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MA Gov. Wants To Ban Non-Competes; Will It Matter?
curtwoodward (2147628) writes "Entrepreneurs in Massachusetts say the state's legal enforcement of non-competition agreements hurts innovation — if you're going to get sued by Big Company X, you're probably not going to leave for a startup in the same industry. But those contracts have powerful supporters, including EMC, which is by far the state's largest tech company. Gov. Deval Patrick is finally picking a side in the debate by introducing his own bill to outlaw non-competes and adopt trade-secrets protections instead. Just one catch: he's a lame duck, and will be out of office in January."
There's something illegal in California that ought to be in other states as well.
> taking any kind of IP and running away with it, which would basically kill the industry
How do you get from 'taking IP' to 'killing the industry'?
The free flow of ideas and techniques is what drives technology and industry.
I should use this sig to advertise my book ISBN-13 : 978-1501515132.
Banning non-competes hasn't prevented Silicon Valley from flourishing, and I would argue it has even fostered progress.
Slashdot Beta is ruining the Slashdot ecosystem.
"Just one catch: he's a lame duck, and will be out of office in January."
Feature, not a bug.
How do you get from 'taking IP' to 'killing the industry'?
The free flow of ideas and techniques is what drives technology and industry.
Well taking IP has certainly driven technology in China, right?
Silicon valley has this rule in place... and it has resulted in a more innovative environment.
Non-competes are bad.
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I fully support this. I work for EMC in Massachusetts. I think my non-compete clause as a regular engineer only comes into play if I take a significant ownership position in a competing company, but that pretty much eliminates any possibility of me doing a startup.
What I really want to see is the elimination of trade secret restrictions on employee salaries. Employees should be free to discuss their salaries. I'm sure they don't want a survey to show that engineers with similar experience have radically different salaries depending on immigration status (wild speculation on my part, but since I can't talk to my H1-B friends, wild speculation is all I have).
i don't understand why that's a "catch". these dark days of oligarchy, this may be the main way we get any honest political effort.
In the US too, for that matter... for those who aren't up on their history. Taking IP is beneficial for any industry up to the point where the local players have a lockhold on the IP. At that point, they tend to stagnate, and others taking their IP kills their business structure. This is the reason the US declared independence in the first place (the UK owned the shipping routes and the taxation structure).
There's a difference between "taking IP" and competing in the same industry, Unless you consider a person's skills and knowledge to be the intellectual property of an employer (in which case you may as well argue that every employee that leaves a job should be forcibly lobotomized)
Ex employee here, my lawyer pretty much laughed at the incredible reach of EMC's employment agreement, which effectively states that "If at any time, any point in the future, you publish an idea, which we believe you may have originally thought of while working for us, even though you never used it, wrote it down, or discussed it with anyone during your employment; you agree to immediately turn over all rights to said idea, including buying out the rights from any co-creators, at your own expense".
It seems like everyone has to sign these anymore, even me, and I often wonder how many companies bother to attempt enforcement of them for most employees.
Sure, there are high-profile "key employees" who have limited employment options outside of another company doing the same thing, and within an industry you'd be hard-pressed to hide your employment status. A TV news anchor isn't going to don a fake moustache and wig to read the TV news at a competing TV station and fool anyone.
But I think of someone like me, working at a SMB consultancy. If I wanted to work at another consultancy (which, near as I can tell from the boilerplate kind of language in mine is considered competition) it seems like my current employer would have to work pretty hard to enforce the agreement.
I'd quit my job and make up some story about either not having a job or tell them I'm taking a job elsewhere. They'd have to hire a private detective to figure out where I'm working (mine doesn't have an employment disclosure clause). Then they'd have to hire an attorney to go after me.
All this sounds like a lot of money and effort for most employees, all the more so for someone who was really motivated to get around it.
I don't have a problem with a non-compete clause. But the extent of the remedy for violation should be loss of employment with that company.
Silicon Valley has a lot of unwritten "no poaching" roals in place. Apple and Google were recently sued over it. And the wholesale theft of IP was certainly a major factor in the development of Windows NT, which hired David Cutler and his team of 20 developers from DEC to help them create a much more stable OS. The result was the NT kernel, which ran better for quite some time on DEC's "Alpha" hardware than on Intel's avaailable hardware.
Apple, of course, invented their UI all by themselves, right? Never took any ideas from Xerox. Nope. ... Nope.
And Microsoft invented everything all by themselves, right? Never took anything from Apple or BSD or
And the entire movie industry isn't based on IP theft either. They never moved west to avoid Edison's patent lawyers. Nope.
