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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."
Link leads to shock site.
Twitter supports and protects racists - by smearing their critics with the "Hate Speech" label.
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...
The company I work for made me sign an agreement before I was hired. Anything I do or create belongs to them while I am at work or even if I create something that deals with my industry on my own time, it's theirs. This post...yea... belongs to them.
Slashdot is too nerdy for me.
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.
You're right; non-competes reduce competition. You're wrong about "nothing says you have to help your enemies," as we have numerous laws that say exactly that, like the CLEC system with telephone companies.
The issue of trade secrets is a separate one from the issue of non-competes. Trade secret laws could still be enforced without the need for non-competes. Again, like the article says, look at the Silicon Valley vs. Boston thing.
Japanese scientist: Technically, sir, tomatoes are fags. Military scientist: He means fruits.
So you can't use your expertise to make a living for 5 years? Or does you contract have your employer paying you severance for 5 years? I'm betting it doesn't. I'm also betting that your employer is happy with the knowledge that he doesn't have to pay you market, or give you decent benefits because if you leave you can't compete with him for 5 years. It's just another form of indentured servitude and you're a willing participant.
Competition is the core of good Capitalism and you agreed not to. Oh yes that's great for your employer, no doubt about that.
"The avalanch has already started, it is too late for the pebbles to vote." -Kosh
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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Whether you have a non-compete agreement with an employer or not does not address the issue of trade secrets. Unless your former employer gives explicit permission to share trade secrets, you can never share them with any other employer. Period. The same thing applies to source code. Now do people break that rule when they go to another company? Yes, it happens but they open themselves up to litigation. The question is whether non-competes harm innovation by placing an restriction on who can employed.
Well, there's spam egg sausage and spam, that's not got much spam in it.
That's their motivation for the non-compete: it's better for them. By the same token, not having a non-compete would be better for you, since you could easily turn around that argument saying "why should I fill their pockets with money just to have them lay me off in bad times". If it's OK for an employer to look after their own interests, then certainly it is OK for an employee, too.
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. So society might have an interest here in looking out for its own, also.
BTW, if you view your employees all as potential enemies, you might not be getting their best efforts.
I am not a crackpot.
Apparantly my employer requires everything I make (software-wise) for them be public domain. I'm not sure if it covers my off hours as well. I like my employer better.
Self proclaimed typo king, and inventor of the bear destroying coffee table (patent not pending).
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?
And I'm in the process of trying to negotiate that BS line away in an employment
agreement I got presented.
There is no way I will sign an agreement of that nature without serious modifications.
I've walked away from contract gigs in recent times where the client's HR outsource
insisted that I couldn't start work without signing the document and that there would
be no modifications to the document (Effectively dismissing me before I even started-
the hiring manager went into a panic and went charging around to get permission to
get me to submit an amendment to the agreement that protected their interests, but
by that point in time, I'd already got another comparable contract and was off the
hook from the other. Don't play games with me. You wouldn't tolerate this stuff
out of me, I won't tolerate it out of you as an employer.
In the end, it's standard boilerplate and it's from businesses or their lawyers
thinking they're "clever" and trying to avoid losing anything that might be theirs.
The problem is, for me, it IS indentured servitude- and they're in no way even remotely
paying me enough to lay claim to everything I might come up with, nor could they.
The HR people all invariably say "that's not what we're intending"- BULLSHIT. If you
intended otherwise, you would have put it in the agreement- what is on the paper is
what you intended. If it's not, you need to fire your damn Counsel and find one that
will do what you actually intend.
I am not merely a "consumer" or a "taxpayer". I am a Citizen of the State of Texas
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.
Patents, non compete agreements, and organized crime are all designed to provide an automatic win without the need for competition.
I don't normally pay attention to anonymous cowards, but in this case it deserves a response.
What this contract really prevents is your employer keeping you happy and on the job. Does your contract guarantee your benefit plan? Your retirement plan? Cost of living minimum yearly raises? Severance should you be released?
