3 ms·

Can anyone here argue why any state should allow noncompete clauses? It seems like something that solely helps business owners and nobody else.

briHass 3y ago
The argument is essentially that a noncompete is a voluntary contract, and generally the courts don't want to prevent individuals from freely entering into agreements. Noncompetes already must have 'consideration', which is typically the employment itself.
edrxty 3y ago
I think it's a case of people only caring about their specific short term individual interests in the narrowest way possible. They're not really a rational thing in any other domain. Basically, if you have a zero sum game with two companies and one has better IP than the other, it makes sense for the time span through which the company without can't reverse engineer it. In every other case it means the groups of companies under the umbrella of non-competes will slowly loose to groups of companies in jurisdictions without non-competes. To expand on that, if you objectively have some special sauce that you don't want leaked to your competition then it's a net gain for you and a loss for the rest of X industry (where X is finance because they're the ones who want this, not tech). In reality though, it's extremely rare to have sole control over an incredibly strong piece of IP that defines a market. In reality, everyone thinks they do because they don't know what anyone else has. Everyone has something that gives them an edge, hence being competitive in the market, but sharing those secrets within their local area can make the whole industry way more performant. The law applies to everyone so if you can't have non-competes, neither can your competition. At a local level it will make groups of companies much stronger than their more distant competitors because they can share knowledge under the table at a much higher rate.
kortilla 3y ago
Things that are good for businesses can be good for society. Trademark laws seem to be useful. Laws against theft seem to be generally nice. Laws against selling company secrets. Contract laws.
- lotsofpulp 3y ago
  And considering California pumps out the most profitable businesses, then clearly non competes are probably not good for the overall business environment (even if they might need good for incumbents).
Plasmoid 3y ago
The argument is there is a (narrow) use-case for them. For example, let's say I'm Bob the baker and I own Bob's Bakery. I sell my bakery to Steve. If I were to then open "Bob's New Bakery" across the street I would have sold Steve a crappy barrel of goods. You can see this in a lot of small service-based business too. So you'll have a non-compete that says you can't open an X within Y miles or Z months. It's a useful construct for some cases.
- JoshTriplett 3y ago
  That's an argument that they make sense at the sale-of-a-company level, not an argument that they make sense for individual employees or contractors.
  - randomdata 3y ago
    They make sense for individual employees because they give an individual employee a leg up over the competition. Ask anyone bemoaning a non-compete why they signed it. They didn't have to! The answer is always: "I wouldn't have gotten the job without it." Exactly. The job would have still been filled. No company is going to not hire a needed worker just because nobody will sign a non-compete. But the company would have hired an otherwise better candidate instead. In other words, the person who signed the non-compete gets to screw over other workers now just by giving up a small chance of not being able to do a certain job for some duration in the future. That's a pretty good value proposition.
    - cogman10 3y ago
      I had to sign my noncompete 2 weeks after I started working. Can you not see the huge power imbalance at play? It's not like other employers in my area aren't also requiring them. So my choice was sign it, or lose my current job, not qualify for unemployment, and I'd have to hunt for a new job but not likely one without a noncompete and likely not without moving. Don't act like "it's a choice" in our industry because the only companies not pushing them are companies in the few states that have outlawed them. We are in a company store situation "you don't have to work for that coal mine, you could go to the next town over and work for a different coal mine that has the exact same city setup"
JoshTriplett 3y ago
https://en.wikipedia.org/wiki/Everything_which_is_not_forbidden_is_allowed https://en.wikipedia.org/wiki/Everything_which_is_not_forbid... The burden of proof is on "why should a state ban noncompete clauses". As another commenter noted, the default should be to permit voluntary agreements between parties. There are certainly good arguments for why states should ban them. But that is the position that requires an argument.
- Supermancho 3y ago
  > default should be to permit voluntary agreements between parties. Government protections for wages, liability, and safety don't need additional argument. No need to construct a logical through-line against someone presenting a specious "trickle down economics" assertion. The imbalance in power is already recognized. I don't know who would believe that this decision was anything but corrupt.
randomdata 3y ago
They always help a business and the other party signing it. If there was not mutual benefit, there would be no reason to sign the contract. The state may have concern if that mutual benefit is harmful to the rest of society. A medical doctor, for example, agreeing to not compete could see him no longer able to provide medical services, which could see a third-party to not receive the care they need. As such, the state may find a need to interject to protect the society (i.e. third-parties in need of medical care) it represents.

