A non-compete allows a company to make an investment in you (in the form of training) with some assurance that you will not immediately turn around post-training and go work for a direct competitor. NDAs/IP assignment agreements do not address this need. If it weren't for non-competes, that investment would be infeasible and we would all be paying our employers for the training we get – either directly, in the form of course fees, or indirectly, in the form of depressed wages during the course of the training.
For a deeper dive on this, see Paul H. Rubin and Peter Shedd, "Human Capital and Covenants Not to Compete," available at https://www.jstor.org/stable/724227?seq=1#page_scan_tab_cont....
Yeah, because employers refuse to train employees unless they sign a non-compete. It's not that they are unable to provide training, it is that they are unwilling. If Non-competes are banned, then they can start providing better training to more workers because there's no more needless red tape...
>A non-compete allows a company to make an investment in you (in the form of training) with some assurance that you will not immediately turn around post-training and go work for a direct competitor.
Then why to most non-competes extend 2 years after you leave a company, and why do they get applied to workers who have been with a company for years? You, like many others in this thread, seem to be confusing "experience", a thing the employee owns, with "training" and "know-how", things the employer owns.
Though, I wouldn't mind keeping my own "non-termination agreement" on hand so that if I am asked to sign a non-compete, I can ask them to sign my contract too.
After all, if they think it's fair that I shouldn't be able to work for another company doing the same thing, it should be equally fair that they can't replace me with another worker doing the same thing.
So yeah, I'll sign your non-compete, so long as you agree that you cannot terminate me without invalidating it.
Even if it weren't, employers aren't hiring machines, they're hiring human beings. If they've become so greedy that they have forgotten that, I see no reason our laws shouldn't compel them to treat their employees (and past employees) properly.
Were Soft Engs simply to do 'work' then you would be absolutely right.
But in a world of IP ... it's a different story.
Company ABC brings you in, trains you on their know-how and core IP, which took a lot of struggle, $, and R&D to create - then you leave, go to a competitor, and effectively communicate and give away ABC Corps. most valuable asset.
Non-competes can certainly applied far too aggressively, esp. in situations where there is not merit ... but there are definitely cases wherein I think it does make sense.
I'm thinking companies like DWAVE in Vancouver that built the 'first' qubit/quantum computer. The guy spent his whole life developing that tech. It's feasible that Google just grabs up some of the team and internalizes all that work and effort for the price of a few headcount.
It's a real problem in some cases, but worse - very difficult to parameterize.
If the employee violates the IP then sue him for that. No need for non-compete agreements. If you're worried the employee will steal your clients then you're not giving your clients a good deal at first place, and the employee shouldn't be prevented from working with your clients. This is a free market. Non compete agreements are completely anti-freedom of both enterprise and work.
> Company ABC brings you in, trains you on their know-how and core IP, which took a lot of struggle, $, and R&D to create - then you leave, go to a competitor, and effectively communicate and give away ABC Corps. most valuable asset.
Then the burden of proof should lie with the previous company, there shouldn't be any possibility of preemptive clause within the former contract. If it's clear corporate secrets were leaked then sue. If you don't want your employee go work somewhere else then compensate him, that's the problem here , most of the time there is no compensation.
It doesn't matter how much R&D was created. That's the role of patents to deal with that thing.
Maybe ABC corp was mistaken, and their most valuable asset was that employee and not just the model parameters he struggled for years to optimize?
I'm beginning to think none of you have ever worked in companies that actually produce IP.
First off - that's not what patents are for. Patents protect publicly known information - not trade secrets. And they don't do it very well. There are very few things you can defend with a patent.
What companies are concerned with is 'trade secrets' and 'know how' - and it's a serious thing.
"Then the burden of proof should lie with the previous company, there shouldn't be any possibility of preemptive clause within the former contract."
If you work at DWAVE for 5 years and learn everything you know about Quantum Computing there - and go to Google to work on Quantum Computing - then there is basically a 100% chance that you are passing on 'know how' and 'trade secrets' - otherwise - Google would not hire you.
Your comments about customers etc. are irrelevant with respect to IP issues.
If you work for ABC corp and they make a 'sales automation tool' - and you go off and build your own 'sales automation tool' - then fine. It's not about IP or trade secrets. You can do as you like.
But for other types of things, no way. You work at Nuance on Speech recognition - then you leave and build a nearly identical speech recognition system? That's probably IP theft.
There would not be any technology if IP could not be protected in some reasonable way.