A fair contract is one that benefits both parties. A non-compete only benefits the employee if they get something in return for the duration of the non-compete. If the contract only protects the companies interests then your interests are being thrown out the door. Don't accept their word that they will "do the right thing." If it's not in writing they don't have to and most likely won't.
"The avalanch has already started, it is too late for the pebbles to vote." -Kosh
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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That is indeed unfair, but it will be quite happily accepted by people that:
a, never intend to produce anything, just coast along doing their 9-5
b, don't read what they sign
I have refused to sign several such contracts, some companies will be flexible about it but some won't... At the very least, you can get the clause narrowed in scope so that it:
a, only includes inventions which relate to the company business or the business your employed for
b, only count things done on company time (ie things your boss told you to look into, not stuff you came up with on your own)
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- My rate will increase because I can't use this work elsewhere and could potentially be working at another client where my work could be reused and make me more valuable.
- My time estimates will at least double since I have to recreate everything I've done elsewhere that I had previously planned on using for this project
When companies realize they get a benefit from not using non-competes, they quickly change their mind, and so far, not one has forced their version of the IP agreement on me.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!
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.
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> 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).
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
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.
I'll fix that for ya:
It will be quite ------ accepted by people that:
a. have been unemployed for an extended period of time after a previous layoff
b. have a family to support
Ethical high ground comes at a great cost when there are responsibilities involved.
If you have responsibilities, do they share your ethical high ground (even if they are below the age of consent)?
'Human capital' obviously does not fit in within the previous literal definition of capital, but phrase 'human capital' absolutely does have real and useful meaning above and beyond mere 'labor'.
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.
Human capital actually fits that definition quite well.
Human capital is exactly the recognition that labor is *not* a trivially interchangeable commodity, that there can in fact be a store of value in specific individuals, and that store of value has the literal or metaphorical same properties and effect as conventional capital.
If the job is digging ditches, there is essentially no human capital involved. Labor is labor and is trivially interchangeable. It doesn't matter who you have and it doesn't matter who you lose, you just hire the next generic labor unit to replace it.
If the job involves a unique and in-depth understanding to operate maintain or improve something that is extremely complex... for example some complex software or a large and extremely intricate manufacturing plant and manufacturing process... then your long time employees who do have that unique knowledge and unique understanding represent human capital. If one of those employees dies or leaves, that human capital leaves with him. You can hire new labor to replace that individual, but that new labor will be entirely incapable of preforming that job. You may need to dedicate that new labor for several months doing nothing other than becoming familiar with the complex whatever-it-is before he can productively do that job. You need to expend that labor for several months, investing in recreating that unique knowledge and unique understanding, to establish that human capital in that new person.
Human capital is a store of value within an individual person.
Sometimes you recreate, replace, or reacquire specific human capital merely by expending labor or money or other resources, as in the example above. However some of the most valuable human capital can be quite difficult and extremely expensive and sometimes impossible to replace. For example say an individual works at a company, and that individual in his off time has become exceptionally productive prominent and influential in open source, perhaps that individual is a lead individual or even the head maintainer for some world-prominent open source project for software that is critical to your business. The company can invest in that human capital. The company can "spend" some of that individual's official "company time labor" to invest in that unique human capital working on that project. That can be valuable and irreplaceable human capital. That human capital can be used to harness an entire community of open source programmers to write software that that company needs. That human capital can directly or indirectly influence that company-critical open source project to meet the needs of the company. That human capital may be able to directly or indirectly influence other global open source projects to meet the needs of the company. That human capital may be able to directly or indirectly influence national and international standards, to directly or indirectly influence national laws or international treaties, to meet the needs of the company.
That particular individual is far more than labor. That individual can represent an enormous and irreplaceable store of value, a vast investment of human capital. Human capital may not only be "used to acquire the means of production, raw materials and labor that is then used in production of something to be sold on the market" in both literal and figurative senses, it can be used for all that and far more. In grand cases human capital may influence the very existence of market for your product.
Yes the phrase 'human capital' can sometimes be abused or used is a fluffy meaningless way, but it is hardly meaningless or nonexistent. It is a somewhat abstract but very real and useful concept.
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