Yeah. Only China.
No, that's what trade secrets laws do.
Now just ban those ridiculous "anything you make while employed by us belongs to us" clauses.
Please, don't give management any ideas.
Seems like it depends. If you're an Oracle DBA, then a non-compete won't really matter. Your unlikely to part of the development of something that unique in the industry your company is in. Signing a non-compete would be silly and pointless, but of course you probably have to sign one anyway because your company wants you to be more beholden to them. Depending on what area you live in it may or may not be easy to find a job at a company in a different industry.
But then let's say your specialty is real-time embedded OS kernel development, and your company's industry is real-time embedded OS. If you sign a non-compete, you're probably stuck with that company and so they are less likely to treat you as well to keep you so it pretty much screws over the employee. OTOH, if there is no noncompete, then what if that company comes up with a really innovative way of doing something, then you go to work at another company and start doing it that way, then it's the first company that gets screwed. This is why it's not so clear-cut whether or not they should be illegal.
It's really a political question whether you want to lean towards socialist, where the employee and startups/entrepreneurs benefit, or lean corporatist where campaign contributors, er, I mean job creators (I couldn't keep a straight face while I typed that) benefit.
"roals"? Rural Obstetric and Anaesthetic Locum Scheme? Did you mean rules, roles, goals, or policies?
Fuck them. They're stupid. Who cares if morons do or do not have noncompetes. It's not like it matters since the people there are so stupid.
I signed a NCA that prevents me from, for example, taking everything I know about my company and literally walking down the street and selling my knowledge to one of our direct competitors. IMO, this is a perfectly reasonable restriction.
What really hurts innovation is software patents. Somebody, somewhere, could probably sue us for some feature in every piece of software we sell. We'd need a legal department ten times the size of our entire company to even know whose toes we might be stepping on. The same is probably true for every other small business in the country, software or otherwise.
That would be confidentiality agreements Non-competes are meant to prevent employees from leaving, and immediatly undercutting the employer.
As for why they're bad, I didn't find what I was looking for (a Texas software engineer sued for work before and after employment at a company), but one sample non-compete is more of a restraint-of-trade, requiring an employee to be unemployed for a period of three years (no regional limitation and no consideration.)
Such non-competes don't prevent innovation from being released into the wild, but instead choke the supply of available workers.
Yeah to the point where all the big players illegally engaged in price fixing and non-poaching agreements.
CA isn't as liberal as you fools think. It's just smoke and mirrors.
Don't they stop employees from taking any kind of IP and running away with it, which would basically kill the industry?
I'm pretty sure that theft of trade secrets, violation of copyrights and patents, etc. are already covered by their own bodies of regulation. It's already illegal to run away with anything approaching the implementation of anything, so non-competes are either redundant or are deliberately intended to extend the 'any kind of IP' to basically include any and all relevant job skills (including the ones they hired you for, which you obviously didn't even acquire through experience at that job), experience, vague musings during lunch, and most of the rest of the employee's brain-meats as company property.
You want me to sign a non-compete? Ok, then sign mine:
You, the employer, agree not to hire any person to fill my position (or other open positions which have substantially similar responsibilities and skill requirements) when I leave the company.
Silicon Valley's leadership is widely regarded as being libertarian.
"roals"? Rural Obstetric and Anaesthetic Locum Scheme? Did you mean rules, roles, goals, or policies?
Its a combination of all the above; like FRAMILY plan. ;)
Yes but those agreements are not the law. And they were illegal in any case.
You can always leave a big company and join a start up that wouldn't have signed any of those no pouching agreements. In fact, most start ups launch BY poaching.
So...
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We don't have to speculate. California law severely limits the enforcement of non-competes. It seems to work well there, so it probably will in Massachusetts.
Do you not realize what a non-compete says? If you work as (for example) as a network admin you cannot leave Company A and go work for ANY OTHER company anywhere as a network admin. If they were commonly enforced you would effectively need to change careers every time you changed jobs. Do you really not see a problem with that?
I started contracting as a server, network and AD admin with one company in 2000, changed to another in 2004, moved to a security company doing server and network administration in 2008, to a different one in 2013, and finally took my current position this year. I had to sign a non-compete as part of the hiring paperwork at all of the jobs before this one. If companies in Washington actually enforced these things I would have been stuck at the same employer for the last 14 years.
"Think about how stupid the average person is. Now, realise that half of them are dumber than that." - George Carlin
Only a moron signs a non-compete clause without being compensated during the blackout period.
Don't they stop employees from taking any kind of IP and running away with it, which would basically kill the industry?
