Law Federal Trade Commission voted 3-2 to ban Noncompete Agreements

[Arkain2K]

I can understand a very limited application of non-competes.

If someone has specific inside technical knowledge that your company spent money to develop and they are in a position to bring that incredibly valuable information to a direct competitor it's basically legaized corporate espionage with some extra steps.

Even then, a company's trade secrets would be protected under corporate NDA's, not time-limited Noncompetes.

There are countless cases of people quitting tech firm A after being secretly recruited by tech firm B, brought proprietary information that they've worked on with them to the new employers, and still getting sued up the ass long after the noncompete time period expired, right along with their new boss who have to cough up millions for stealing IP's.

The problem is non-competes are most often used to make sure people can't develop skills into a career within an industry, or to limit the job options of low skilled labor. It's a boot heel on the throat of the working class.

Yup. Non-competes nowadays are offered to execs in exchange for a higher pay, but the rank-and-file workers get absolutely nothing out of it beside less options.

 

[Two Crows]

My job as a broker carried a non-compete that effectively ran the length of the Series 7.

The company justified this by citing employment while I finished the Series 7, but that was a Catch 22 ... as you can not sit for the 7 without being sponsored by a FINRA member.

IOW, it's an absolutely mandatory process that you can not complete without the employer that is used to justify the non-com.

 

[jx820]

There are countless cases of people quitting tech firm A after being secretly recruited by tech firm B, brought proprietary information that they've worked on with them to the new employers, and still getting sued up the ass long after the noncompete time period expired, right along with their new boss who have to cough up millions for stealing IP's.

Yeah, that's the exact case for at least trying to prohibit that behavior. Because if you leave OpenAI with a robust understanding of their methodology and go to Google, it doesn't matter if there's a 10 million dollar fine. That's a speed bump in developing a billion dollar product line. And they don't have to directly steal patented IP. Processes, proceedures, methods that Company A spends millions to figure out can be difficult to impossilbe to patent and Company B can have them instantly for the cost of a 250k engineer salary.

That's not to say leaks wouldn't happen anyway, or that such a loss justifies non-competes as a whole, but there is a case to be made for limited (narrow) use of them in some instances as part of an overall strategy to protect proprietary information.

 

[avenue94]

Processes, proceedures, methods that Company A spends millions to figure out can be difficult to impossilbe to patent and Company B can have them instantly for the cost of a 250k engineer salary.

If it can't be patented or protected by NDA, it shouldn't be able to be limited by a non-compete. It would be quite a stretch of IP protections to claim that it protects a process or method (if we mean them figuratively, not like a chemical or technical process). If company A wants to retain an engineer and their experience, pay them more.

 

[jx820]

If it can't be patented or protected by NDA, it shouldn't be able to be limited by a non-compete. It would be quite a stretch of IP protections to claim that it protects a process or method (if we mean them figuratively, not like a chemical or technical process). If company A wants to retain an engineer and their experience, pay them more.

Ok, hypothetically I'm a marketing exec at Samsung, and I have intimate knowledge of the market segmentation strategy for the next gen line of phones, all of the features they're going to announce, buzz words they're going to use to brand this stuff, even a little bit of technical information about its development and challenges they faced, what they were able to pull off and what they didn't, I know the launch date, and announce date.

What's a fair compensation to ask for to keep me from walking across the street to Apple? 5 million? 10 million?

I mean, even without taking any intellectual property out the door with me, just knowledge I have, you could plan a campaign to undercut their every announcement, Make their branding look dumb, bury their events by doing one the next day.

You could severely damage an entire generation of a multi-billion dollar product line. And there may be 20 guys like that on just the marketing team. Why shouldn't we negotiate with a gun to the company's head? It's not actually against the law. By your logic we're just asking the company to pay us a better salary to retain us.

I'm being somewhat hyperbolic, but not entirely. Non-competes didn't come to exist in a vacuum. They started as a solution to a real problem.