briHass 3y ago

The argument is essentially that a noncompete is a voluntary contract, and generally the courts don't want to prevent individuals from freely entering into agreements. Noncompetes already must have 'consideration', which is typically the employment itself.

edrxty 3y ago

I think it's a case of people only caring about their specific short term individual interests in the narrowest way possible. They're not really a rational thing in any other domain. Basically, if you have a zero sum game with two companies and one has better IP than the other, it makes sense for the time span through which the company without can't reverse engineer it. In every other case it means the groups of companies under the umbrella of non-competes will slowly loose to groups of companies in jurisdictions without non-competes. To expand on that, if you objectively have some special sauce that you don't want leaked to your competition then it's a net gain for you and a loss for the rest of X industry (where X is finance because they're the ones who want this, not tech). In reality though, it's extremely rare to have sole control over an incredibly strong piece of IP that defines a market. In reality, everyone thinks they do because they don't know what anyone else has. Everyone has something that gives them an edge, hence being competitive in the market, but sharing those secrets within their local area can make the whole industry way more performant. The law applies to everyone so if you can't have non-competes, neither can your competition. At a local level it will make groups of companies much stronger than their more distant competitors because they can share knowledge under the table at a much higher rate.

kortilla 3y ago

Things that are good for businesses can be good for society. Trademark laws seem to be useful. Laws against theft seem to be generally nice. Laws against selling company secrets. Contract laws.

lotsofpulp 3y ago
And considering California pumps out the most profitable businesses, then clearly non competes are probably not good for the overall business environment (even if they might need good for incumbents).

Plasmoid 3y ago

The argument is there is a (narrow) use-case for them. For example, let's say I'm Bob the baker and I own Bob's Bakery. I sell my bakery to Steve. If I were to then open "Bob's New Bakery" across the street I would have sold Steve a crappy barrel of goods. You can see this in a lot of small service-based business too. So you'll have a non-compete that says you can't open an X within Y miles or Z months. It's a useful construct for some cases.

JoshTriplett 3y ago
That's an argument that they make sense at the sale-of-a-company level, not an argument that they make sense for individual employees or contractors.
- randomdata 3y ago
  They make sense for individual employees because they give an individual employee a leg up over the competition. Ask anyone bemoaning a non-compete why they signed it. They didn't have to! The answer is always: "I wouldn't have gotten the job without it." Exactly. The job would have still been filled. No company is going to not hire a needed worker just because nobody will sign a non-compete. But the company would have hired an otherwise better candidate instead. In other words, the person who signed the non-compete gets to screw over other workers now just by giving up a small chance of not being able to do a certain job for some duration in the future. That's a pretty good value proposition.
  - cogman10 3y ago
    I had to sign my noncompete 2 weeks after I started working. Can you not see the huge power imbalance at play? It's not like other employers in my area aren't also requiring them. So my choice was sign it, or lose my current job, not qualify for unemployment, and I'd have to hunt for a new job but not likely one without a noncompete and likely not without moving. Don't act like "it's a choice" in our industry because the only companies not pushing them are companies in the few states that have outlawed them. We are in a company store situation "you don't have to work for that coal mine, you could go to the next town over and work for a different coal mine that has the exact same city setup"

JoshTriplett 3y ago

https://en.wikipedia.org/wiki/Everything_which_is_not_forbidden_is_allowed https://en.wikipedia.org/wiki/Everything_which_is_not_forbid... The burden of proof is on "why should a state ban noncompete clauses". As another commenter noted, the default should be to permit voluntary agreements between parties. There are certainly good arguments for why states should ban them. But that is the position that requires an argument.

Supermancho 3y ago
> default should be to permit voluntary agreements between parties. Government protections for wages, liability, and safety don't need additional argument. No need to construct a logical through-line against someone presenting a specious "trickle down economics" assertion. The imbalance in power is already recognized. I don't know who would believe that this decision was anything but corrupt.

randomdata 3y ago

They always help a business and the other party signing it. If there was not mutual benefit, there would be no reason to sign the contract. The state may have concern if that mutual benefit is harmful to the rest of society. A medical doctor, for example, agreeing to not compete could see him no longer able to provide medical services, which could see a third-party to not receive the care they need. As such, the state may find a need to interject to protect the society (i.e. third-parties in need of medical care) it represents.