allowed to and any competent corporate attorney will try to get as much over on the other party as possible in a contract negotiation. This research is completely unsurprising to me. Anyone with more than 5 brain cells to rub together can easily figure out that non-competes are a total farce and have no reason for existence.
barrenko 4y ago
The only reason is the exercise of power and making sure you are an "employee".

284 points by tekdude 4y ago

bediger4000 4y ago

So noncompetes are just a result of the human tendency to assert control wherever possible?

JohnFen 4y ago
Noncompetes are an attempt by companies to deny potential resources to their competitors. Nothing more or less than that. That's why they're unethical -- they're using a former employee as a kind of cannon fodder in a business war.
- rgbrenner 4y ago
  If that’s all they were, then we would have never seen companies create broad non competes that deprive a person of their livelihood. I agree that’s one purpose, but I think another is to penalize the employee for leaving, discouraging them from doing so… and as a result increasing retention and/or reducing the pressure on the company to deliver increased benefits and wages in the future.
  - JohnFen 4y ago
    Yes, this is an excellent point. Interestingly, when I am presented with an employment contract, there are two things that often appear and that I always require to be removed: noncompete clauses and wording that assigns the rights to all of the work I do (even work that does not use my employer's time, resources, or knowledge) to my employer. I have never once had an employer refuse to remove or modify those terms, but a couple of times it took a bit of negotiation to get there.
- sonotathrowaway 4y ago
  Jimmy John’s forced fast food employees to sign non-competes. The labor pool of potential fast food workers is so vast, and the number of employees is so vast that it’s very clear these non competes were intended to threaten workers and suppress wages.
deleted 4y ago
[deleted]
moosey 4y ago
This tendency is not necessarily human. There are enormous numbers of humans disinterested in control of others, or their environment, etc. Those who want control might suggest otherwise, and they might actually believe it, but that's just lack of creativity (thinking of other possible worldviews) or empathy (realizing that others might see things differently).
- Buttons840 4y ago
  Yup. In a group of 100 people, if only one wants control, guess who will probably get control? Paradoxically, it's probably the last person you want having control.
yamtaddle 4y ago
More like—if you can do something that's very, very unlikely to benefit you, but also costs you nothing and cannot hurt you, you may as well do it (unless you care about, like, ethics or any of that mumbo-jumbo)

olliej 4y ago

noncompetes that don't include full compensation for the period of the noncompete are purely a tool for wage suppression. That uncompensated noncompetes are legal, let alone a thing that companies do, is abhorrent.

madsbuch 4y ago
they are not in Denmark. in Denmark you can only enforce a non compete, if you compensate (not 100% salary though)
- deleted 4y ago
  [deleted]
- ghaff 4y ago
  Garden leave is a pretty imperfect mechanism. Given bonuses/RSUs and benefits, even 100% base salary could represent a 50% compensation cut plus the potential cost of taking a year break mid-career. Sure, some would be happy to sign up but a lot wouldn't really want to be in that position.
  - madsbuch 4y ago
    I am not entirely sure if you juxtapose the legal framework for Danish non-competes and garden leave. But assuming you do: In Denmark you are formally not employed, and you are free (actually obligated) to look for other job opportunities. You just can't, well, compete. So you can not take employment in a competitors company etc.
    - tedajax 4y ago
      OK so... I can't work in my chosen field now? Seems pretty stupid.
      - madsbuch 4y ago
        Yes, for a maximum of 6 months, which is the maximum time you can enforce a non-compete in Denmark.

DesiLurker 4y ago

what else is new, companies also said child labor laws will wreck business.

fabianhjr 4y ago
s/said/say/ And along with the GOP are working to remove those laws/restrictions. https://businessinsider.mx/fair-labor-standards-act-hiring-child-laws-worker-shortage-iowa-minnesota-2023-2/ https://businessinsider.mx/fair-labor-standards-act-hiring-c...
- twiddling 4y ago
  When you can't bring in sufficient numbers through immigration, you expand the labor pool in other ways.
  - rgbrenner 4y ago
    There are sufficient numbers… they expand the labor pool to reduce pressure on employers to increase pay and benefits. Need people desperate if you want to keep paying $7.25/hr. The bottom end of the labor market has the most slack… it’s the last place in the labor market where you need additional supply.
- gabereiser 4y ago
  Somebody has to work the BBQ pit for $8/hr… Teens want $20/hr and don’t work. I bet we could get their little brother to do it for $8. /s
  - nerdponx 4y ago
    You're being sarcastic, but other people aren't.
  - sonotathrowaway 4y ago
    Actually, they’re using kids to clean slaughterhouses and assemble cars.