 

[avenue94]

Ok, hypothetically I'm a marketing exec at Samsung, and I have intimate knowledge of the market segmentation strategy for the next gen line of phones,

So for a little context, I work in the consumer electronics industry and have worked with Samsung a good amount. Your marketing exec from Samsung almost certainly came from another electronics company. It's a big merry go around.

Ok, hypothetically I'm a marketing exec at Samsung, and I have intimate knowledge of the market segmentation strategy for the next gen line of phones, all of the features they're going to announce, buzz words they're going to use to brand this stuff, even a little bit of technical information about its development and challenges they faced, what they were able to pull off and what they didn't, I know the launch date, and announce date.

All of this is covered by NDA. PMs move from manufacturer to manufacturer all the time. And something like a buzz word to marketing is hardly a trade secret.

What's a fair compensation to ask for to keep me from walking across the street to Apple? 5 million? 10 million?

It's up to the two parties to come to see if they can find a figure that makes sense. If not, tough luck. If it's Apple, Samsung better be ready to shell out.

I mean, even without taking any intellectual property out the door with me, just knowledge I have, you could plan a campaign to undercut their every announcement, Make their branding look dumb, bury their events by doing one the next day.

Sounds a lot like tortuous interference. It's hard to keep secrets in the consumer electronics industry, and brands don't really do this. IT's a waste of time and not worth the risk it brings. Plus there is a very good chance it backfires and gives your competitor free PR.

Why shouldn't we negotiate with a gun to the company's head? It's not actually against the law. By your logic we're just asking the company to pay us a better salary to retain us.

I don't see why employees shouldn't try to use every bit of advantage they can muster given how much the scale is tipped toward employers vs employees in the modern labor market.

I'm being somewhat hyperbolic, but not entirely. Non-competes didn't come to exist in a vacuum. They started as a solution to a real problem.

What problem do you think they started as a solution to? I feel like if we were to take a look at old court records, we'd probably find employers used non-competes 100 or 200 years ago for the same reasons they do today.

 

[jx820]

PMs move from manufacturer to manufacturer all the time. And something like a buzz word to marketing is hardly a trade secret.

It's not a secret because people move from manufacturer to manufacturer all the time. Sony got their dick kicked in at CES in '91 because Nintendo knew what they were going to say, and when they were going to say it. All Nintendo had to do was make a conflicting announcement the next day. Sony's product took 3 years to recover. Because someone knew a little bit of what was going on behind closed doors.

I don't see why employees shouldn't try to use every bit of advantage they can muster given how much the scale is tipped toward employers vs employees in the modern labor market.

How is anyone supposed to work together on anything if every bit of shared information is to be used as a cudgel to blugeon that party sharing that information. I'm all for negotiations, but I don't think it's unreasonable to expect people to act in good faith.

All of this is covered by NDA.

An NDA does not work when your information is held behind closed doors by your competitors. As long as nothing is put in writing it's basically impossible to prove whether an NDA has held up. You'd be much safer if a key member of your team was not doing the EXACT same work for a directly competing product. And that's really not a big ask. Most products have one or two primary competitors. That leaves every other product on earth to work on.

But I don't think we're going to see eye to eye on this. I'm going to bow out.

 

[avenue94]

It's not a secret because people move from manufacturer to manufacturer all the time.

Right. Which is how a well functioning market works.

Sony got their dick kicked in at CES in '91 because Nintendo knew what they were going to say, and when they were going to say it. All Nintendo had to do was make a conflicting announcement the next day. Sony's product took 3 years to recover. Because someone knew a little bit of what was going on behind closed doors.

How would a non-compete have prevented the PlayStation launch situation? They had agreed to work together on a a console and had multiple contracts. Sony didn't read the fine print, that's on them.

How is anyone supposed to work together on anything if every bit of shared information is to be used as a cudgel to blugeon that party sharing that information. I'm all for negotiations, but I don't think it's unreasonable to expect people to act in good faith.

Because you can't tell your company "hey, if you don't pay me more, I will go to a competitor and share confidential information." If NDAs are so necessary, why has Silicon Valley and California tech operated amazingly without them?

