Slashdot Mirror

← Back to Stories (view on slashdot.org)

Non-Compete Pacts Called Bad For Tech Innovation

Posted by kdawson on from the we-know-we-know dept.

carusoj writes in with NetworkWorld reporting from a panel at Harvard last week. It concluded that employee non-compete agreements have stifled tech startup development in Massachusetts, where the pacts are aggressively enforced, but failed to hold back the tech industry boom in states like California, where they are mostly unenforceable. We've discussed non-competes often here in the past; Techdirt made much the same point a year and a half back.

8 of 190 comments (clear)

  1. apropos by 7-Vodka · · Score: 5, Interesting
    My friend in Massachusetts recently got hit with one of those when he tried to leave a startup company that was paying him badly. It turns out this was their employee retention program: Sue or threaten to sue very loudly and scare everyone else into staying in their underpaid positions.

    He would have been out of work for 18 months with no compensation and no recourse had he not been lucky enough to find something in a non-related area. Even companies in california (where non competes are illegal) declined to hire him because they said they could be sued in MA.

    --

    Liberty.

    1. Re:apropos by pacroon · · Score: 5, Interesting

      I can be living in a corporate-law bubble here in Europe, but don't you sign a contract, which you could potentially deny to sign, before any pact can be enforced? I once turned down a study-job (even) at a well-known corporation because the contract forced, that any project, SCHOOL or private, was to be the sole property of this company from the written date to six month after terminated employment. This was a standard contract given to everybody, I couldn't believe it. This was just a part time student job, not even a full-time one.

      --
      It's all fun & games until someone loses the game.
    2. Re:apropos by EdIII · · Score: 5, Interesting

      It may not be as simple as you are stating it to be. I can see a lot of people that would be very lucky to have even 6 months to live without a steady paycheck. You add some kids to the mix, and you have a LOT of pressure to find work quickly.

      Waiting for the good job is not always a luxury that Americans can afford, especially in a recession.

      Other than that, I do agree with you. A company that I worked for, my only W-2 in my entire life, tried to force one of those contracts on me too.

      I flatly refused. Actually, I did not refuse, but I countered them with my own contract which specified certain technologies and products that were exempt. They would not sign mine, I would not sign theirs.

      About every 6 months the general manager and company lawyer would get together and try and throw their weight around to get me to sign it. I never budged, even with threats of dismissal.

      My value though was very high. I headed a department that the entire company depended on 24/7. My department screwed up, and everything was down. That might have had something to do with it.

      I would say never sign those contracts period, but then again I am in a position that affords me to do just that.

    3. Re:apropos by blantonl · · Score: 5, Interesting

      Every large corporation has these types of clauses.. especially big corporate type information technology firms.

      It's pretty simple, you don't decline the job, you talk to the HR team and tell them about your concerns. In my situation, I've run a rather successful online business for quite some time and always negotiated T&C's that let me keep all IP and $ from my existing entities. It's a matter of crossing out clauses in the contract, initialing, and having an officer of the corporation do the same. In my case this included IBM as a company... whom I worked for many years. They are the mother of all patent-hoarding-mommas.

      Now, if you think you are going to come right out of school with no professional experience and a bunch of great ideas and expect that your efforts in the evening are going to be protected... you better detach yourself from the yoke and either find funding, VC, or talk to Mr. VISA. Otherwise, SOMEONE is bankrolling your efforts... and they expect a payback of at least principal or they expect to reap the rewards.

      I would too if I employed you.

      --
      Lindsay Blanton
      RadioReference.com
    4. Re:apropos by AlXtreme · · Score: 5, Interesting

      Now, if you think you are going to come right out of school with no professional experience and a bunch of great ideas and expect that your efforts in the evening are going to be protected... you better detach yourself from the yoke and either find funding, VC, or talk to Mr. VISA. Otherwise, SOMEONE is bankrolling your efforts... and they expect a payback of at least principal or they expect to reap the rewards.