JohnFen 4y ago

> Employers say they need noncompete clauses in order to protect their trade secrets and confidential information. Which is such a clear and obvious lie that I'm amazed they even bother to say it out loud. There already exist several contractual and legal mechanisms that do a much better job of protecting trade secrets and confidential information. Noncompetes aren't needed for this, and are only marginally useful for this at best.

tibbon 4y ago
Surely some CEO here, or someone who has worked in HR can illuminate us on how they believe this is true. I once caught a company I worked for in the lie about this. I was advocating for a new employee who didn't want to sign the no-compete clause. They say they needed it. I asked what problems they had in California, and how it was impacting their business - they replied there were no problems. So I was like, "Ok, so if it isn't impacting you in CA, why do you think it will impact elsewhere?" In the end, they did hire that person, and did not make them sign the non-compete.
- ryandrake 4y ago
  Companies don't "believe" things. They will amorally advocate for whatever is remotely favorable to the company. There is no financial incentive for them to say "We don't need noncompetes" or even "You know, it really doesn't affect our bottom line either way." So instead they will always say "Of course we need it." There's no downside.
  - AlexandrB 4y ago
    > Companies don't "believe" things. They will amorally advocate for whatever is remotely favorable to the company. I think this makes companies seem much more rational than they actually are. Plenty of companies do things because other players (especially larger players) in the space do it, regardless of cost/benefit to themselves. Where do you think the phrase "no one got fired for buying IBM" comes from?
    - 4y ago

CatWChainsaw 4y ago

Pair this story with the other one that made the front page - about Meta paying employees not to work, but not to work for their rival FAANGs. And yet I'd be surprised if there weren't a horde of lawyers that go to bat on behalf of employees trying to hop to a different Big Name but have to deal with noncompetes. It's a weird world in the Valley. When you put those two approaches side by side, you're almost forced to say Meta did it better, simply because if an employee bound by a noncompete can't work for a rival, at least Meta was paying them not to.

paxys 4y ago
> And yet I'd be surprised if there weren't a horde of lawyers that go to bat on behalf of employees trying to hop to a different Big Name but have to deal with noncompetes. It's a weird world in the Valley. The difference is that non-competes are (mostly) illegal in California, so silicon valley tech companies don't use them at all. Meta has no choice but to employ and pay developers if they want to stop Google from having them.
- CatWChainsaw 4y ago
  Right, right, the California Exception to Everything... At a past job, there was a 2-year noncompete clause that stated I could not work with any company, anywhere in the world, who currently competes or might someday compete with the company I was at. I'm in the biotech industry, so I was unimpressed when I first read that. I can only imagine it was designed to intimidate people who would take that clause at its word, not realizing it was so broad and vague that it would be unenforceable.

throw_m239339 4y ago

You can't have a society that claims that "the right to work" is a thing while disallowing workers to go work for the competition if the competition offers a better compensation. NDA already exist for trade secrets.

thwayunion 4y ago
Of course you can! It's what we have in the US. Don't confuse capitalism -- the ideology of capital -- with marketism or competitionism or dynamism. If you take it as an axiom that capitalism is an ideology designed to acreed economic activity to holders of capital -- and you should, it's literally in the name -- then "right to work means union busting and strong non-competes that sacrifice the right to work on the alter of return to capital" makes perfect sense
- AlexandrB 4y ago
  Reminds me of how "economic freedom" metrics usually include[1] how easy it is to fire people, but not how restricted employees are by non-competes and other measures that make changing jobs harder. This seems to hinge on the idea that employer-employee relationships are non-coercive and potential employees can always "vote with their feet". However, employees usually depend on having a job to live and - whether through collusion or herd mentality - employers in an industry tend to converge on a common set of restrictions on their workers. [1] https://www.fraserinstitute.org/economic-freedom/approach https://www.fraserinstitute.org/economic-freedom/approach > Many types of labor-market regulation infringe on the economic freedom of employees and employers. Among the more prominent are minimum wages, dismissal regulations, centralized wage setting, extension of union contracts to nonparticipating parties, and conscription. The labor-market component (5B) is designed to measure the extent to which these restraints upon economic freedom are present. In order to earn high marks in the component rating regulation of the labor market, a country must allow market forces to determine wages and establish the conditions of hiring and firing, and refrain from the use of conscription.

