U.S. Moves to Bar Noncompete Agreements in Labor Contracts

Re:U.S. Moves to Bar Noncompete Agreements in Labor Contracts by fendy3002 on Thursday January 05, 2023 @01:06PM (#34263893)

Well if all companies are doing it, employees will have no option other than to agree. This is the current case with non compete afaik.

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Re:U.S. Moves to Bar Noncompete Agreements in Labor Contracts by chadash on Thursday January 05, 2023 @01:32PM (#34264281)

There's a big difference. Paid gardening leave means that the employer actually has skin in the game. I'd bet that 9 times out of 10 they won't actually enforce these non-competes if they actually have to bear some cost (certain industries might be exceptions). The problem with the status quo is that an employer will have the non-compete in play regardless of whether the "competition" would really hurt them.

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Re:U.S. Moves to Bar Noncompete Agreements in Labor Contracts by throwaway09223 on Thursday January 05, 2023 @01:45PM (#34264491)

When I look at the last decade of my employment, my base salary is less than 10% of my overall comp. Maybe even 5%.

For high demand folks (the kind we read about in executive emails between Apple and Google and so on) it seems very possible that a company would opt to pay 10% of the employee's comp to deny them from the competition.

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Re:U.S. Moves to Bar Noncompete Agreements in Labor Contracts by bfdm on Thursday January 05, 2023 @02:09PM (#34264870)

That can be solved by setting the payment terms to match some minimum % of total compensation of some period before the paid leave.

eg, you get full benefits plus no less than 80% of all compensation of the previous 12mo. Non-cash compensation (eg equity) may be replaced with equivalent cash.

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Re:U.S. Moves to Bar Noncompete Agreements in Labor Contracts by throwaway09223 on Thursday January 05, 2023 @03:25PM (#34266024)

That's an offer, not a solution. What if the offer isn't reasonable? What if the employee is leaving because the equity vesting has dropped off? (eg: leaving after 4 years)

> "Non-cash compensation (eg equity) may be replaced with equivalent cash. "

What's the equivalent cash value of options? The variability here is huge. Seems better to just ban these schemes entirely, especially considering there's seemingly zero upside to allowing them.

Remember: California has never allowed noncompetes and we're doing just fine in the tech department. Better plan would be for the rest of the country to follow our lead.

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Re:U.S. Moves to Bar Noncompete Agreements in Labor Contracts by coredog64 on Thursday January 05, 2023 @04:34PM (#34267007)

What if you allow the new employer to buy out the non compete? So if your old employer low-balls you, the new employer can buy it out on your behalf. If your knowledge is really worth it, that provides an incentive to make the pay worthwhile. Doesn’t help in all cases, so I’d couple that with stronger restrictions on what a company can call a competitor. If there’s a cut for the state, that will provide incentive for them to enforce.

But really the right move here is either no non-competes or employees getting to set their own prices for them. Being on the wrong side of a power asymmetry forces behavior changes.

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Re:U.S. Moves to Bar Noncompete Agreements in Labor Contracts by chadash on Thursday January 05, 2023 @06:33PM (#34268560)

> the kind we read about in executive emails between Apple and Google and so on

In other words, the kind of person who is actually in a position to negotiate the terms of their contract. What bugs me most about the current situation is the ubiquity of non-competes for low salary employees, who have the least amount of leverage to negotiate contracts. I'm much less concerned about staff engineers at tech companies and portfolio managers at hedge funds, although I'd prefer to see non-competes banned altogether (except perhaps for non-competes for owners selling a company... I think it's fair that if I buy your ice cream shop, we can agree that you can't open one up across the street the next day).

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Re:U.S. Moves to Bar Noncompete Agreements in Labor Contracts by randomdata on Thursday January 05, 2023 @01:48PM (#34264530)

> Well if all companies are doing it, employees will have no option other than to agree.

If all employees rejected them, companies would have no option but to disband them.

The issue is that when one enters into a non-compete without equivalent compensation the government loses potential tax revenue. Income tax is maximized when workers are working most productively, so there is a strong incentive for the government to keep workers working productively. Similar reason for why we have minimum wage.

If non-competes provide sufficient "garden leave" then the tax revenue should not be impacted, so there is no reason for the government to care. The productivity is still captured. The government isn't in the business of spotting bad deals for individuals – you are quite free to make all kinds of boneheaded financial decisions – only bad deals for itself.

Granted, execution and enforcement can be a challenge. Say you enter into a non-compete with "garden leave" of $1. Is that sufficient compensation with respect to the intent of allowing "garden leave"? Now you need a tribunal to make the call and all the complexities to go along with it. And so, when drafting laws, it may be more practical to prohibit "garden leave" as well.

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