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Non-Compete Pacts Called Bad For Tech Innovation
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.
Innovation is incremental and people are collaborative. Whenever you stifle that collaboration, the economy as a whole suffers...
This is my sig.
So business school cunts and lawyers are detrimental to the progress of society?
Who would have thought it?
"Why did they cancel my favorite Sci-Fi show? I downloaded ALL the episodes!"
The point is not to enhance innovation, but to enhance corporate (ok, and shareholders as a side effect) profits. If there happens to be innovation, that's a nice addition.
Great minds think alike; fools seldom differ.
The actual detriment to innovation is the business community's failure to regularly bring in new talent. The only folks being offered jobs are those who are deeply entrenched in the business.
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.
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.
I have a business consulting corporation (founded in 1993, incorporated in 1997) that works in large scale construction and tech. We will never require an employer to sign a non-compete. We don't even require them to sign anything preventing them from "stealing" our business. What you do on your own time is yours. If you go off on your own and take our customers, all it does is teaches us to be more efficient, competitive and effective for our clients. I openly motivate my own employees to discover how to become their own bosses: save money, learn basic business skills, gain confidence, discover a niche market. Capitalize.
A true capitalist welcomes competition, and also pushes themselves, not their employees, to be a motivator and an expert in their field. I would refuse employment if I had to sign anything that stifles my freedom to produce, invent or perfect a current product or service.
I really hate non-compete agreements. In an at-will employment state they are indefensible, and Massachusetts would do well to make them unenforceable.
BUT I think that conclusions of this article are very far fetched. With the exclusion of Silicon Valley, Metro Boston is the #1 startup hotbed in the United States. It is one of the best places to create a startup, with immense intellectual capital available from the biggest concentration of 4 year universities in the world. And the geography of the startup area covers 4 states, not just Massachusetts - NH, CT and RI as well.
The article gave no numbers, and no comparisons of the laws of the various states in the region and their effects. Where are the facts, Jack? The article is just speculation without substance to back it up.
I call Bullshit.
The entire concept of a non-compete clause is to discourage brain drain and startup competition from previous employees. Isn't it obvious that this would reduce new startups where enforceable and have no impact where its not? Sorry, but this just isn't news to me.
A couple of 30-somethings embark on the ultimate roadtrip
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.
I'm sorry, but as a former consultant, occasional inventor*, and business owner, I've always thought that non-competes were mostly b.s. If you're afraid that they'll steal your IP, register and enforce your IP. If you're afraid that they'll provide better services, well then, best you do a good job there, cobber. Seems to me that non-competes usually just protect those with lots of lawyers against those competing on the basis of value for the dollar.
*See patent 4,808,204.
It's all about the information. And what we do with it.
In short, this guy signed an "Exclusivity" contract. Apparently that's different from a "Non-compete", though how in the world that's possible is beyond me.
Perhaps someone other than the IANAL types can educate me here. But, in short, if this one holds up, you can bet that you're going to see Exclusivity Contracts start popping up among software and hardware designers, instead of just doll designers.
The best way to predict the future is to create it. - Peter Drucker.
Capitalism is presented as being a healthy economic model because it provides a fitness function that weeks out the unhealthy players. That's fine until people game the system in various ways: monopolies, no competes, undercutting....
Engineering is the art of compromise.
The whole eastern seaboard, at least from Massachusetts to Florida, is a cesspool of snobby lawyers and greedy big money people. But the southeast is worse than anywhere; it is especially laughable that so many states proclaim the "right to work" (without a union, possibly for peanuts or for a tyrannical boss) but you don't actually have a legal right to work in your occupation if you've signed a broad non-compete that forbids it. These are often "at will" states as well, where your employer can fire you and hire someone else to do what you do, but you can't necessarily work for another company doing what you know how to do.
I've lived in VA and in PA most of my life, and I'm just about finished with the eastern US forever. My next home will be either in Europe or west of the Mississippi. By the way, the states that will not enforce non-competes include CA, OR, CO, MT, ND, SD, OK, LA, and probably a couple others. Nearly all of them are in the western US.
As for the most ridiculous non-compete ever, how about a membership agreement for an outdoors club that forbids former members not only from operating a competing club, but even using a google group to organize similar activities? The original version was even worse, if you want to read some lawyerspeak that will make your head spin, and prompted this article in a local newspaper.
As an employer, you lose as much (in terms of failing to recruit experienced staff from your competitors) as you gain in terms of preventing the loss of experienced staff to your competitors.
In an industry where these clauses are common, everyone would be better off if there were to be a law disallowing them.
The trouble is - if you're the only employer who doesn't do it, you lose staff and can't easily recruit replacements.
It's a classic "crisis of the commons" issue - and that means that you need a law to prevent it.
I have one of these, and I haven't been impressed with it. First of all, it's very generic, without being specific as to what knowledge I can't use in future employers, etc. It was also handed to me *after* I moved across the country about 4300km to my new employer, and after I had received and accepted the job offer (which I had before I left). Since I had already quit my former job and moved 4300km, there wasn't much I could do but accept. I even asked to append more specific details and was turned down.
Luckily, my company doesn't have any history of trying to enforce these idiotic things, and I have no plans on doing anything dumb like jumping ship and taking company-specific info or customers with me, but I do wonder how enforceable these boilerplate contracts are. From what I've researched, they're not very enforceable if they aren't rather specific (what the actual 'competition' would be, the competitive region, etc) , or if alternate methods would have sufficed (say to prevent stealing proprietary info or customers).
I do wonder of the legality of hitting somebody with this *after* the job offer has already been given and accepted. I had requested the contract before moving but had assumed that it was more or less in the offer.
A noncompete clause is akin to telling a sculptor never to take up the chisel again. These should be illegal. They strangle the ability of someone skilled in an art to earn a gainful living. Stinko.
When I was foolish enough to work for wages, I always took a red pen to the salary negotiations. With it, I struck out every non-compete clause before signing the employment contract. Some HR folks freaked out over it, but it never cost me the job.
If it had ever cost me the job I was seeking, I would have considered it a very cheap exit out of what could otherwise have been a very expensive experience.
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Seems like a total nonsense to me. The premium would be very high. With an average duration of employment being 2-3 years, an 18 month non-compete would require a 50-80% salary premium. If you take taxes into account, the premium would go to more than 100% (there is a big tax penalty if you get your 3 year income in just 2 years).
Not everything you can put your signature on is considered to be a valid contract and rightly so.
Let's have an inane discussion about what WE think overused partisan cliches mean!
I bet then everyone will thank us for being so (+5) Insightful!
DRM: Terminator crops for your mind!
How non-compete agreements ought to work is that they can prevent you from getting a competing job, but they have to pay your salary during this period. This would prevent damage to a worker's livelihood when a company invokes these, and provide a monetary disincentive to invoking a privilege that is damaging to the industry.
Not that I expect this to happen...
"Screw Sun, cross-platform will never work. Let's move on and steal the Java language." - Visual J++ Product Manager
Deary me,
We didn't call you "unwashed" old chap, if anything the plumbing is the best system in the United States. We called you "uneducated Barbarians" and could also have used "Philistine" as opposed than "Barbarian" to denote you lack of culture and sophistication.
Hope this has cleared up this little matter my good man.
Tisk, tisk, look at the time, I'm late for tea.
Cheerio.
PS, we Europeans don't like the French either.
PPS, the Romans beat you to a Representative government by 2000 years.
Calling someone a "hater" only means you can not rationally rebut their argument.