Mizoguchi 4y ago

In my experience, at least with startups, non compete agreements are often pushed and drafted by the legal team of the entities investing in the business. Investors want to be protected and their attorneys will do anything that's necessary to make sure there aren't loopholes left open for ideas to be stolen. The result is poorly drafted and ridiculously broad non compete clauses that would not be enforceable in most if not all states. However even when they may not be enforceable (and you will hear the hiring manager saying that 100 times), non competes can still hurt candidates big time once they go back to the job market because many companies actually have provisions to disqualify those coming in with the extra baggage of a non compete. If candidate A and B have very similar skills and experience and A has a non compete and B doesn't, why would anyone bother with A? So it is true, non competes are in most cases non enforceable but they can still reduce your chances of getting a (better) job. I declined offers after months of negotiations because of non competes and I would advise others to refuse to sign them, unless you desperately need the job, the compensation package is amazing or there are provisions or amendments to the clause, like a reasonable garden leave, that compensates you for having to carry a stinky non compete agreement on your forehead for an entire year or more if things don't work out. If they want the non compete, make them pay for it, don't pick up the tab yourself.

thwayunion 4y ago
> non competes can still hurt candidates big time once they go back to the job market because many companies actually have provisions to disqualify those coming in with the extra baggage of a non compete. Get a lawyer, ensure it's not enforcable, then sign it. If you're in CA, sign it. If you're in MA and there is no garden leave clause, sign it. Then do what you want. When a hiring company asks if you have a non-compete, specify: "I am not bound by an enforceable non-compete". If they ask for specifics, explain and mention the law firm you consulted. This has always worked for me. I suppose you could also just say you're not bound by a non-compete, and leave it at that, as that's also not a lie. If I sell myself into slavery in the USA, then I can -- without lying -- tell everyone I'm definitely not a slave. Because I'm definitely, absolutely, not. Non-competes are no different: if it's prime facie unenforceable, then you are NOT bound by a non-compete, full stop, end of story. But I like to be a bit more up-front. > If candidate A and B have very similar skills and experience and A has a non compete and B doesn't, why would anyone bother with A? I've admittedly never been in this situation -- at least as far as I know -- because my skill-set is pretty niche (ie, I am pretty sure that I have always known all the other people in the world who are interchangeable with me for a particular position when I get to the stage of negotiating the offer).

BrandoElFollito 4y ago

Are non-compete one-way in the US? Here in France we can have them as well but there is a counterpart: if I want to go to a company which is a competitor, my current employer can say no but they have to pay me for that for the time of the non-compete (something like 75% of the salary). This is the law and they have no choice (short of not enforcing it)

galdor 4y ago
French here. The exact amount is negotiated (aka decided by the employer) and written in the contract. I had multiple work contracts where the indemnity would have been 30% of my annual salary, never more (which is actually pretty bad because you still have to find a job without breaching the non-complete). Non-compete clauses must also be limited in scope (geography and profession) and must not stop employees to live from their trade. As a result companies rarely exercise non-compete clauses since they are regularly thrown away by courts ("conseil des prud'hommes" in french). Still they are part of the so called "standard work countract". I imagine most companies just get their base contract copy-pasted from the same template.
- BrandoElFollito 4y ago
  Thanks for the details. The amount also depends on the employee (some employees can actually negotiate if they have the upper hand, others as you mention get what is in the contract). On top of that there may be provisions in the collective agreement (convention collective). An example is the collective agreement for metallurgy (CC Métallurgie - this is a French thing and the name is historical) where the lowest compensation is 50% of the salary computed over 12 months.
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red-iron-pine 4y ago
That is a thing in other countries as well, and is usually what makes the non-compete enforceable. It's the idea of "consideration" -- in that the other party is getting paid in exchange for not working in that industry. You see it in Oil & Gas a lot. Take 2 years off w/ a 80% pay, teach at a local community college or something for a minute, then back to the industry, etc. etc.

tombert 4y ago

I certainly understand why companies do this, but often these non-competes are so overly broad to a point of being farcical. When I was at Apple, in my free time, I started hacking on a clone of Plex Server. I had gotten multiple emails around the time saying that open-source policies have changed, and every open source contribution needs to be approved by the VP of technology, which sufficiently scared me. I managed to get a meeting with the VP of tech when I was in California, and while he was extremely polite, his response was that because my project dealt with video, and Apple sells video, it's therefore competitive, so I need to immediately stop working on it. [1] It honestly kind of soured my opinion of the company, and I subsequently became a kind of crappy worker, because I stopped really caring if I made Apple better. I stayed on for about 1.5 years after that, and accomplished very little in the aftermath. If he had just let me open source my stupid project that, lets be honest, would not have diverted a single dollar away from Apple, I think they would have gotten much better work from me by the end of my time there. [1] Yes, obviously I could work on it in secret, and maybe it was a fools errand to ask permission on this, but I really didn't think Apple was going to be so overly broad with their definition of "competitive".