You're confusing non-compete with a non-disclosure agreement. Non-competes are generally illegal/unenforceable and rarely upheld, unless the company you're coming from pays you to effectively remain out of the employment market for a period of time. Non disclosures are absolutely enforceable (and these are about taking IP from one company to your next), and is usually what gets former employees in trouble. I'm under an NDA from my last employer, and a non-solicitation through the first week of next month. I'm not under a non-compete, and the company I now work for indirectly competes with my former employer. But, I still can't divulge any trade secrets I know of to my current employer (not that I can't tell my new employer how *not* to do something based upon knowledge).
For those who worship the sanctity of contract, please remember one cannot legally contract slavery. And that is what long non-compete clauses amount to -- the inability to market your skills ties you to the employer. Trade secret protection is a very different thing used as a smoke-screen. Unequal barganing power and contracts of adhesion are further aggravations.
And you've taken away the I-tag again! I don't know why I'm still coming back here...
Apple, of course, invented their UI all by themselves, right? Never took any ideas from Xerox. Nope.
Nope. They bought the rights from Xerox. Different thing entirely. Micorsoft and the movie industry, though - they wer another matter and have the lawsuits (and subsequent settlement in the case of Microsoft) to prove it.
I wish the Apple-haters around here would at least get their history straight. I'm not an Apple fanboy. However, I am a computer history fanboy and I wish the amateurs would at least not keep spreading misinformation.
That is all.
If it's a choice between screwing a company and screwing a person, screw the company. (I don't buy the legal fiction that a company is a person) Of course, if we can avoid screwing either, that's better. Unashamedly anthropocentric.
If you're an Oracle DBA, you're unlikely to be part of something that works at all . . .
Sorry, couldn't resist.
"Think about how stupid the average person is. Now, realise that half of them are dumber than that." - George Carlin
Whether Apple paid for Xerox's ideas or not, the fact is, the flow of ideas from Xerox to Apple meant that the state of art moved forward. When Microsoft copied similar ideas to Apple, the state of art didn't stagnate either. Ideas flowed through many people and it didn't cause the industry to stagnate.
You don't work in the tech industry I take it. I've yet to see a non-compete that offered three years of compensation (typical blackout period that I've seen).
"Think about how stupid the average person is. Now, realise that half of them are dumber than that." - George Carlin
Has anyone ever seen a non-compete actually stop someone from moving to another company? Non-competes have never been successfully upheld unless the ex-employee has it as part of his /her severance package. If they give you a million dollars to go away, they might be able to stop you from working for a competitor for a while. If you are fired, no way no how.
+1. Non-competes are good for big established companies (like EMC) but bad for the state's economy. Innovation comes from people leaving heavy bureaucratic companies and exploiting opportunities. And of course they continue to work in the same field.
There is no way that any US government will do something that big established companies would not like. So what happens is that more and more successful start ups happen in places like California, and the industry moves.
Those types of heavy non-compete clauses are, of course, generally unenforceable outside the USA. Certainly unenforceable in Australia.
at least one company has tried to assert just that. well, more specifically that knowledge, of the skills and knowledge of the employees, constitutes company IP and trade secrets. if you can't know what someone does (because their resume is just a list of protected trade secrets), you can't know to reach out to interview them, so you can't hire them, so they can't leave the company. makes sense, non?
Nope. They bought the rights from Xerox.
If they bought the rights from Xerox then why, in the middle of the Apple/Microsoft suit, did Xerox try to sue them for infringement?
In the midst of the Apple v. Microsoft lawsuit, Xerox also sued Apple alleging that Mac's GUI was heavily based on Xerox's.
Apple purchased the Xerox patents later.
You don't work in the tech industry I take it. I've yet to see a non-compete that offered three years of compensation (typical blackout period that I've seen).
Even if companies did offer three years of compensation, by the time you got to the end of that three years, you would be three years out of date and three years out of a job, and would be lucky to get a job for half of what you were getting paid previously. This is not fair to the employee either. The company would have to compensate you for the three years plus COLA, plus typical raises and bonuses that you got for three years and then continue to pay you at half that rate plus COLA, raises and bonuses for the remainder of your professional career. Or, perhaps they could take the quick way out and just offer you a one time cash settlement. $2 million ought to be reasonable for a typical $100,000 job.
If you are not allowed to question your government then the government has answered your question.
> Yes but those agreements are not the law. And they were illegal in any case.
