FTC Announces Ban on Non-Competes

[rjs330]

Nevertheless, the non-competes are still contracts requiring a quid pro quo. In particular, non-competes that I have signed in the past obligated my employer to continue to compensate me for the duration of my non-compete term. I thought that quite fair.

I actually like that idea. I dint know what your compensation was, it seems like a fair idea.

 

[rjs330]

Your logic makes sense, but can you imagine the wailing and gnashing of teeth that would come from having to pay out an extra 6-24 months of salary continuance for everybody who quit?

I think it would definitely cut down on the non-competes. They would be saved only for those that have that critical knowledge. It would also prevent companies luring away others just for their knowledge of the other companies proprietary information rather than their actual skills. I've got no.issues with company A luring employees from company B with better pay and perks. But don't hire them expecting them to spill the beans on all the proprietary info from their former employer.

I think making companies pay former employees during their time period is perfectly fair. And would also cut down on the issuing of the non-competes. A win win in my book.

 

[ThatRobGuy]

That's why I don't understand the argument that they're designed to protect trade secrets. I could maybe understand it if you're in an industry where product development is so fast that a few months' delay is going to make insider information irrelevant, but outside of that, what's the point beyond just putting up roadblocks to worker mobility?

I can see a few isolated situations where it would apply, the example I provided before where if two companies are nearing the finish line with parallel/similar product offerings, and you snag 3 of their key employees away so that they don't get theirs finished as soon as you do. But those would be few and far between.

I think some of the motivation (especially with higher ranking employees) is more of a "brand reputation" thing...both in the eyes of the customers and in the eyes of potential future employees.

For instance, if people see that "It looks like 15 mid-upper level people just left XYZ Corp to go work at ABC Inc in the last two months" (which can be done pretty easily if you dangle a big enough signing bonus carrot), that's going to create certain market perceptions about the respective brands, that may be completely detached with quality of the product offering itself.

"You should really go with ABC Inc...actually, 15 of XYZ's people have came over to work for us in the last 3 months" sort of thing... where the fact that you were able to snag the competitors employees becomes a sales pitch


One other aspect would be secondary recruiting. Joe Smith leaves XYZ corp, Joe worked there for 5 years so he knows who the mission critical people are. Joe tells his new boss at ABC "If you really want to stick it to them, hire Dana, Greg, Steve, and Billy". Something like that wouldn't be able to be addressed via an NDA... however, non-competes are too blunt an instrument to address that in a meaningful way without overstepping.


And I can see where a company may be able to make a case for situations where specialized benefits were part of the compensation package agreement. I can actually provide a real world example of that one.

Companies that offer tuition reimbursement.

I could see why a company would have some interest in not wanting to be paying for someone's education (for an amount that would actually exceed the pay difference with the other company) only to have that other company siphon them off as soon as they're done.

So if offer $55k (with a program where you can get up to $7k a year tuition reimbursement)
You offer $58k (but with no reimbursement)

Joe Smith knows he wants to finish up his Master's degree so he comes to work for me for 2 years, I shell out the $14k to help him pay off his education, and then the day after, he bails to go work for you because offer $3k more a year.

I can see why I'd want to have some stipulations/agreements in place.

 

[Hans Blaster]

The “let-states-regulate-capitalism”, would be delightful, I'm sure.

The new FTC rules on non-competes are basically those that California has had for some time.

 

[o_mlly]

The new FTC rules on non-competes are basically those that California has had for some time.

I'm fine that Californians are allowed to make non-competes illegal in their state. Shouldn't Texans also be allowed to have their own say on non-competes?

I see that Californians recently amended their statute in 2023 to include non-competes executed outside California to also be unenforceable. However, their own Supreme Court ruled against just such a case citing comity rules overriding the statute's restraint of lawful contracts executed elsewhere. Stay tuned.

 

[o_mlly]

I actually like that idea. I dint know what your compensation was, it seems like a fair idea.

I was not a jobseeker but being recruited and so likely had more leverage than others who have posted their experiences in the thread.

 

[iluvatar5150]

I'm fine that Californians are allowed to make non-competes illegal in their state. Shouldn't Texans also be allowed to have their own say on non-competes?

Not really, no. The impact of these rules extend well beyond the bounds of a particular state and there's nothing special about one state that would warrant different rules on this subject. "States' rights" is often just code for "Rights of the powerful."

I see that Californians recently amended their statute in 2023 to include non-competes executed outside California to also be unenforceable. However, their own Supreme Court ruled against just such a case citing comity rules overriding the statute's restraint of lawful contracts executed elsewhere. Stay tuned.

That's a good example of why it's better to have rules be enacted at the federal level.

 

[o_mlly]

Not really, no. The impact of these rules extend well beyond the bounds of a particular state and there's nothing special about one state that would warrant different rules on this subject. "States' rights" is often just code for "Rights of the powerful."

That's a good example of why it's better to have rules be enacted at the federal level.