Arch-TK 4y ago
Really their policy on open source programming while working there is one of the main reasons I have never considered applying there.
- tombert 4y ago
  Yeah, it’s infuriating; when I pushed back a bit on him claiming it was “competitive” he then said “we really want you focusing exclusively on Apple”. Confused, I said “but I would be doing this on my own time, not during work hours”. His response was to say that Apple pays its employees pretty well so there really isn’t a dichotomy between “my time” and “Apple time”.

GreedClarifies 4y ago

I've never fully understood the market failure here. Let's assume no Monopsony. Let's assume no collusion by employers, since this is explicitly illegal, indeed it did happen, but the tech firms were slapped on the wrist for it. Why do employees not attempt to strike out those portions of their contract? Why does no entrepreneur create a tech company with one of the innovations being a no "non-compete" clause and using that to woo employees? My guess is that employees do not actually dislike non-complete clauses that they would accept a lower wage in compensation for no "non-compete".

nickff 4y ago
Most people value compensation in the short term over the absence of a non-compete in the long term.
- GreedClarifies 4y ago
  Yes. I agree. I think this is the root of the problem. They do not attempt to compute a price.
mjevans 4y ago
* A huge difference in power between the parties. * Lack of laws. Non-competes should be treated as an exclusive employment by the company, to expressly NOT work on any of the covered topics. They must be funded.
- GreedClarifies 4y ago
  Who has more "power" in the arrangement seems to be a function of the business cycle. Employees, in tech (we are on hackernews), had far more power 1-2 years ago. Why does there need to be a law here? Why don't employees say: "If you want a non-compete you have to pay me $X/hr more" or conversely if non-competes are common : "you can pay me $X/hr less if there is no non-compete". That this doesn't happen, and that there isn't a wiley entrepreneur out there figuring out that "if everyone would take X less for non-compete job, I'll offer then X/2 and make bank!". Since this doesn't happen, this means that employees don't care much at all.

skeletal88 4y ago

In europe, in my country, the company that wants to enforce their non-compete has to pay the former employee their salary for the duration of the non-compete. I mean if i was working at a bank diing ordinsry software development like is done at all the banks then if they want me not to use my knowledge of payment schedule snd late fee calculations at other banks then they have to compensare for it. This change in the law killed all the non-competes for software developers, because it was ridiculous. If you wsnt me not to work then pay me for my time.

ChuckNorris89 4y ago
Interesting,. In my European country, non-competes are fully legal and one-way, with no compensation for the employee if the other party chooses to enforce it.

cronix 4y ago

That is the first thing I redline in any potential contract. I've never had serious push back beyond, "oh, um, that's just boilerplate from our legal team. You're the first person who has said anything." It's basically along the lines of, "we know you have talent in x niche, which is why we are hiring you. However, you will no longer be allowed to work in that niche if we part ways for whatever reason" Yeah, ok.

hinkley 4y ago
In the early days of the dotcom era someone thought "internet technology" was a niche and tried to make me sign an NC, after I moved to take the job. I said "I'm not signing this", they did the old it's not a big deal thing and I said if it's not a big deal you can change it. In theory he was supposed to give me a reworded NC, but he promptly forgot it. Un/fortunately for him they didn't have anything that I would compete with.

tristor 4y ago

My most upvoted comment on HN is from some time ago specifically about non-competes. In summary: fuck non-competes. I will not sign them. I will not work for any company that puts non-competes in their employment contracts. I will advocate that all of the people in my professional network (all of whom are top of their fields) do the same. I have never seen a single convincing argument for why companies need non-compete agreements for employees. Every single argument I have been provided, including the arguments in this article, are not even covered by non-compete agreements and are actually covered by non-solicitation or non-disclosure agreements instead. Non-competes are amoral, create a social and moral hazard that depresses wages and further imbalances the power relationship between employees and employers, and are on their face rather stupid. There is not, and never has been, any legitimate reason for any company to put a non-compete into their employment contract. The only reason companies do this is because they're allowed to and any competent corporate attorney will try to get as much over on the other party as possible in a contract negotiation. This research is completely unsurprising to me. Anyone with more than 5 brain cells to rub together can easily figure out that non-competes are a total farce and have no reason for existence.

barrenko 4y ago

The only reason is the exercise of power and making sure you are an "employee".