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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."
Companies teach you what they need for you to work for them and stop you from innovating so you can't compete with them.
Link leads to shock site.
Twitter supports and protects racists - by smearing their critics with the "Hate Speech" label.
My contract prohibits me from engaging in the same business as my current employer for up to 5 years after termination. It makes perfect sense though; why fill my head with Trade secrets and methods just to have me open up shop across the street.
Hell, that's how my boss got started. His employer didn't have a non-compete clause and he proceeded to run them out of business.
Competition is the core of good Capitalism but nothing says you have to help your enemies.
Virginia is for lovers. EVE is for griefers.
these were made in enforceable as a company does not have the right to deny you a living. In the us it could most likely be argued in the same manner
Non-compete has existed for decades, long before DRM. It would make a lot more sense to reverse the comparison, but some people have no concept of what came before their own awakening to the ways of the world...
Florida is great. I'd have to actually leave & take my current employer's customers with me for them to have any chance of enforcing a non-compete here. I think this holds true in most right-to-work states.
There is a war going on for your mind.
I really don't have a problem with extened non-competes with in some limits.
But then the company also has to pay your wages in full during the non-compete period and a generous severance beyond that period.
That is, you allegiance or commitment to any non-compete ends when the pay cheque ends.
DRM ? Don't buy it!
Non-compete? Don't sign it!
It's that simple... If a company wants you to sign such an agreement, it says alot about the corporate culture of that company. It means management thinks it completely owns the people who work for them.
It could also mean some people have already left the company to work for competitors and they're trying to protect themselves from this happening again. That tells me it's probably not a nice place to work at, if people leave to go and do the exact same job somewhere else!
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Lincoln freed the slaves.
We all have free speech and right to association as part of the First Amendment.
Sign such an agreement, and you give up your rights to both.
Capitalist tool.... and another wedge against the spirit behind "We the people...." as opposed to "We, the slaves to stockholders...."
Applause to California and other states that don't enforce these enslavements.
---- Teach Peace. It's Cheaper Than War.
In his book, 'The Innovator's Dilemma' http://www.businessweek.com/chapter/christensen.htm , Clayton Christensen points out that disruptive technologies often/usually are invented by large entrenched companies. They can't take advantage of the technology because their business practices prevent it. It makes sense that an employee, familiar with the work, would start a company that could take advantage of the new technology.
Viewed in this light, the old entrenched companies are the dog in the manger. They can't take advantage of the technology they invented, because they can't make enough money on it to cover their overhead, but they sure don't want anyone else to develop it. Non-compete contracts are one way to make sure that doesn't happen.
Exactly. The fundamental difference between non-compete clauses in employment contracts and DRM is that in most jurisdictions, one of them usually doesn't hold up in law when it matters, while unfortunately the other one apparently does.
If you disagree, post your argument. (-1, Overrated) isn't your personal censorship tool for views you don't like.
few judges will uphold a non-compete, so they are basically useless sheets of paper.
it's all an example of the corporatization of our creativity and our culture
it's sort of the opposite of communism, where it was believed that by expelling selfishness as a motiviation in life, all will be enriched. when in reality, communism just makes all of society as poor as its poorest member, as selfishness is a motivation to succeed and do better, and this enriches society in indirect ways
meanwhile, business law thinkers know that innovation is the wellspring of all of their profits. so the idea is to lock in the wellspring of creativity at earlier stages, so as to ride the wave to greater and greater financial success later
but actually, locking the wellspring of innovation at earlier and earlier stages has the perverse effect of killing the wellspring of innovation
so much like the paradoxical dichotomy that ruins communism (that selfish behavior leads to rich societies), there is a paradoxical dichotomy at work when it comes to business, the law, open culture, and creativity: if you let innovation proceed freely, it will enrich your business more in indirect ways than if you try to cage it
itr's counterintuitive, and it goes against the human desire to control things, even that which they cannot control, and if they just stopped trying to control it, they would actually be richer, figuratively and literally
intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
That non-compete agreements are damaging is well known to anyone with any economic understanding, a market economy is based on competition. If you take that away, you are left with something as even worse than the old communist economies. A planed economy without the planning part.
Whether you call it anti-compete agreements, guilds, trusts, or five year plans, the result is the same. Short time gains for a few, long time economic stagnation for everybody.
Anyone wanting the state to enforce non-compete agreements is either deeply corrupt, or deeply incompetent. There is no third possibility.
The economic case against DRM is far less clear cut. The strongest arguments against DRM are not economic, but moral, and concerns the loss of consumer rights. And are as such much weaker, going against economic theory is just stupid, going against a specific moral theory is obviously a value judgment.
It seems to me that non-competes are a classic example of what economists refer to as the Tragedy of the commons. For any individual company it makes sense to get your staff to sign a non-compete, to stop them taking elsewhere the knowledge you've paid them to acquire. For a technology cluster as a whole (e.g. Silicon Valley or Route 128) the overall effect is negative due to stagnation in the workforce. The problem is that existing firms don't have an immediate incentive to worry about stagnation in start-ups; they are more concerned about loosing good employees to their competitors.
The Tragedy of the Commons crops up all over the place - the most frequently seen cases are things like over-exploitation of natural resources. Generally there are only two ways to deal with the problem; one is to legislate against the behaviour that is detrimental in the longer term and the other is to convince the players to take a longer term view. What's interesting about this debate is that there are people who do have a longer-term interest as well as some sway over the companies: the venture capital firms that invest in not just one start-up but many start-ups over a period of time. They have an incentive to make the environment the best for all companies to thrive. I hope Bijan Sabet manages to convince a few more of them!
If intelligent life is too complex to evolve on its own, who designed God?
I don't know that you can link the difference between Boston and Silicon Valley to enforcement of non-compete agreements. Here's some other equally likely candidates:
San Jose has better weather than Boston. Maybe people with a choice of where to work choose a nice place to do it.
San Jose pays programmers slightly better than boston. Maybe people like to be paid more.
Why are people always so eager to boil complex situations down to a variance in a single variable in an attempt to prove a point?
Some people have a way with words, and some people, um, thingy.
This is all a perfectly natural evolution of your IP laws. It simply cannot go any other way. When you want to stomp your "enemy's" (meaning everybody but you) into the ground, if you want to push him off the cliff as you scramble to the "top", this is the way to do it. Anybody who has their eyes open can see this coming a mile down Broad Street. Mo' money Mo' money Mo' money. Enjoy your "free" market. From my perspective, you all are putting up lots of great entertainment. It's like watching the ants in my garden fight over a leaf. By all means, carry on.
What?
How enforceable are non-competes anyway? A couple of years ago I worked for a design house that made me sign a non-compete. I was terminated two weeks into the job, and three months later got a new design job. The terms of my non-compete stated that I couldn't work for another studio for one year after termination, but I obviously disregarded that. What's the track record for enforceablity of these agreements?
--They say only a fool looks at the finger pointing to the sky...
Patents, non compete agreements, and organized crime are all designed to provide an automatic win without the need for competition.
taken care of in the manner of one trade secret at a time. Every time that you, as an employee, are exposed to information deemed a 'trade secret' then the employer should have you sign a specific agreement on THAT piece of information. The catch all non-compete is like agreeing to binding arbitration. Both are overly broad, and designed to give the other party the upper hand in all cases where the future brings conflict. Making such a promise is no more enforcible than the marriage vows many people take. Marriage was once viewed higher than today, but today, you can get a divorce with little or no real effort. The same should be for any particular 'business agreement' where money has not exchanged hands.
That is to say that if a court can find in favor of the non-compete agreement, you should be able to get a divorce, or sue for compensation. I do not know if this has been tested, but I'd bet a couple of court cases is all that would be required to break that camel's back.
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What if your employer goes bankrupt, makes you redundant, or gets taken over by a company that wants you to relocate to Japan? You could be in a sticky situation.
Yeah, umm. There is no such thing as "human capital". Capital is a store of value that is used to acquire the means of production (plant and machinery), raw materials and labor that is then used in production of something to be sold on the market.
What you are calling "human capital" has been known previously as "labor", as in "non-competes as the DRM of labor". But apparently in this amazing new, new economy labor is no longer required, production is a process of just "capital" and ummmm "human capital".
Excuse me, I gotta go to work now.
Huh?
Advice for EVERYONE: Don't sign these things, ever. Never, ever sign a non-compete. Just don't do it. I did and luckily it wasn't a super-long term. Also, if a company forces you to use a non-compete, find out BEFORE accepting the job offer. If a company that you've been working for comes along and asks you to sign it, call your lawyer immediately.
-- I am. Therefore, I think!
Writing annoyingly bad titles is an art form onto itself. What'ya think, can my subject line compete with the article title, or should I throw in a ", says industry analyst" for good measure?
nonsense, a person who's worked for three years won't be able to save up enough to live for two more years. The reality is non-competes are more often not upheld. always check the laws where you live, you might be surprised at how enforcement of non-compete varies by nature of work, position level, etc.
Every "non-compete" agreement that I have ever signed or given someone to sign is first and foremost a statement of ethics. The employee understand they are going to have some valuable materials at their disposal and to either share these with a competitor or to run out and start a business using them would be unethical. And possibly lead to legal sanctions.
The second part is assignment of inventions which is almost alway completely separate. Or at least it should be. If you are employed in a "creative" capacity where it is your job to come up with new things, do you honestly believe that you should have the right to (a) come up with something new that is within the scope of your job, (b) quit, and (c) form a new company to exploit this new idea?
Maybe you are thinking "Nobody would be that stupid!" but it has been done. Exactly like that, within the period of a few days, not weeks or months. It has even been done at the level where the new idea has been completely researched and proven to the point where it could be implemented. And they the "inventor" walks away to do it all independently. Motivations differ, but usually it is because their brother-in-law (the attorney) sold them on the idea that they could "make billions" this way and they would never see anything from it if they stayed with the company that paid for the research time.
Sure, there are people that have tried to behave ethically and gotten screwed. But for every one of those there have been people that have lied, cheated and stole from their employer. And in my experience the far larger quantity has been on the side of unethical behavior.
...unless you're some key scientist at a major corporation.
For "average" techies who have to sign them, how do they know where you go to work when you quit and how much effort will they put forth to actually enforce it?
I work for a small consulting company (20 people) and they made new guys sign non-competes and tried to get existing employees to sign them (I said sure, for $10k consideration and a full salary and benefits guarantee during my non-compete period, they said not to worry about it then).
But if I quit my job, I just go into my boss' office, hand him a resignation letter that says "Thanks for the opportunity. My last day is Month XX, 20xx. Please have any final checks available on this date as I am relocating and do not have a forwarding address." I don't tell them where I'm going, I don't tell them who I'm working for (if really pressed, "looking into several opportunities I do not wish to discuss").
I just find it hard to believe that a company my size, or even 10 times my size, is going to go through the hassle of hiring an investigator, an attorney and spending possibly a year of my salary to keep me from working. I mean, they have to FIND me, FIND where I'm working and be able to prove it in court. That's not trivial.
Now, if you're a really key exec or scientist or something at a company with real, real deep pockets or you do some real obvious, high profile job change that even the tabloids can track, I can see where they could spend the money (or not need to) to enforce them. But for everyone else it just seems like a BS corporate bluff.
The problem with your attitude here is, you're thinking about what's good for the company, not what's good for you. While you won't be able to take any trade secrets if they've had that covered properly (NDA, worst case), why not insist that you retain that ability?
In other words, yes, it would suck for that company if you just open up shop across the street. But if you're anything like most of us, it's a lot harder and riskier to start your own business than to work for a boss -- particularly if you're working in a business that tends towards companies big enough to have a boss in the first place.
So, it's a way to make your employer at least try to keep you happy, if they know you can always do that. But they don't even have to try that hard, because it is so hard to "just open up shop".
And that is the core of what's wrong with your employer, if that's their attitude.
You are an employer, not an enemy.
From what I remember of my own contracts, the worst was the NDA. That is, I can't disclose their trade secrets, ever, whether I leave or not. But the only thing I remember about not competing was that I can't compete with them while working for them -- if I leave, I can do whatever I want.
But rather than enforcing a lot of paperwork -- each contract I signed was less than two pages -- they instead make me want to stay. Because if I don't leave, any kind of noncompete extending past the term of employment is completely irrelevant.
Don't thank God, thank a doctor!
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!
I see at least one essential difference between DRM at non-competes. Where both non-competes have a limited lifetime and thus eventually will stop holding you back, DRM makes your content inaccessible for _ever_.
Please correct me if I got my facts wrong.
I've often wondered how many times it happens that a lone programmer creates a unique application or fills a niche and gets screwed by one of his first employees taking his ideas and running with it. Imagine that he put years of thought into the structure and algorithms. Maybe the actual code wasn't extremely difficult to write, but the though process behind it was unique and the relations of his models took a significant amount of time and effort to produce. He hires a few hackers to help with final testing and the implementation and during that time, one of them was secretly writing his own version of the app. He didn't steal the code, but stole the model and the work that went into putting all of the relationships together in a cohesive way. Maybe the thief is a better programmer or has more resources and, instead of putting that talent and resources into making the original app the best it could be, he creates a better version, gets the market share and leaves the original guy in the dust. On his own, the "thief" would never have come up with the app, but once he saw the value, it was easy to steal and call it his own.
Does this happen regularly? Do you feel that it is just the "free market" at work? What did the original author do wrong? Should he have had a non-compete? If not, how does he prevent this scenario?
Having worked almost all of the 19 years of my professional career in Boston, only once have I ever been asked to sign a noncompete agreement. Before signing it, I checked with a few professionals (including, informally, a lawyer) and was told that it could only apply if I voluntarily left the employer with whom I had the agreement to go to a competitor, and it only applied for 3 months anyway.
Noncompetes just aren't common in Boston.
> The HR people all invariably say "that's not what we're intending"
That one is particularly easy, cross out the relevant part of the contract, and write "what they were intending" in the margin.
If have never personally experienced problems with modifying the contracts, usually the "hiring officer" will accept them. The same laziness that makes most people accept the outrageous contracts, also works on the people on the other side of the fence.
> That's going a bit far. If you quit, why should they pay you severance?
Because the value of you *not* working for the competition is more worth to the company than the money in question naturally. It system is actually in use for the upper levels of management, where the people are too smart to sign a non compete agreement with no compensation. It is a significant part of what's behind Golden handshakes.
The problem is that most engineers are lousy businessmen, and thus willing to sign away something value for free (if the non-compete agreement wasn't valuable to the company, it wouldn't be there).
a) Contest a plaintiff who sues based on a non-compete agreement
b) Hire a lawyer to get advice about a non-compete agreement
c) Traffic in information about non-compete agreements or laws that concern non-compete agreements (including this law)
"Believe me!" -- Donald Trump
human nature is paradoxically selfless and selfish at the same time
so any social system: a government, a legal structure, that attemptes to straightjacket human nature as totally selfish or totally selfless fails, because it misses half of human nature. a legal structure must attempt to reflect the nature of the human beings it is forced onto as much as it can. if you instead try to force human nature into unnatural simplistic assumptions, you are automatically weakening the social structure, and the lives of the human beings in that structure
you can't boil human nature down to simple philosophies. human nature is complex, and so must its legal structures reflect that. when you try to simplify human existence, such as with fundamentalist teachings for example, you only impoverish the lives of the human beings toiling under strict simplistic strictures
intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
Does Washington state enforce non-compete agreements? What's it like at Microsoft and Amazon compared to Silicon Valley?
To contrast the horror stories of noncomplete clauses, the company I work at (large insurance company) has written into their contract that anything I do at home is explicitely mine, and if I want another job after this one, I am only restricted from using customer data and source code from here when I go there, which is perfectly reasonable.
DRM is a form of contract, enforced by technology. Not the other way around as this article suggests.
My take on these is that if I leave on my own to seek a better job I might be subject to the terms of such an agreement. OTOH, if I'm laid off of fired for some BS reason (such as to save money), I would consider any such agreement I might have signed null and void.
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?
Wansu, th' chinese sailor
The post title makes an assertion regarding California law not recognizing non-competes... does anyone have first hand experience with this. It is my understanding that you can sign a non-compete but have it struck down in a California court because CA does not view it as a legal agreement? This work for anyone? It didn't seem to work for Google's Kai-Fu Lee vs. MS.
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.
Having seen then non-competes at Microsoft, Intel, etc. they are appropriately scoped to avoid leakage of trade secrets, but not attrition of employees. Small companies should be doing this (i.e. use non-competes to keep someone from taking your trade secrets and going to work using them at a competitor) but usually they are really just interested in keeping *you.*
I believe that non-competes, used appropriately, do more good than harm. However, they are very often abused and on the whole that may not be the case.
LedgerSMB: Open source Accounting/ERP
My business has no trade secrets aside from customer lists, etc. Hence we get by just with trade secret protections (no poaching customer, and the like). Non-competes are more or less useless for us.
BTW, one thing my business actively does is provide ideas we have in development to third party businesses free of charge. THe reasoning is: in these cases we are involved in core communities of open source projects, and our competition helps us more than it hurts (because they are downstream of us and this helps us reach more customers).
LedgerSMB: Open source Accounting/ERP
DRM is a technological method of enforcement of a legal right (the right to restrict copying). Non-competes are just legal agreements, not any physical or technological mechanism.
Unless you're completely against copyright (which I'm sure many but not most of you are), you think that content owners should have their content legally protected, it's the enforcement of that protection through flawed, restricted and/or proprietary formats that we all pretty much agree sucks.
Non-competes might be bad just like copyright might be bad, I don't see what DRM has to do with it.
If you sign a non-compete agreement, make sure you will be paid for the duration of the non-compete period.
NDAs should also pay something for the duration of the non-disclosure period, because they also make you significantly less employable.
I think the use of terms like "consumer" is, to some degree, a symptom of the same problem. Corporations and governments have ceased even pretending to treat people as actual people.
I try to remember to use the word "citizen", but sadly, I usually fail.
But then again, I could be wrong.
I work for a tiny piss-ant company with a name that makes no sense. The owner wanted his 15 or so employees to sign a form he found on the net and filled in the values on. It said we could not work in our field for 10 years after we quit (I guess we were to flip burgers) and if we did we were to pay him $100,000.
I wasn't here yet, but my co-workers (who don't strike me as rabble-rousers) all refused to sign it, and it went away.
That's gotta be the most impressive troll I've ever seen. Even on OSX.
What do you expect a baker/coder/doctor/etc to do then? Somehow not earn a living with her/his skills (while still keeping them up to date for future employment) for X years?
Ridiculous.
Same goes for those unethical clauses which basically state "On signing up, the Company owns any idea you had in the past, in the present and in the future".
I thought slavery was abolished in most countries.
Non-compete clause.