      Yes, someone is bankrolling my efforts; however that isn't the company I would work for. It's me.

      A company pays you to work for X hours a week. What you do in your own spare time is totally up to you, and none of your company's business. The company isn't bankrolling your company, it is simply paying you for an honest day of labour. What you do with those funds is up to you (buy a new car, invest or start a company).

      Now I could understand that your company wouldn't be glad if you set up a direct competitor, but anything that doesn't compete with the company interests should be fine. NCA's and the like are simply arbitrary arrangements to get more than those X hours a week from an employee. If you want me not doing anything besides my job, you'll have to pay me for 168 hours a week, and not a minute less.

      As someone who's running a small business, I wouldn't mind an employee setting up a side-business. Such a person is likely to be much more proactive in his work, probably gets more work done and brings in new knowledge from his side-business. Instead of badgering him with a legal battle (which means he'll be gone right away) I'd rather follow such an employee closely. It might even mean new business opportunities for the whole company by partnering with him. If he were very successful, I would look around for a replacement but as long as he does his regular job well I wouldn't want to kick him out.

      --
      This sig is intentionally left blank
  2. this might be a small part of it by Anonymous Coward · · Score: 5, Interesting

    Clearly after being quite competitive with Silicon Valley in the '70s, Mass. has fallen far behind its rival in terms of the number and quality of startup companies, at least in the IT sector.

    Anna Lee Saxenian got a lot of it right in her book comparing Route 128 with SV. Her main thesis was that eastern Mass. companies tended to have an NIH, all-encompassing, soup-to-nuts mentality (Apollo Computer, and Ken Olsen's DEC were prime examples), whereas SV has more of a ecosystem where engineers, capital, and ideas flow relatively freely between companies.

    Of course, this handicap is not unique to Massachusetts. For example, Microsoft is known to have been strongly influenced by DEC - in fact the Windows NT project was seeded by top engineers from the VAX project.

  3. Sounds like a form of slavery... by parabyte · · Score: 5, Interesting

    that fortunately does not exist in Germany. Here the law is simple: A company that wants an N.C.A. to be enforceable, it has to pay at least 50% of the former wages of the employee, otherwise the N.C.A. is void. It also has to be very specific, the new company must be competitor, being an IT-company is not enough, you basically have to provide the same product to the same custumers. It is also limited in time to one year.

    When I once left a company that didn't want to let me go I happily told them I would love to sign an N.C.A., but when they saw what it would cost them and would bring them (I would be gone anyway), they quickly reconsidered.

    p.

    --
    Without order, nothing can exist. Without chaos, nothing can be created.
  4. Re:I guess, "No Duh", might be redundant... by Anonymous Coward · · Score: 5, Interesting

    Exactly! And no industry is quite so guilty as games and entertainments I think. They are actively destroying the lifeblood on which they thrive. Take an industry that absolutely depends on pushing the boundaries and cultivating the brightest and most talented. Tie up the practicioners in chilling NDAs and wicked intellectual property landgrabs. Get them to sign non-compete agreements to turn their careers into cul-de-sacs. Make sure they isolate themselves in a monoculture. Ensure you're using arcane, expensive proprietry tools that students and educators don't have access to. Make sure the people who've paid for access to the inner circle are too selfish or fearful to engage outside. Work against standards that would create portable skillsets. Abuse the patent system to breed anti-commerce knowledge monopolies. Reduce the image of the industry to something you "break into". Spit on the ideals of a professional meritocracy by putting work out to unpaid spec, so those with the self respect to value their work get passed over. Replace fundamental principles like mathematics and physics with toy push button instant mash potatoes TV dinner plugins. Not invented here syndrome. Paranoid, insular, self-defeating.

    And then turn around and say "We've got a skills shortage".

    http://news.slashdot.org/article.pl?sid=08/06/19/1719206
    http://news.bbc.co.uk/1/hi/technology/7460870.stm

    No shit? Perhaps if you were't so full of yourselves and treated your employees with respect they might stay.