Well, no surprise here.

Why do LLE's (lazy liberal elitists) go for a "the federal solution" right out of the box? First, they think they know better than everyone else and want to, in a wholesale method, quickly impose their supposed omniscience on everyone else. Sorry, but the LLE's are just not as smart as they think.

On the other hand, COC's (cautiously optimistic conservatives), like our founding fathers, believed. better to try it before you buy it for everyone.

 

[iluvatar5150]

Well, no surprise here.

Why do LLE's (lazy liberal elitists) go for a "the federal solution" right out of the box? First, they think they know better than everyone else and want to, in a wholesale method, quickly impose their supposed omniscience on everyone else. Sorry, but the LLE's are just not as smart as they think.

On the other hand, COC's (cautiously optimistic conservatives), like our founding fathers, believed. better to try it before you buy it for everyone.

lol, yeah, because there aren't any COCky conservatives running around thinking they know it all.

What is it, exactly, that we haven't tried yet? We've tried letting companies do whatever they want and, once again, many of them have shown a willingness to abuse the system for their own ends. California banned non-competes in 1941 and their tech sector has outperformed that of every other state in the country. The reason people are leaving in droves is because they can't build enough housing to satisfy the demand for all of those high-paying jobs.

We have 83 years of this working exceedingly well in California. How much longer do you want to experiment with this?

 

[ThatRobGuy]

Not really, no. The impact of these rules extend well beyond the bounds of a particular state and there's nothing special about one state that would warrant different rules on this subject. "States' rights" is often just code for "Rights of the powerful."




That's a good example of why it's better to have rules be enacted at the federal level.

For certain rules, yes... I would agree that they should be handled federally (worker protections such as child labor laws and and OSHA safety-based things)

For this one, I'm not so sure.

Trying to stuff all the eggs into one basket is great if we're sure that one particular basket is the best one.

I still kinda like the idea of (within reason) having 50 active ongoing experiments we can observe in real time to know what works and what doesn't.

I don't think it's a good thing to have sweeping regulatory power in the hands of a few people appointed by whichever party is in power at the time and opts to structure their regulatory policy around whichever large/powerful and most partisan state (in their favor) wants to do.

Otherwise we'll be constantly switching off between "Mimic California/New York policy" and "Mimic Texas/Florida policy" every 4-8 years.


I would also argue that "States' Rights" isn't always a dogwhistle... Both factions have had their love/hate relationships with the concept.

States' Rights is what allows California or New Jersey to say "we don't care what your company (based out of Texas) handbook says, no...employees won't be allowed to carry concealed weapons at any store location in our state just because you say it's okay"

It's also what gives California the ability to say "no, marijuana is legal here, our state laws dictate that your company's locations here in Cali can't terminate someone's employment just because they like to smoke weed on the weekends"

Things like gay marriage and marijuana legalization wouldn't have gotten off the ground if not for States' Rights.


So that's something that the more progressive people need to consider.

It can't be a "have it both ways" scenario where I get to pick and choose what should be state vs. federal based on which level of government happens to agree with me on a particular issue at the time.

The gay marriage topic was one where we saw a lot people flip flop quite a bit. When the federal government was proposing DOMA, conservatives cheered and progressives said "the states should get to decide", in the wake of the obergefell v. hodges ruling, we basically saw the two teams switch positions.

 

[Mayzoo]

Apart from executive teams, I haven't really heard of just your "average workers" ever having to sign one that long.

My company has them for some non-executives, but it's usually only 30-90 days and isolated to people who are in a few key positions of intimate company knowledge.

They've largely moved away from them in favor of much more specific (but much longer lasting) NDAs.

I used to be under a general 90-day non-compete. But they nixed that, and it was replaced with an 8-page long NDA that listed the specific things I'm not allowed to disclose or discuss with other companies (in an employment situation or just in general), and gave a very specific list of the companies I'm not allowed to discuss it with.

If leaking of company specific trade secrets is the main concern, NDAs are much more effective for that anyway. If I were going to go spill the beans to one of my company's competitors in exchange for a signing bonus, "it's a contract violation at 90 days, but if it's been 91 days, good to go" seems rather arbitrary.

The one company I turned down was for 18 mo. No trade secrets were involved, and it was a very low management position. Not even a large company. They wanted to deter people from quitting. If I had taken the job and quit, I would not have been able to work "in that field for 18 months" which is a very broad stroke they painted with.

 

[ThatRobGuy]

The one company I turned down was for 18 mo. No trade secrets were involved, and it was a very low management position. Not even a large company. They wanted to deter people from quitting. If I had taken the job and quit, I would not have been able to work "in that field for 18 months" which is a very broad stroke they painted with.

Obviously it differs from state to state...

Here in Ohio, they're generally not allowed to extend past 1 year

Ohio Non-Compete Agreements: Everything You Need to Know

Explore the impact of an Ohio non-compete agreement on independent contractors and the potential consequences for employers. Get guidance from a DGMS lawyer.

ohiotiger.com

It's one of those things that's a double edged sword, it can protect the workers in some instances, but can protect the established "powers that be" in others.