An NDA does not work when your information is held behind closed doors by your competitors. As long as nothing is put in writing it's basically impossible to prove whether an NDA has held up. You'd be much safer if a key member of your team was not doing the EXACT same work for a directly competing product. And that's really not a big ask. Most products have one or two primary competitors. That leaves every other product on earth to work on.

But I don't think we're going to see eye to eye on this. I'm going to bow out.

Do you want to provide a concrete example of some kind of protected info that couldn't be prosecuted? You seem to be convinced that tech companies operate in a way which they don't, at least based on the years I've spent working with them. You keep presenting hypothetical that would get instantly vetoed by legal departments.

The bottom line is you seem to think only employers should have leverage, not employees. You are complaining that employers will always be under the gun when that's literally how employers treat employees with layoffs and other tactics.

 

[no fat chicks]

Amazing news

 

[lsa]

I got a noncompete with sherdog.
I cant post anywhere else.

Its alrite. for now

 

[panamaican]

Ok, hypothetically I'm a marketing exec at Samsung, and I have intimate knowledge of the market segmentation strategy for the next gen line of phones, all of the features they're going to announce, buzz words they're going to use to brand this stuff, even a little bit of technical information about its development and challenges they faced, what they were able to pull off and what they didn't, I know the launch date, and announce date.

What's a fair compensation to ask for to keep me from walking across the street to Apple? 5 million? 10 million?

I mean, even without taking any intellectual property out the door with me, just knowledge I have, you could plan a campaign to undercut their every announcement, Make their branding look dumb, bury their events by doing one the next day.

You could severely damage an entire generation of a multi-billion dollar product line. And there may be 20 guys like that on just the marketing team. Why shouldn't we negotiate with a gun to the company's head? It's not actually against the law. By your logic we're just asking the company to pay us a better salary to retain us.

I'm being somewhat hyperbolic, but not entirely. Non-competes didn't come to exist in a vacuum. They started as a solution to a real problem.

Then your company really, really needs to incentivize you to stay.

Noncompetes exist for a reason, it's just that those reasons rarely justify the terms outlined in them.

Companies put themselves in this position by drafting more and more restrictive NCA's. Like Hockey said earlier, 1 in 6 fast food workers has a non-compete. What for?

 

[oldshadow]

Sounds like mostly a win wich I support. However I support it at a lower level in business. I could understand that type of thing being required and justified at high level positions in companies.

 

[jx820]

Then your company really, really needs to incentivize you to stay.

Noncompetes exist for a reason, it's just that those reasons rarely justify the terms outlined in them.

Companies put themselves in this position by drafting more and more restrictive NCA's. Like Hockey said earlier, 1 in 6 fast food workers has a non-compete. What for?

You're jumping into this discussion pretty late. What I argued was that there are some instances for very narrow applications.

I completely agree that fast food workers shouldn't be prohibited and there's no justification for it other than making it hurt to leave. That's a broad and malicious applicaiton that shouldn't be allowed.

On the other hand, I work for an employee owned company. As a shareholder I know that we've spent millions over the years building our accounts, and determining fair market pricing for our VERY specialized industy. We don't have any non-compete's but I certainly wouldn't want our sales manager to leave here and take his intimate knowlege of our accounts and pricing (that we've spend a fortune cultivating) to go to our only direct competitor in our space. There are thousads of potential opportunities he'd be qualified for in closely related market segements and I don't think we should have to bribe him to not butcher our busness and serve it to our competition. I also don't think it would be ethical for us to do it to them.

Limiting 1 opportunity for some key figures in an advanced stage of their careers is not an undue burden. particularly when balanced against the threat it poses to hundreds or thousands of other emplyees. I think that's a silly argument.

 

[panamaican]

You're jumping into this discussion pretty late. What I argued was that there are some instances for very narrow applications.

I completely agree that fast food workers shouldn't be prohibited and there's no justification for it other than making it hurt to leave. That's a broad and malicious applicaiton that shouldn't be allowed.

On the other hand, I work for an employee owned company. As a shareholder I know that we've spent millions over the years building our accounts, and determining fair market pricing for our VERY specialized industy. We don't have any non-compete's but I certainly wouldn't want our sales manager to leave here and take his intimate knowlege of our accounts and pricing (that we've spend a fortune cultivating) to go to our only direct competitor in our space. There are thousads of potential opportunities he'd be qualified for in closely related market segements and I don't think we should have to bribe him to not butcher our busness and serve it to our competition. I also don't think it would be ethical for us to do it to them.

Limiting 1 opportunity for some key figures in an advanced stage of their careers is not an undue burden. particularly when balanced against the threat it poses to hundreds or thousands of other emplyees. I think that's a silly argument.

Kind of missed my point -- you need to incentivize that individual to not do so.

So, yes, you should have to "bribe" the employee to not butcher your business. If his knowledge set or skills are so valuable that it would literally cost you millions to lose him, shouldn't his compensation package reflect that aggressively enough to forestall his loss?

I, on the other hand, do have my employees sign non-competes because when they leave, they take their relationships with them and that can have a negative effect on out customer size. But I also know that if I don't pay those people enough to keep them happy, no non-compete is going to keep them with me.

Your argument and mine are why people say that non-competes are used to artificially depress wages.

I use them to keep customers from leaving and, indirectly, keep my competitors from outbidding me for the employee and the business that employee generates. You don't use non-competes but you don't want to "bribe" your employees to stay with you. So rather than pay them more than the competitor would pay them, you'd prefer that they legally can't solicit higher wage work.

Let me present a hypothetical -- let's take your high knowledge employee. If he came to your company and said "Your direct competitors offered me double what you pay me to go to them, will you offer me triple my salary to stay?" What would you suggest your company do? And, more importantly, do you think this approach provides a better reflection of the employee's true value to the company?

 

[avenue94]

Limiting 1 opportunity for some key figures in an advanced stage of their careers is not an undue burden. particularly when balanced against the threat it poses to hundreds or thousands of other emplyees. I think that's a silly argument.

What threat are these hundreds or thousands of employees under?

 

[chardog]

You're jumping into this discussion pretty late. What I argued was that there are some instances for very narrow applications.

I completely agree that fast food workers shouldn't be prohibited and there's no justification for it other than making it hurt to leave. That's a broad and malicious applicaiton that shouldn't be allowed.

On the other hand, I work for an employee owned company. As a shareholder I know that we've spent millions over the years building our accounts, and determining fair market pricing for our VERY specialized industy. We don't have any non-compete's but I certainly wouldn't want our sales manager to leave here and take his intimate knowlege of our accounts and pricing (that we've spend a fortune cultivating) to go to our only direct competitor in our space. There are thousads of potential opportunities he'd be qualified for in closely related market segements and I don't think we should have to bribe him to not butcher our busness and serve it to our competition. I also don't think it would be ethical for us to do it to them.

Limiting 1 opportunity for some key figures in an advanced stage of their careers is not an undue burden. particularly when balanced against the threat it poses to hundreds or thousands of other emplyees. I think that's a silly argument.

it is indeed very interesting

similarly, I developed an application for my work, they directed it somewhat, I redirected the way I wanted because I'm an engineer, they're not, they dont comprehend completely..... If I were to leave and start something new, I could become a serious competitor, even siphon away key contacts.

The more practical thing behind this would be that I'm too lazy to put up the capital and build up a brand and following..... but if someone bought me out for a good chunk more money.................. it would cripple the somewhat large company, and a lot of people will be out of jobs.

on the flip side, if a lower level worker decided to steal my code and join another company..... that would be kind of fucked up, and probably impossible to prove.

 

[panamaican]

it is indeed very interesting

similarly, I developed an application for my work, they directed it somewhat, I redirected the way I wanted because I'm an engineer, they're not, they dont comprehend completely..... If I were to leave and start something new, I could become a serious competitor, even siphon away key contacts.

The more practical thing behind this would be that I'm too lazy to put up the capital and build up a brand and following..... but if someone bought me out for a good chunk more money.................. it would cripple the somewhat large company, and a lot of people will be out of jobs.

on the flip side, if a lower level worker decided to steal my code and join another company..... that would be kind of fucked up, and probably impossible to prove.

And this is where, imo, it behooves the employer to find a compensation model that encourages you to stay.

In the mid-1900s, I imagine vested pensions would serve this purpose. Stock options are another way to get there, there's little point in destroying your existing employer if it craters the value of the stock that you were been paid in. Company paid houses or vehicles. Profit sharing models have lots of potential variability.

I'm sure a creative payroll team could come up with compensation models that reward the employee for not leaving or at least not destroying the employer when they do leave.

 

[jx820]

I, on the other hand, do have my employees sign non-competes because when they leave, they take their relationships with them and that can have a negative effect on out customer size.

So you do the exact thing I'm suggesting there's a case for. And you do it for the exact reason that I'm suggesting?

And no I don't think you should have to pay every single employee millions of dollars to not destroy your business. That's a crazy thing to say.

In the world you're suggesting I don't ever need to do a dime worth of research and development and I don't ever have to invest in building a book of business I just have to have a payroll 10 grand larger than my nearest competitor on average.

 

[jx820]

What threat are these hundreds or thousands of employees under?

Well my company employs just shy of 200 people on any given day. The way benefits packages work we probably insure closer to 500 or 600 people. Because it's an employee on company a large number of those people have a disproportionate amount of their retirement savings in company stock. We're a major customer to about a dozen local businesses and relatively large customer to another 20 or 30 more.

If I lose my entire customer base to my only competitor because my sales guy was able to walk all of those customer relationships out the door and knows exactly how much to charge to undercut my price, this business goes under.

200 people lose their jobs, and most of their retirement funds, 600 people lose their health care, at least two of my vendors go under and have similar effects on their staff, and a few more have around a layoffs when they lose my business, with domino effects through our supply chain. Because of how our competitor does their sourcing versus how we do it, all of that manufacturing work goes overseas.

Or you could avoid all of that by prohibiting him from going to that one company. He could work the exact same job in a very very very similar company In the same industry just not the one that directly competes with us for our tiny little market segment. In a world with millions of jobs there's one job I wouldn't want that guy to have. I feel like that's not a crazy ask.

 

[panamaican]

So you do the exact thing I'm suggesting there's a case for. And you do it for the exact reason that I'm suggesting?

And no I don't think you should have to pay every single employee millions of dollars to not destroy your business. That's a crazy thing to say.

In the world you're suggesting I don't ever need to do a dime worth of research and development and I don't ever have to invest in building a book of business I just have to have a payroll 10 grand larger than my nearest competitor on average.

I notice that you ignored my hypothetical.

You keep saying it's a crazy thing to have to pay your employees to not destroy your business...while ignoring the point that I keep making. If your employee is so important that they could destroy your business, you should be paying them enough that they have no incentive to do so.

What's absurd to me is the idea that there's an employee who holds the keys to a company in their hands, yet paying them enough to keep them from leaving is a bridge too far for employers. How in the world are you calculating the value of that employee?

If you could swipe someone's employee for $10k more than they're making, their employer is pretty stupid to not simply pay the employee more than you're willing to pay.

As for R&D, sounds like it's time to be more creative with the pay structure. Compensation models that are time based, compensation that involves profit sharing, incentives and perks that are hard to easily match. If the employee has a lucrative pay package that allows them to share in the profits from their work, they won't want to destroy that company for a company who doesn't have the same upside. If you give them a pension that kicks in at 20 years and scales up so long as their last employer is you (whether they're fired or retire) then they have less incentive to jump ship to a company where they might not have the same retirement package.

Competition is what capitalism is meant to thrive on and that should include competition for talented employees.

It all comes back to "value". The employee has value -- is the compensation matching it? If someone else could swipe that employee for more money then that's a good sign that the compensation model isn't matching the employee value.