Non-Competes As the DRM of Human Capital

An anonymous reader writes "Techdirt has an interesting look at how non-compete agreements are like DRM for people, doing just as much damage to innovation as DRM has done to the entertainment industry. It includes links to a lot of research to back up the premise, including some studies showing that Silicon Valley's success as compared to Boston's can be traced in part to the fact that California does not enforce non-compete agreements."

Warning: Unsafe redirect

[sethstorm]

Link leads to shock site.

Re:Non-compete

[canuck57]

Your suggestion is not well thought-out, unless your purpose is really to say "non-competes are okay as long as we make sure that no sane company would ever ask anyone to sign one".

Having been under a few, and had to fight one, and won with prejudice I can can say most non-competes are rope around your neck documents. Often they want you to sign after accepting the job or change rules 3 years into employment. Puts people in the situation of having to comply or be on the outs. Fortunately where I live, an employer can try to do this but a judge wouldn't even hear of it as if not signed with or before the offer, unless in the employees favor - it legally has no value.

Employers want the right to fire, I have no problem with this. Really, I am for employer and employee rights. Both sides. But when an employee is restricted in practicing his skills for another employer, then the former has to pay his bench time or forget about it. That is, no one can stand in front of a persons right to practice their legal profession unless they are going to put their money where their mouth is.

It's all BS

[joeyg1973]

I have dealt with this before. My lawyer told me that only one or 2 of these cases have ever made it to the court. Judges throw these cases out as soon as they see them. Your previous employer cannot tell you where you can and cannot work. It is taking away your ability to earn a living. I had worked for a company for 2 years, went to their direct competitor for more money for a year, then came back to the first company. Both times I got a very official and long letter from the former company's law firm chastising me about the non-compete and asked me to respond within a certain time limit to some questions in the hope that I would write something that was actionable. Both times I ignored the letters, the time limit came and went, and nothing further happened. I have a friend who was in a similar situation and his former company decided to press the issue. It never made it to court, judge just threw it right out. I believe that the only way that a non-compete can be enforced is if the company can show significant monetary damage has occurred. Working for whomever you want is still perfectly legal in the USA!

Re:Florida

[negative3]

How does right-to-work laws apply to non-compete agreements? To quote wikipedia, right-to-work laws "prohibit agreements between trade unions and employers making membership or payment of union dues or 'fees' a condition of employment, either before or after hire." Unless Florida has added more to the concept of a right-to-work law.

Re:Don't feed the competiton

[Alsee]

TFA, on the other hand, suggests that the practice of non-competes reduces overall innovation. So what's good for an individual employer is not necessarily best for society at large.

It's not even necessarily good for an employer, however much he thinks he wants it.

An employer wants a non-compete to cut off harmful "outflow" of value. However if the practice of non-competes is legally enforced, then by definition it also cuts off his own beneficial inflow of value. And the direct benefit to an employer of any inflow value is almost always going to be larger than the diffuse indirect negative impact to the employer from outflow.

So in a state that enforces non-competes, yes an employer may have a selfish interest in trying to impose non-competes on their employees. However the practice itself is not good for the employer, and in fact leaves him at a disadvantage relative to companies in other states that do not enforce non-competes, leaves him at a disadvantage to companies that do benefit from inflow. In the same way that Boston's Route 128 tech center (subject to non-competes) was trounced by Silicon Valley and California's non-enforcement of non-competes.

So the employer's short view interest may be in pushing non-competes for his employees, but his true interest is in opposing the practice itself and opposing state enforcement of the practice.

Kinda like a politician who accepts corporate campaign contributions, and says he will (and who does) vote to prohibit corporate campaign contributions every chance he gets.

-

not limited to what you invent

[Wansu]

One outfit I interviewed with was wanting me to sign an agreement which stipulated, among other things, that I not work for any competing companies for a year after termination of employment with them, even if they fire me. I balked. They withdrew their offer. A few years later, they shuttered their operations here.

Is this enforceable? I don't know. But the way I look at it, if they're doing stuff like this during the interview process, what will they be like later?

Depends on the market and business

[BrianRagle]

According to my wife's business law class, a NCA is largely enforceable only under certain conditions. Market location, trade secrets, and client base are the major factors. For example, if I work for a small advertising shop in Florida, which only works within the Florida market, and I move to Washington (state), an NCA would be nonsense, even if I signed it. It would prevent a reasonable expectation to earn a living. Now, if I worked for Microsoft (as if) and left to work for Apple (yay!), an NCA would probably be enforceable.

One thing I have noticed is NCAs being employed in places you wouldn't expect them. My son went to work for a local paintball field as a game helper and referee. This is a small-time outfit operating out of some guy's house. He had to sign an NCA. He showed it to me and I just laughed.