I'm not suggesting that many of these contracts are crazy - and that there can be absurd limitations and weird corner cases - of course it's very tricky - but companies deserve the right to protect their IP in some manner.
That isn't trade secrets, it's experience.
No.
100% false.
If that information is key to the nature and success of a product, then it's called 'know how' and it's both legally and rationally protectable.
You people need to grow up and grasp that fact that once you go to a company and they teach you what they have spent $100 Million dollars on developing, that you cannot walk across the street and spill the beans on 80% of the materiality of that R&D which happens to be such details.
All you care about is the profitability of the company, and you think forcing employees to sign away their ability to work in their field is an acceptable solution.
People are getting hired for 3-month contracts and then getting sued when they find a similar job a year later. People are getting laid off and then getting sued by the companies that laid them off for getting a job at a competitor.
Fuck that. The job market needs competition, not a focus on raw profits above all else.
If your employee leaves your company, joins your competitor, and then leaks your trade secrets, then sue them for that. Don't sue them for even getting a job at your competitor - that doesn't mean that they are leaking secrets.
And if you think that your employees are so untrustworthy that getting hired by a competitor is a guaranteed leak of trade secrets, then that probably explains why you are so terrified that they will leave you to find a new job. You're a terrible employer, and they would be better off with a different job.
But let's face it, you don't have any employees, because you aren't an employer. You're a "temporarily embarrassed" entrepreneur who is already convinced that someone will try to steal that million-dollar idea you haven't had yet. Well, I wouldn't work for you, nor should anyone else, so good luck with that idea once you have it.
That said, it doesn't mean that it's either ethical or necessarily legal for them to go to company Y and immediately do a core dump of every marketing campaign they ran and what the results were. But there's a fuzzy line between doing that and saying "Oh, millennials really respond well to this sort of language, but be careful not to say this."
Unless you have a noncompete clause. That's exactly why they're a problem. You can't develop your professional skills. When you leave, you have to start from scratch in a different industry.
Buddy - I'm saying there should be no 'non compete' clause in that situation. Obviously - there's no basis for it because there is no IP involved. Which is a case of over-aggressive application of these protocols.
Sure. What I have in my head isn't the companies IP though, it's my experience.
"IP" is often confused with "the collective experience of your employees". IP is physical artifacts such as code, drawings, patents etc. The memory of having written that code is not part of the IP, nor is the capability of doing it again in a fraction of the time.
Again - 100% false. A lot of 'what is in your head' is the IP of the company you worked for.
Clearly, you grasp this, because you people seem to accept that NDA's are valid.
So - that yo accept and 'NDA' is valid, means you accept that 'what is in your head' can be the property of the company.
These 'I'm paid for labour' arguments are naive. You are paid to create outcomes, and to keep information about the company private - indefinitely.
I consider most of it "experience". How would you draw the line between what is "experience" and what is "IP"?
> you people seem to accept that NDA's are valid.
> 'NDA' is valid, means you accept that 'what is in your head' can be the property of the company
Well it rather means that I can't disclose things to certain people at certain times. I accept that e.g. for unreleased products and other secrets.
> to keep information about the company private - indefinitely.
Not sure what that means? If I work for ABC corp to develop over 10 years some advanced tech for ad targeting, and I have a non-compete that doesn't let me go to google for a year. For that full year they pay me full salary. That is the non-compete. I accept that (only with full salary). While at ABC, I had an NDA. That's cool.
After that year I can clean room implement something similar. I might have to avoid making the exact same system I did at ABC corp if there are IP issues such as patents. Note that this IP (patents) is not secret. I don't necessarily agree with software patents of most kinds however.
I develop the similar system at google in 1 year. That's what experience does: I take none of the dead ends I did at ABC corp. That's why google can pay me a load of money: I have experience. Is that experience in large part the SAME as ABC corps "IP"? yes. Of course. Do they "own" all of that experience? No. They still have their product. They own that. Google will have a product too, which they own. I wrote both.
And yes, I have a lot of patents and trade-secrets to my name.
I've seen people talk with a straight face how they think their company invented the use of IFNDEF/DEFINE for C .h files
And parent comment only goes to show how there are cattle that supports barbecues
All software companies produce intellectual property.
If the person from your quantum computer example gets fired with non-compete, it would mean being forced out of he field with 100% certainty. Quite a leverage for a company.
In my opinion, there is still enough stuff out there benefiting corps over employees even if non-competes go away.
Not being able to work work in the same field for up to 2 years (non-compete) and not disclosing internal ip, processes, etc when you go work at another company (NDA) in the field are much different.