For instance, if a nasty CEO wants to punish employees for leaving, they can leverage a non-compete agreement to punish people for leaving.

On the other hand, without any non-compete agreements, if Jeff Bezos gets wind of an idea that a much smaller company has that could be a "game-changer", absent a non-compete agreement, there's nothing that would stop him from simply saying "I'll give you a 50k signing bonus if you quit there and come work for me, that idea will be Amazon's now"


Which is why I noted earlier that there needs to be a "meet in the middle" solution of some kind here...

If we were starting from scratch in an environment where there were no established business super powers, and everyone's at the same starting line, then I can see where a no non-competes allowed model would be preferable.

But I think people need to consider the dynamic of "preventative vs. prescriptive". That's where the libertarian party lost me on a lot of topics.

Things that would be good preventative measures to prevent certain forms of overstepping would be great if everything was starting from scratch. Once entities have already built a critical mass, things are a little different.

You nix any/all non-compete agreements, sure, that will give workers more options, but those other options are almost always going to be offered by "the big guys", who A) probably aren't going to treat them a whole lot better than the places they were already working for, and B) can easily dangle a $2k carrot in front of someone to steal them away from a much smaller company before they can even get off the starting line.


To be clear, there's virtually nobody working at $25k a year job who could be making $100k a year "if it weren't for those darn non-compete clauses"


My stance is still that they should be allowed, but structured in a way where they make sense. The requirement of "your previous employer who enacted the non-compete has to pay you your salary for the duration of that agreement" solves a lot of those problems organically.

At the end of they day, those people running the companies speak the language of money, and they're not going to want to shell that out for 6 months for a person who does literally no damage by going somewhere else.

 

[Pommer]

The one company I turned down was for 18 mo. No trade secrets were involved, and it was a very low management position. Not even a large company. They wanted to deter people from quitting. If I had taken the job and quit, I would not have been able to work "in that field for 18 months" which is a very broad stroke they painted with.

That this practice has been tolerated by seemingly intelligent people even during these days of low unemployment…without non-competes “players” are able to go “free-agent” and look for better prospects on another “team”, in the same “sport”.
This makes the “managers” be better “coaches” and loosens the purse-strings of the board-of-directors.

Why would workers tolerate being stifled in finding the best deal that they can wrangle?
Are people that compliant?

 

[o_mlly]

The reason people are leaving [California] in droves is because they can't build enough housing to satisfy the demand for all of those high-paying jobs.

Really? Is that the reason they spin on you as to why droves are leaving? Do they also offer you some Kool-Aid in the flavor of your choice? Oh, sorry ... it's California; no choice you get grape just like everyone else ... it's good for you.

 

[o_mlly]

But I think people need to consider the dynamic of "preventative vs. prescriptive". That's where the libertarian party lost me on a lot of topics.

There are other dynamics to consider. Companies that develop new products or processes must have a working environment in which chemists and engineers freely share information. In the absence of non-compete agreements information sharing is stifled among co-workers. Your co-worker today may become your competitor tomorrow. The info that the departing employee takes is more often than not someone else's insight or discovery.

 

[iluvatar5150]

Really? Is that the reason they spin on you as to why droves are leaving? Do they also offer you some Kool-Aid in the flavor of your choice? Oh, sorry ... it's California; no choice you get grape just like everyone else ... it's good for you.

lol, k buddy

 

[adrianmonk]

Back in the 90s, even jobs like tech support (usually by body shops) presented non competes. These agreements were designed to make the employee feel nervous about switching jobs and/or requesting pay increases. Usually when I asked what my compensation would be during the life of this non compete agreement, the recruiter would simply remove it from the contract. I am under a non-compete now, but since I am one of the founders, the non compete in this situation makes sense.

I had a side gig as an infrastructure consultant and some clients tried the non compete where I could not create certain software for companies they considered competitors and they are also easy to take out of the contract, and if not, I have no problem walking away.

Larger companies that I have worked for directly have never presented me with these type of non compete even in senior developer/application architect type positions.

 

[Trogdor the Burninator]

There are other dynamics to consider. Companies that develop new products or processes must have a working environment in which chemists and engineers freely share information. In the absence of non-compete agreements information sharing is stifled among co-workers. Your co-worker today may become your competitor tomorrow. The info that the departing employee takes is more often than not someone else's insight or discovery.

Which is already covered under existing NDAs and other employment contracts. No-competes is just a cheap way for companies to try and lock employees into accepting lesser conditions once they've joined because they know it will be difficult for them to seek jobs outside their industry, or fund a defence if the employer tries to sue.

If companies deem that it's so important to specifically have a no-compete, then they should be required by law to compensate the employee at full pay for the length of the clause. I'm willing to bet 99% of no-compete contracts would disappear overnight if that were legislated.