My point there was that while Silicon Valley may have had state law interfering with non-compete agreements, at least some of the businesses there had another means of enforcing non-compete agreements: they had written and unwritten, though illegal, non-poaching agreements
In theory, you can join a startup and avoid the "non-poach" agreements. In practice, roughly 3 out of 4 startups fail, so it's quite risky.
The mere prospect of a lawsuit from your former employer (typically alleging theft of trade secret, unlawful conversion, etc.)
is sufficient to make your potential new employer look askance. It's not whether you (or the new employer) will prevail in court, it's whether when choosing between prospective employee A (with sabers rattling in background) and prospective employee B (quiet).
It is every bit as liberal as I think. I have simply chosen to not delude myself into thinking that liberal means "good for me."
1. As long as the agreement is in force, full salary and benefits. 2. In a similar vein, if you insist on specific grooming (e.g., haircuts for guys, tattoo removal or something) then you have to pay for it, pay triple the normal salary since I'm subject to your grooming ritual 24 hours a day, and continue that pay during the six years it take my hair to grow back when I stop working for you.
except for it didn't preclude you going off to join a new start up or any of the smaller companies that didn't agree to this... it was mostly between the big companies.
In a non-compete system you can't even do that. Its a problem.
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They are akin to indentured servitude. Imagine, your salary has stagnated, there are 5 competing businesses in your area that are hiring at 20% more than you make now. Since your general knowledge of the industry would make you a prime candidate you could probably get a 25% raise.
Too bad you're effectively banned from even applying for those jobs. Sure, you're not technically indentured, you could apply somewhere where your industry knowledge is worthless and you could always become a waiter. Of course, if not for that, you probably would have gotten a raise from your current employer by now to keep you from leaving.
In the real world (certainly NOT occupied by most managers), the 'valuable trade secret crown jewels' are nothing special and everyone in the industry has that same knowledge and thinks it's their crown jewels and nobody else knows it. If any company actually does have an advantage in the industry it's because they got lucky several times when hiring.
Don't they stop employees from taking any kind of IP and running away with it, which would basically kill the industry?
No, it stops the "competing" company hiring employees of the other company. The standard employee contract in most companies typically includes a clause that everything the employee does on company time and hardware belongs to the company, and that if/when the employee leaves they acknowledge that the IP to all work performed or used by the employee stays with the company and cannot be taken, copied or used by the employee once they leave.
Non-competes limit the free flow of employees (resources, if you like) around the marketplace. If a company feels they need to justify a non-compete by citing IP concerns, then they are being disingenuous. Sorry, I mis-typed there... I meant to type "they are lying through their ass".
You might have a point if we didn't have software patents.
Name one thing he has done....not all at once there [crickets...]
My state is one of the most corrupt and bloated bureaucracies in the nation. I'm surprised something like this is even an option here. I'll be more surprised if it ever actually passes.
http://i.cubeupload.com/T6cyLu.png
No need for a frontal lobotomy. Just put a bottle in front of me. (If you don't "get it", say it out loud.)
Uhm... since when are non-competes a bad thing?
Don't they stop employees from taking any kind of IP and running away with it, which would basically kill the industry?
If said company IP was so important to the company, why is it not important enough to pay me at market rates so I have no desire to leave with it?
It's like trying to claim some artifact means the world to you and is the most important thing evar! yet you store it in a wet paper sack that gets thrown around willy nilly and you can't even remember where you left it most of the time.
Pretty hard to convince anyone that the thing is very important to you with such treatment.
If the company can't afford the people that create their IP, by your own laws of capitalism that company can't and shouldn't exist.
If the company can't exist in the first place, it's not really possible to harm that company, right?
> taking any kind of IP and running away with it, which would basically kill the industry
How do you get from 'taking IP' to 'killing the industry'?
The free flow of ideas and techniques is what drives technology and industry.
Correct, sort of. There is the concept of running away from intellectual property (say, you work on Coca-Cola, and you run away with patented/secret drink recipes and formulas, and go work with PepsiCo or make your own company. This is obviously stealing IP property. Non-compete agreements do nothing of the sort to prevent this, and there are already Federal and State laws to deal with such situations.
Similar laws and situations arise when, for example, a employee at, say, an insurance company, takes contact information on the company's clients, and leaves to make a competing company, using company-owned client information to poach those clients. That is unethical (and possibly unlawful). An ideal non-compete should be aimed at preventing that.
Sadly, non-compete agreements have a greater, nefarious scope: Non-compete agreements are of a complete different sort - you work at an insurance company and you leave to create your own. Then your former company comes to sue you out of work, forbidding you from establishing your own company in the same metropolitan area/county (or state!).