Preventing someone from working in a field and not disclosing or sharing secrets/ip are two different animals.
NDAs are useful and I use them myself when contractors work with us, but non-competes create a very master/slave type of relationship, ownership of someone's skill that they need to work.
Paid non-competes are something that isn't as bad but non paid non-competes are horrible for the little guy and really a form of ownership that really goes against 'pro-business' ideals for smaller companies trying to compete while seemingly being 'pro-business' for the company doling out non-competes (big fish).
Contractors can't be told where to work, how to work or times to work, why are we allowing companies to tell skilled workers what they can and can't work on after the contract is up aside from what is under NDA?
Um, that's covered by an NDA--Non-Disclosure Agreement.
Those are generally QUITE enforceable, even in California and often last for 3 to 5 years.
Non-compete is quite different.
Pragmatically speaking, it's nary impossible to work in some fields, and then move to a competing firm without passing on know how or trade secrets.
Even the 'manner of approach' to a problem, while it may not be a trade secret, is basically a core part of the 'true IP' that is developed by a company.
Using DWAVE as an example - there are thousands of 'little things' that they will have had to figure out along the way - from which parts to use, which vendors work well, material types, tooling, physical test units, support gear (like cooling etc.) - all of this is IP.
Any number of small issues can be the 'key ingredients' that make or break a project. When DWAVE spends a year trying to figure out how to keep some material at a steady temperature in order to bind it to another ... then that's IP.
It's a paradox when nearly one's entire skill set is tantamount to 'trade secrets' but it's feasible.
An NDA - in the broadest sense - in this case would be a de-facto 'non compete' - because there's hardly a thing this Eng could do for Google that wouldn't involve giving away important information.
In case you guys are not aware: hiring people to steal away trade secrets and know-how is very common in the Valley, often by major players and firms.
If you haven't noticed - the biggest and most successful tech companies all have either natural monopolies (i.e. Facebook/Twitter with network externalities), or insurmountable massive barriers to entry keeping others out (i.e. Apple having MacOS/iOS, a retail distribution chain, massive leverage over supply chain, and market share).
In business scenarios it happens as well, in less 'protectable' scenarios. Apple snared away tons of BlackBerry sales/BD execs - not because they were necessarily skilled or talented - but because of their established relationships within carrier channels. Apple was buying access to Verizon and AT&T - not random sales guys abilities.
Don't forget that not only do companies lose their "IP" with outgoing workers, but they also get more free with incoming ones. Perhaps it balances out but with a net positive effect since effective skills get spread around the industry instead of being locked up whereever they were discovered.
I think this is part of a bigger argument about how much IP protection is enough to encourage innovation but not so much that it stifles the market. You seem to be advocating protecting every last little bit of knowledge but perhaps that's stifling for the economy overall even if it is more fair for individual members.
Intellectual property is a bit of a misnomer it has very little in common with property of the standard sort and the burden falls upon you to explain why we ought to create greater artificial scarcity for imaginary property.
+ My point is nearly everything that you learn at a company could be considered a 'trade secret' - depending on the company or project.
In the example I gave, I listed a variety of situations in which minute operational skills and knowledge, all contribute to be 'key information' regarding the development of the product, and can essentially be 'trade secrets'.
Ergo - it would be nary difficult to work for a competitor and not give that information up.
I am not particularly in favor of or against non-competes as a whole, (though I would be reluctant to sign one,) but they strike me as less invasive than other marketplace restrictions (such as government regulations).
On the last point, see generally J. Doyne Farmer and John C. Holland who've done significant work on innovation and the processes by which it occurs. You'll find presentations from both on YouTube, as well as publications. Both are/were associated with the Santa Fe Institute (Holland died in 2015).
1) No non-compete, long hours, and low salary
2) Non-compete agreement, short and flexible hours, and high salary
If this is a possible scenario, would the ban on non-competes be anti-worker?
My first piece of evidence for the proposition that employers pay for non-competes is that some of them prefer to hire employees with non-competes. Companies pay for everything they require of employees, as all unnecessary conditions reduce their options (for employees), and the only reason they ever offer money is to increase their options (from 0-1 or 100-200). In addition, it is very common for employers to value non-competes as assets (for accounting purposes). There are many other points in favor of the idea that companies do pay for non-competes, but we can start here.
I attribute the downvotes to the unpopularity of non-complete clauses on HN. In addition to that, most of the libertarian and right-leaning users seem to be in North America, so I can count on less sympathy from ~4-12 GMT. It is also possible that my writing has gotten substantially worse in the last few hours, but it seems unlikely that I am being more rude or unfair than I normally am.
The non compete is nearly entirely valuable in that it it depresses wages. In reality its entirely likely that between firm A and firm B neither has a whole lot of special sauce non competes mostly serve to keep each other from competing for employees thus driving up wages.
Why would you suggest that the employee pay a cost for accepting a fair workers agreement (no non-compete clause)? At least suggest that salaries be raised for people on non-competes.
The value the employee is generating through this IP is always going to be considerably (orders of magnitude) larger than whatever their salary is - the company can afford to pay them more.
In fact its trivial to show that non competes result in depressed wages. It in fact shows you the exact opposite of what you intend to show. Non competes are valued as assets as it enables employers to pay employees LESS than in a free market.
I agree that I am ignoring many things, as this is a limited discussion, and I am only addressing the impact of a law on a single employee, and its ethical ramifications.
Secondly: my second point answers my first.
Markets don't manifest in individual transactions, they manifest as the emergent behaviour of multiple transactions. As others have noted, setting bounds to what can be traded away has proven necessary, empirically, to avoid winding up in a highly non-optimal equilibrium point.
If you're interested in ethical ramifications, I recommend two excellent works on the topic: A Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations.
Even that treatment is unsatisfactory as it neglects considerations of short-term vs. long-term trade-offs.
Your example is contrived in that it essentially poses a Sophie's Choice: give up condition of long-term viability A or because of my superior position in establishing and enforcing terms, give up condition of long-term viability B.
The optimum condition would be for no artificial constraint on A or B imposed by the employer.
Your earlier scenario made no sense as their would be no reason to suspect that the 2 employers respective pay and conditions were related you have just presented it as such. Imagine the law were changed tomorrow? Would the high paying non compete using employer suddenly start paying smaller wages? Would they have any employees tomorrow if they did? A freer labor market would be MORE competitive not less there is no reason to suspect that they wouldn't have to pay more not less to retain the same talent.
It is like a reverse market regulation against workers that are bringing the productivity and skills to the company.
Company: "Hey come here and build us this thing that makes us capable in this area, and when you are done you can't go on building things for other people". It almost seems like a fatal attraction or overly obsessed/attached owner/girlfriend.
Non-competes are a kick in the nuts really to put it bluntly. You'll know the feeling when you get one. It is closer to a company trying to own a skilled worker rather than a partnership.
>"makes me not want"
I do not want to agree to many terms, so I do not agree to them; this does not make me want to ban those terms.
>"It is like a reverse market regulation"
Non-competes are 'like' any other business agreement to me. In any case, I am not sure what a 'reverse market regulation' is.
>"seems like a fatal attraction or overly obsessed/attached owner/girlfriend"
If you were analogizing an employer/employee relationship to a sexual one, they would seem most similar to a pimp or john; I do not think this is a useful analogy.
>"are a kick in the nuts... You'll know the feeling"
Many agreements feel unpleasant; I dislike any deal which obligates me to pay a large sum of money. This is interesting, but not very important to anyone else.
1. Money.
2. Skills and Knowledge.
3. Career Contacts.
With non-competes a company is trying to screw you out of #2 and 3.
The argument whether to ban non-competes should be rooted in the practical applications of the clause. Highly skilled, in-demand workers have the power and financial safety to negotiate a non-compete clause.
The question is when the power dynamic between employer and employee is heavily skewed yowards the employer, can they abuse this imbalance to force non-competes as a market equilibrium.
For example, for a person struggling financially, the slightly higher salary may be a short-term requirement, while the non-compete ruins their long-term prospects.
i suspect the employer / (healthcareinsurer if in US) imbalance is really the core issue.
In medical research ethics, informed consent acknowledges the imbalance. I think e.g. CA unenforcement of non-compete does a similar job.
(I am also a worker bee and benefit from non-enforcement, so take my input for the electrons they're based on.)
As a freelancer, contractor and self-employed business owner/worker, please make these illegal, tired of these.
The worst part about non-competes is they are blanket protectionism usually and up to 2+ years of non-compete, this sometimes happens on a job that is only 1-3 months. You have to laugh at those types of situations. Usually the client will push them aside or lower the time to the job plus some time, but both non-competes and arbitration agreements are horrible for workers in today's economy where people change jobs frequently and many are self-employed/freelancing/contracting.
The non-compete should not exist, at the core removing competition from skilled workers in our economy is bad all around, unless you are one of the current big fish.