This is the type of non-compete agreements that should be illegal, or at the very least be time-limited (say, 6 months) instead of being open-ended. And these are not limited to tech companies mind you.
Names and locations omitted for obvious reasons:I know of a person who was a professional dancer in his country of origin, came to the US and continued training (and working) at a local dance school.
Being the young, inexperienced foreigner that he was, he signed a non-compete. When it was time to finish his training, he decided to open up his own school on a different area of the metropolitan area he and his former school/employer resided.
Long story short: school tried to sue the living crap out of him, that he could not open up a "competing" school in the whole multi-county metropolitan area. He was being pretty much forced into a situation of forced unemployment vs change careers vs get-out-of-dodge.
Ah, America, land of the free, home of the brave... and ridiculous lawsuits, where enough money can buy you the power to shake up young, starting entrepreneurs.
Fortunately, a lawyer was able to advise him well, and a judge pretty much ruled that the dance company was in effect trying to force the young man into unemployment. Although the young man signed the NC agreement, the judge ruled that the agreement was unreasonable and illegal.
Banning such types of NC agreements explicitly is a good thing; it will stop harassing entrepreneours and former employees; and it will free judges from having to deal with such ridiculous cases
Whether Apple paid for Xerox's ideas or not, the fact is, the flow of ideas from Xerox to Apple meant that the state of art moved forward. When Microsoft copied similar ideas to Apple, the state of art didn't stagnate either.
Nope, it went backwards.
The cesspool just got a check and balance.
Yes. There are examples above. I declined a job offer because a non compete would have prevented me from working in the state, because "they were training me". I had a degree in web design and had been doing it for over 6 years...I found a job that paid more too...it was putting paper into boxes. I know of others that lost out on jobs because it was the same industry and they were sued for taking "proprietary clients" which effectively put them out of business because of the legal costs.
Don't they stop employees from taking any kind of IP and running away with it, which would basically kill the industry?
More than that, they also help suppress wages.
They are little more than medieval fealty oaths that people are forced to sign by the power and leverage of former employers. There is no justification for them.
Non-competes are a joke. They are almost impossible to enforce, since you can't bar a person from earning a living. No judge takes these seriously. Any lawsuits for violation of a non-compete are typically just so the lawyers can make some money.
I thought conservative libertarians were supposed to support the "free market". The idea that if your employer is ripping you off then "it's a free country" and you can work elsewhere. Then they turn around and support things like non competes which if measured in "freedom units" would be much more tyrannical than a minimum wage or anti discrimination laws.
And spare me the "if you don't like it don't sign the contract" line of bs. If people were able to unionize there might be some way we could fight back against this crap on our own. The fact is a reasonable person has no way of getting assurance from his fellow tradesmen that there will be an organized strike on such agreements, so he signs it knowing that if he doesn't, someone else will.
If you think workers should have to get an different MBA/Doctorate for every job they choose to work I hope you and your entire extended family die in a bus accident.
I was under the impression that several courts have applied a doctrine called "inevitable disclosure" to let a former employer enforce a non-disclosure agreement as if it were a valid non-compete.
If his choices were to sign a non-compete or not be employed in the industry, that's not a real choice.
Please be careful of falling into "no true Scotsman". One could always make ends meet by being employed in a different industry.
If you violate a non-compete, who the hell do you think the company goes to for enforcement? We allow, and even expect, government to interfere with contracts all the time: either because they have no meaning without some third party to actually enforce them
Under some libertarian ideologies, that's the whole reason a government exists: to enforce private contracts.
Do you believe that government should not interfere with a contract that, say, grants ownership of one human being to another?
Governments already enforce custody agreements, which grant ownership of a child to a particular parent or guardian until the child reaches the age of majority.
Nice try, but the fact that you felt it necessary to deny being a fanboy, referred to others as "Apple-haters" and were factually incorrect (see jklovanc's reply) kinda suggests that you are and Apple fanboy after all.
const int one = 65536; (Silvermoon, Texture.cs)
SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
The original intent was to encourage companies to invest in staff training with the knowledge that they wouldn't simply be helping competitors who then offer a slightly higher salary. There were also concerns over poaching of employees known to be working on research projects so that the other company could basically get free R&D. The problem is that it quickly became "we own your brain, you can't use it for anything else remotely related to what we do" and then finally "we own every thought you have at any time".
Give it a few years and you will start seeing mandatory thought recording devices fitted into employee's brains, complete with remote wipe capability in case they try to get a better job.
const int one = 65536; (Silvermoon, Texture.cs)
SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC