California Lawsuit Wants To Weaken Noncompetes (axios.com)

An anonymous reader shares a report: California already prohibits companies from enforcing noncompetes within the state, but a Bay Area life sciences company is asking a state court to go even further. Veeva Systems is suing three of its East Coast-based competitors and asking a California Superior Court judge to declare that it has the right to hire employees who have signed such agreements. Veeva also wants a court to limit the use of non-disparagement and confidentiality agreements. "Non-compete agreements are bad," the company said in its suit. "These agreements limit employment opportunities. They suppress wages. They keep employees trapped in jobs they do not want, and they keep employees from fairly competing with their former employers. These agreements restrict fair and robust competition for employees."

Comments

one solution

[ganjadude]

make the company that makes you sign a non compete pay you full salary for the duration of the non compete, whether you are actually working or not.

Re:one solution

[grasshoppa]

Take this a step further, require them to report your last day of employment as the last day of the non-compete. Ie: no employment gaps on your resume.

Re:one solution

[beelsebob]

Actually, that's (not quite) the reason why non-competes are invalid in CA. The court ruled that a company wouldn't just have to pay you your full salary, but in fact would have to pay you more than your full salary during the non-compete period. The justification was that during this period you would not be keeping up with the latest technologies, and your skills would bit-rot. You'd become inherently less employable, and the company must compensate you for that.

Re:one solution

[Anonymous Coward]

This.
If they want you to not compete, they can pay for it.
How exactly are most people supposed to find a new job with their existing skills that is not in an area where they already have experience?
Either you will end up in a new profession, or the same profession but entirely different industry.
Either way, due to lack of experience I would expect you to face a pay cut.
Maybe late night hosts can afford to just go on vacation for a year, but for most in the tech industry that will just kill your skills.

Re: one solution

[Anonymous Coward]

That is often what happens, but California wants to take our right away to do that.

Re:one solution

[MangoCats]

I work for a major corporation which has this provision in its non-compete, no doubt as a bone for the "unconscionable" provisions of the law.

The mechanism goes like this: if you want to take a job with a competing firm, first you must notify corporate legal who must review the potential move and either release you from non-compete obligations, or enforce the non-compete clause by offering you continued employment at a compensation rate matching the bona-fide offer you presented to legal for evaluation, whether or not you are actually working for the company.

First problem: what does submitting your offer to legal and waiting for a response do to your chances of landing the outside job? what does it do to your continued career development if you end up not leaving?

Second problem: how often does it all go as advertised, without lengthy delays, stonewalling, etc?

Final problem: even if the company does pay you for non-compete, that's very temporary while you look for other work, basically little better than unemployment compensation - and you'll be trying to get it out of a legal department for a company that you're cutting ties with - what could possibly go wrong?

Re:one solution

[jimbolauski]

That's what our company does for all higher level managers, who are the only ones with non-competes. You receive 3 months worth of pay which is the term of the non-compete, it does not matter who ends employment. I work for an employee owned company so a balance between the companies interest and employees' is the philosophy we live with.

Re:one solution

[alvinrod]

That and most people in the software industry (and I imagine many other fields) switch jobs for a pay raise. Even that alone is enough to justify asking for more than your previous salary. The fairest way to do it would do a non-compete would be for the previous company to have an option to pay whatever your next employer is offering (or something close to 100% of that amount) to not work for them for some period of time.

I think that alone makes it a fair compensation and there's nothing stopping a person from updating their skill set while they wait for the non-compete clause to expire. If you want to stay sharp, there're are plenty of open source projects to get involved in and there are plenty that are using new languages, technology, etc.

Re: one solution

[Anonymous Coward]

This. CA has always been against freedom since Reagan was governor. It's sad how this state has gone downhill into nannyism.

Re:one solution

[OrangeTide]

Indeed, it's related to a general trend that most companies would rather throw away old employees than maintain a long term relationship. You'll find hot tech start-ups in the Bay Area with very high churn rates. Ordinarily this would be a problem, but the culture here wants to believe there is some huge advantage to switching jobs every 30 months or so.

Re:one solution

[GLMDesigns]

That's not the definition of non-compete. If you come up with a great idea and hire people to spec it out - BAs, UX, PMs, DBAs, developers, graphic designers you don't want them to walk with your idea.

It's not as if the BAs, developers, and designers can't go and work elsewhere - only that they cannot compete with you regarding your company plan. I've signed many non-compete contracts and it never stopped me from getting my next position.

Re: one solution

[Anonymous Coward]

You shouldn't have the right to harm yourself.

Re: one solution

[Anonymous Coward]

Because that right isn't enumerated in the Constitution so you don't have it.

Re:one solution

[Hognoxious]

Pinching IP and trade secrets would be actionable (if not actually illegal) even without a non-compete.

Re:one solution

[GLMDesigns]

How, would I, be inconvenienced by a non-compete?

I'm asking. Not trolling.

I worked for company X doing UX and front-end development. (You have heard of the company.) My signing the non-compete clause did not stop me from getting my next job. In what circumstance would I be hurt from so signing?

I can see, perhaps, if the non-compete clause was written overly broad and that they went after me because I went into a similar field. But I understand why I couldn't be directly hired to work for a competitor. (example: work for Uber and go to Lyft). But not if you go from Uber to Amazon or to Goldman Sachs.

Re:one solution

[Anonymous Coward]

As someone who has had to sign a non-compete I can tell you this isn't always the case. They are also used by consulting companies to keep you from working for other employers who may service the same clients as they do. Company A and Company B both supply contractors to companies C, D, and E. I work for Company A and service Company C. I quit and try to take a job at Company B servicing Company D or E. Uh oh, non compete is a problem. Should be noted that companies C, D, and E all are in entirely separate industries and have no competing products or services (Telecom, Financial Services, and Health Care).

I don't have a problem with non-competes used for the purpose you mention. But when they are used to just make it a pain in the ass for you to take another job they are a problem.

Re:one solution

[GLMDesigns]

Interesting issue. So if you sign with a head hunting firm the do-no-compete clause may prevent you from taking positions offered by one of their competitors?

Now. That is truly f**ked up.

Re:one solution

[Anonymous Coward]

UX and front-end development is a generic skill that applies to many industries.

Some skill sets are more specific such as a restaurant manager. If they were limited by a non-compete there management skills would be far less in demand in a different industry.

Re:one solution

[Anonymous Coward]

You should Actually Read some non-competes.

Re:one solution

[Anonymous Coward]

In my experience with this, they will only go after you if you switch to a competing project or contract. Wayback machine to Lockheed F-35 vs the Boeing POS. Someone being hired from POS project to the F-35 project may run into issues while the contract competition is still running (and probably for more concerns than just the noncompete.) In general, I'd say most companies just have their people sign those because they've been burned by managment in design and contracting jumping ship to a competitor back in the 60s. Now they're just a part the industry for the just in case.

Re:one solution

[Grishnakh]

but the culture here wants to believe there is some huge advantage to switching jobs every 30 months or so.

There is: your salary goes up, and in general is maximized according to what your value on the open market is. Companies won't give decent raises if you stay with them long-term, but by getting a new job you reset your salary to what the current market rate is. The downside to this, of course, is lack of stability for the employee, but it does help keep you from getting stuck in a rut.

Now how this situation benefits employers, I'm not sure. There's nothing stopping them from offering better raises and retaining employees so they don't have to suffer the costs and effects of employee turnover, but they just don't want to do it for some reason. I guess they're hoping that some fraction of employees will be averse to spending effort job-hopping and dealing with the uncertainty that comes with that, and that they'll profit that way, but what really happens is the worst employees are the ones who stick around for the reliable paycheck, and the best employees jump ship for a better offer in 18 months.

Re:one solution

[psycho12345]

The employer sees an immediate cost reduction from hiring a cheaper person. The loss of productivity of the turnover won't be felt for months. Existing employees are still gaining skills/knowledge, so they will mask the issues for a little while. Takes about a 6 months to a year for the negative impact to be felt, and even then, it is difficult to quantify (project that is already late runs a bit later, bugs that would have been fixed within a day with former employee take a week with lesser experienced one, etc.)

Re:one solution

[ShanghaiBill]

You'll find hot tech start-ups in the Bay Area with very high churn rates.

Churn is good. New employees bring new ideas and fresh perspectives. Geographic areas with high churn rates have higher productivity rates than areas with more stability/stagnation. Churn-friendliness is one reason that California has been successful despite the high taxes and stifling state bureaucracy.

I have found that the most productive workers are "boomerangs", that leave, work somewhere else for a few years, and then return. They already know the people and culture, and return brimming with ideas of how to fix our processes.

Re:one solution

[arglebargle_xiv]

UX and front-end development is a generic skill that applies to many industries.

That depends. If by UX you mean "continuously tweak shit at random because change is good" then sure, that's generic, anyone can do it (Microsoft, Mozilla, Google, and many others have made this a standard part of their development lifecycle). However, if it's "design and implement a good, effective, usable interface" then that's much, much more rare.

Re:one solution

[arglebargle_xiv]

make the company that makes you sign a non compete pay you full salary for the duration of the non compete, whether you are actually working or not.

You could make quite a bit of money that way, sign up for as many different jobs as you can, all with noncompetes that require you to be paid out...

Re:one solution

[Darinbob]

Police: Well I hardly think this is good enough. I think it would be more appropriate if the box bore a large red label "warning lark's vomit".

Salesman: Our sales would plummet.

Re:one solution

[Darinbob]

Right, non compete usuallly means things like not having salespeople build up a solid rapport with clients and then taking the clients with them when they leave the company. Or if you're the lead designer of their smart phones they don't want you to leave to go design a smart phone for someone else. Ie, you're actually gaining a competitive advantage by using trade secrets or confidential information.

The problem arises in making this too broad - a generic middle grade programmer isn't competing by working for a competitor, though of course you don't want that person to blab the trade secrets. Even a senior person working on say the software design inside of a device isn't competing by taking the top tier skills to work on someone else's devices. Laws in most places however prohibit non-compete clauses in contracts from being too broad.

Re:one solution

[Anonymous Coward]

except you can't really improve your skillset without work experience, because that's where the edge cases happen.

But I speak as a database geek.

Real world work involves all sorts of craptastic data that only happens at work, whether it is 3rd party data or cleaning up internal data form one's systems before sending it to the 3rd parties (or the accounting system...). At least for that aspect, one does not get experience with dealing with crap data outside of work environments. And every company is different, even if platforms & apps may be the same.

Most sample or useful test data sets available are already cleaned up and havn't been touched by users, customers, managers or well-meaning DBAs.

Re:one solution

[Jack9]

> the culture here wants to believe there is some huge advantage to switching jobs every 30 months or so.

It's not just the culture, unless that culture is capitalism in information industries. Experience with skills are equated to proficiency in software usage/development everywhere. Now you have specific industry knowledge (of a potential competitor), shown a beneficial behavior (ability to stay employed), and proficiency. It's a huge salary advantage to jump every two or three years, which is why developers do it consistently. In other countries and localities this is just as commonplace (for the industries I'm familiar with overseas). The position hasn't usually changed, but the worker has. In addition to the marketable improvements to the individual, the company still needs someone to man the post for the original costing and it's common for the employees get complacent (reduced or limited efficiency without innovation). The Bay Area isn't special in what's typical human nature.

Re:one solution

[houghi]

Works like that in Belgium.
As I learned from a HR- course about working laws in Belgium a non-compete in Belgium (and most likely the rest of Europe) means the following:
First there has to be a period. e.g. 1 year, next there needs to be a price linked to it e.g. 3 times your salary, and lastly it should be for a higher function, so not a store clerk. So we are talking about higher management in reality.

So what happens when a person leaves (willingly or unwillingly) and there is a non-compete contract? The person that leaves gets the monies. (Don't forget to ask for it) as he is not able to work at certain companies. The fact that he retires or starts a bakery does not matter.

I had one and the moment they fired me, they canceled the non-compete. Not sure if they did the same to the CEO and CFO that where fired at the same moment.

Not many people in Belgium know this. If you are in a similar situation talk to a lawyer that is specialized in these things as it is a very specific subject in the law. It could be that the company owes you money. It could even mean that your are not even obliged to follow the non-compete because you did not earn too much and then you can work anywhere AND get the monies.
Again: talk to a specialized shark.

Re:one solution

[wed128]

you're conflating genericity with rarity, which are two different things. UI design, good or bad, is a fairly generic skill (and can be applied to a lot of different fields)

Re:one solution

[Anonymous Coward]

you are confusing non-compete with non-disclosure

Re:one solution

[Anonymous Coward]

The fallacy is that a new employee's actual productivity, until they catch up with procedures and specifics of the tasks at the new employer, is so low the company is actually losing money to that employee for first 6 months. Another 6 months productivity is above the break-even point, but the profit merely recuperates losses from the first 6 months. Only after a year the employee actually starts generating profit. Rule of thumb: if you see a company with turn-over period below 12 months, avoid it. It may be still raking money from old, established contracts and products, but currently it's current development process generates more loss than profit and as soon as its old sources dry up, it's going belly up really fast.

Re:one solution

[OrangeTide]

I don't know, I like to retain company knowledge and have a stable company culture. Some of the most productive tech companies in silicon valley like Apple and Intel have many employees pushing 10 years at the company.

Re:one solution

[OffTheWallSoccer]

I can see, perhaps, if the non-compete clause was written overly broad and that they went after me because I went into a similar field. But I understand why I couldn't be directly hired to work for a competitor. (example: work for Uber and go to Lyft). But not if you go from Uber to Amazon or to Goldman Sachs.

In Silicon Valley, people jump from their company to a competitor all the time. In some industries (storage being a prime example) there are a limited number of companies, so you hop within that group. Eventually you know many of the people at all of those companies, making it even easier to switch.

Re:one solution

[GLMDesigns]

I can see that it's a fine line. But where would you put it? It needs to be somewhere.

Re:one solution

[OffTheWallSoccer]

The line is very simple:
1. Do not take your former employer's property with you when you leave (no files, printouts, etc.)
2. Do not share your former employer's plans, strategies or technologies with your new employer

Abide by those and, in California, your former employer can't do jack about you going to a competitor.

A somewhat vague line is poaching. Many companies will ask you to sign something (usually during exit) saying that you will not use your knowledge of company employees to help a competitor identify/hire them. But recommending your buddies from your old job at your new job is common practice. Some people pretend to take the high road and will tell people that they can't tell you about a job at their new company unless you ask them, first. But it's all the same in the end -- old employer loses some people.

Re:one solution

[GLMDesigns]

2. Do not share your former employer's plans, strategies or technologies with your new employer

I'm going to play devil's advocate here.

What if you were on a chess team helping someone win a championship. Would it be fair to that team if you then switched to another team? You would know the strategies that were being developed. If your job included developing strategy would you not have an advantage by knowing what your previous employer was planning? What if you were hired simply to bring that insight to the new team?

Now, I know that this happens in sports ALL the time. Coaches have a great deal of knowledge of the inner workers of their previous team and use that knowledge against them when the two teams play.

All this is to say that even as a techie who is involved in business meetings I don't see how I can hurt my company by going to a competitor. But I could see how a high level business planner may be barred by a non-compete clause.

Re:one solution

[OffTheWallSoccer]

All this is to say that even as a techie who is involved in business meetings I don't see how I can hurt my company by going to a competitor. But I could see how a high level business planner may be barred by a non-compete clause.

Excellent point. I suppose the higher up the food chain you are, the more such a move could be scrutinized.
But for engineers, engineering managers and engineering directors, no real issues (so long as you abide by those two guidelines I mentioned). Marketing or BizDev directors might have some issues.

Of course if you go to a competitor and then use prior company's intellectual property, prepare to be sued or jailed. Every now and then you see that happen.

Voluntary Contract

[sycodon]

Why does CA think it can unilateral terminate a voluntary contract between an employee and employer?

Re:Voluntary Contract

[rthille]

Same reason why it's not legal to sell your heart or lungs.

Re:Voluntary Contract

[avandesande]

One of the basis of contract law is that they are void if they require you do something illegal. IE if I sign a contract that makes me your slave it cannot be enforced.

Re:Voluntary Contract

[Anonymous Coward]

Why does CA think it can unilateral terminate a voluntary contract between an employee and employer?

the contract becomes null and void upon termination of employment, there is no compensation to the employee, the employer has no right to enforce any contract where there is no business being conducted.

Re:Voluntary Contract

[MightyMartian]

Because it's the sixth largest economy in the world.

Re:Voluntary Contract

[Drethon]

Well one side of my previous contract basically said if I've walked past the type of work while working for them, I can't perform the work for someone else. The other side said there would be no changes to pay without a discussion involving both myself and my employer. A few days after I started they cut everyone's paycheck 15% across the board. When I left to work for a different division of the customer with someone else, guess which part of the contract was all anyone looked at?

Re:Voluntary Contract

[Anonymous Coward]

Why does CA think it can unilateral terminate a voluntary contract between an employee and employer?

Because California is expected to enforce it.

Re:Voluntary Contract

[PopeRatzo]

Why does CA think it can unilateral terminate a voluntary contract between an employee and employer?

Why you stupid ass. Have you ever heard of "contract law"? It's one of the biggest areas of the law. Probably half the laws on the books are what's legal in a contract and what's not.

Re:Voluntary Contract

[barc0001]

"Voluntary". Let's not bullshit, in almost every job offer situation the employer making the offer has significantly more leverage than the person accepting the job and will press for concessions like a non-compete. A lot of people sign on to the non-compete because they need the job today, and can't worry about the nebulous effects of the non-compete as it may apply in the abstract future. Employers know this and take full advantage of it because once the employee is in the door, that's one more thing keeping them there even if the work environment starts to suck.

Those reasons alone are why it's not a bad idea for CA to void these "agreements".

Re:Voluntary Contract

[Moof123]

Employee/Employer relationships are hugely lopsided. It is reasonable for the state to step in and protect the rights of the little guy. Try red-lining and negotiating your terms of employment next time you get a job. Good luck with that.

I find it especially hypocritical that you have large companies who lobbied and won "Right to Work" laws in most states (i.e. at-will employment) to turn around and put in non-compete clauses. If you want to make it hard for employees to unionize and make it very easy/cheap to kick them to the curb to balance the books every quarter, you can't in good faith expect individual workers to have zero job security AND be disallowed to get another job in their area of expertise.

But this is America where trickle down voodoo economics is still held in pretty high regard a good 30 odd years since it was demonstrably wrong and damaging.

I like the idea of requiring 1.5x salary for the duration of any non-compete term. If the feared damage is so great as to deprive gainful employment, then such a sum should be chump change.

Re:Voluntary Contract

[Anonymous Coward]

The entire contract isn't void, just the clauses that require something illegal.

Re:Voluntary Contract

[Anonymous Coward]

Why does CA think it can unilateral terminate a voluntary contract between an employee and employer?

That's not how this works. An employer can ask you to sign a non-compete, even in the state of CA, but it's basically meaningless. Why?

If you choose to not honor the contract, the employer must take you to civil court and ask the state to enforce the contract's terms. However, CA refuses to enforce non-compete contracts, so their lawsuit gets dismissed by the judge, rendering the contract worthless.

So CA just chooses not to enforce these contracts, making them pointless. I believe the justification is that they are an unfair "restraint of trade" that the state will not enforce.

Re:Voluntary Contract

[MangoCats]

Ever see a "severability" clause?

Want to try to sue for specific performance on that 15% pay cut? I bet you really don't, given the chances and amount of any potential win.

Re:Voluntary Contract

[Cyberglich]

Look up Lochner v. New York where SCOUTS basically said state labor laws protecting workers were unconstitutional and all the fall out and abuses it cause till it was overturned by SCOTUS again later..

Re:Voluntary Contract

[Serge_Tomiko]

Oh god, libertarians.

What would you do without the state civil court system?

Duals? Warfare?

Whether or not a contract is voluntary is irrelevant. What is relevant is the authority that can enforce the contract. In this case, that is the State of California and they can modify how contracts are enforced in their civil court system at will.

Re:Voluntary Contract

[MangoCats]

Plus the fact that Silicon Valley companies have become some of the biggest jerks in history at swinging non-compete, anti-poach and other employee abuse agreements around as wildly as they can possibly imagine.

Re:Voluntary Contract

[OrangeTide]

Do you think you can operate a business without a license from the local government?

Re:Voluntary Contract

[Anonymous Coward]

What would libertarians do without a state civil court system? Wishful thinking and inflammatory rhetoric.

Re:Voluntary Contract

[Zontar The Mindless]

That's not a given, else there'd be no need for severability clauses.

Re:Voluntary Contract

[Anonymous Coward]

Yo, fuckhead, go fuck your mother, then your sister, then yourself.

Pieces of shit like you are why the internet is a shithole of trolls.

Fuck off and die in a car fire.

Re:Voluntary Contract

[taustin]

Because the two sides of the contract are not in an equal position to negotiate.

And because California hates business even more than New York.

Re:Voluntary Contract

[EndlessNameless]

There are already things that you cannot legally contract for. If California wants to expand that list, then so be it. Let's see how that works out.

Non-compete agreements are a protection for the employer, who generally enjoys the position of power in negotiations. The company can already use salary adjustments and other benefits to dissuade employees from competing.

If the person is a high-level executive or has knowledge of trade secrets, then maybe some protection is reasonable.

Otherwise, screw it. Let them compete the way the market intended---with money and other benefits. This country cannot remain an economic leader if we sideline our best and brightest.

Re:Voluntary Contract

[Anonymous Coward]

He's right though. You asked a very stupid question.

Why can a state enforce some new law? Because it is the role of the state to enact and enforce laws to serve the public interest.

Re:Voluntary Contract

[tlhIngan]

I like the idea of requiring 1.5x salary for the duration of any non-compete term. If the feared damage is so great as to deprive gainful employment, then such a sum should be chump change.

I say make it 1.5x annual salary, PLUS normal benefits as if you still worked there. You know, health insurance (or extended health insurance0, stock options, etc. And they have to pay out your regular PTO, too.

Funny thing about non-competes, it's often applied lopsidedly. I.e., an employee joining you probably came from a competitor who didn't enforce or have a non-compete, but you do. You effectively benefited from it, yet deny it to others.

When David Cutler took his team from Digital to Microsoft (to make Windows NT), the ex-Digital employees balked at Microsoft's non-compete, basically saying the only reason they're at Microsoft right now is that Digital didn't have a non-compete. (This was a time Microsoft really wanted those employees) The non-compete was struck from those employee's agreements.

Re:Voluntary Contract

[Anonymous Coward]

> A lot of people sign on to the non-compete because they need the job today
Not saying CA shouldn't ban non-competes or whatever, but that's stupid of those people.
Just because I'm hungry now doesn't mean I'm going to eat poison to fill my stomach.
They can sign the non-compete, but they should make sure they consider the consequences, and try to negotiate terms so they don't get fucked.

Re:Voluntary Contract

[Anonymous Coward]

Because CA is the one enforcing the contract.

Re:Voluntary Contract

[Anonymous Coward]

Which is why California has no businesses at all. I was just there last Saturday, and didn't see a single one.

Re:Voluntary Contract

[Anonymous Coward]

You can sign a contract that says anything you want. The state will not enforce it.
You can't go to the states court, you can not get the state to back you collecting damages.

If the Contract is not backed by law it is worthless.

Re:Voluntary Contract

[Grishnakh]

When David Cutler took his team from Digital to Microsoft (to make Windows NT)

I wonder how things would be different today if someone went back in time and arranged an "accident" for Cutler before he could arrange this transfer. Would MS have become the company it is now? Would they have come up with something like NT, or tried to continue on with the Win95 tech? How far would they have gotten with that?

Re:Voluntary Contract

[barc0001]

And you have to be at the gym in 26 minutes too, right? To impress your wife Morgan Fairchild?

Re:Voluntary Contract

[Drethon]

Ever see a "severability" clause?

Want to try to sue for specific performance on that 15% pay cut? I bet you really don't, given the chances and amount of any potential win.

Yeah, I threatened them, they threatened to send their lawyers after me for breach of the noncompete. I found working elsewhere for a year, then coming back to be cheaper. I've been working for the same customer they said I could work for going on seven years now after the year away.

Re: Voluntary Contract

[KGIII]

Libertarians are quite fond of civil courts and contracts, as a general rule. You can read Wikipedia and learn what libertarianism is, if you want. I promise, none of them are hiding under your bed.

Re:Voluntary Contract

[Anonymous Coward]

Because the two sides of the contract are not in an equal position to negotiate.

And because California hates business even more than New York.

California doesn't hate businesses, nor does New York, California hates huge disparities in power. Get it right. California hates businesses so much that it powers a very significant portion of our nation's economy.

Moron. Not every single item on this planet has to go in favor of the elite, rich and powerful.

Re:Voluntary Contract

[taustin]

The overwhelming majority of business in California (and everywhere else) are family owned, and the overwhelming majority of workers are employed at family owned businesses.

My employer is family owned. And we have state regulators come in and dig through our trash cans looking for burnt out light bulbs.

So no, California hates business. All business, but especially profitable business.

Re: Voluntary Contract

[Anonymous Coward]

But the number of people employed by non-family businesses is MUCH greater.

Re:Voluntary Contract

[houghi]

In Europe it can mean that either the complete contract is void, or parts of the contracts are void. This will depend from case to case. Basically any contract for work will be an extension of the law and can not be negative for the employee. The decision of the court will always rule in favor of the employee if there is any doubt.

Re:Voluntary Contract

[houghi]

And that is why in Belgium the law almost always sides with the employee. An example:
As a manager you will perhaps sign that you will not get any payment for overtime as you already get a premium payment that includes this.
This is not legal and if you get enough proof that you did overtime, when you leave the company, you will most likely be able to force them to pay you these hours. (Ask a specialized lawyer, not the one that did your divorce)
The only thing you need to say most of the time is "I was afraid they would not give me the job if I pointed it out". Case closed, please pay.

Obviously it would not be very wise to do if you are interested in working anywhere else and it might even be immoral to do so, as it was clear that this was the case. Yes, there have been managers/directors that received extra payment.

To me it seems as if California sticks closest to the "For the people by the people" communist/Christian principle.

Re:Voluntary Contract

[mr.mctibbs]

And even on a severable contract, the whole thing will be void if the consideration is an illegal act or a promise for an illegal act.

The East Coast

[mhollis]

Here on the East Coast in the Federal Circuit Courts, non-compete clauses in contracts have been declared invalid and not binding. And this will be why Veeva Systems is trying to sue in California court to make it universal—they do not want to be hauled into a court in a "foreign" state

This is a good strategy for Veeva. It is a pre-emptive move in a court of their own choice

Re:The East Coast

[sexconker]

Non-competes are illegal in CA.

Re:The East Coast

[Anonymous Coward]

Non-competes are illegal in CA.

Not illegal, just unenforceable. You must have the cooperation of the state to enforce a civil contract. CA won't enforce a non-compete employment contract.

Re:The East Coast

[mhollis]

This is the precise language being used in the East.

Re:The East Coast

[Anonymous Coward]

Illegal within the state of California. But that doesn't invalidate a contract signed in, say, Virginia that was legally sound according to the laws in Virginia (and the federal laws of the United States).

I think Veeva would be smarter to sue those companies in federal court. It would likely lead to another invalidation of non-compete clauses at a separate federal court, which would then ideally bubble up to the Supreme Court. Once there, we'd have a "true" federal judgement declaring these legal or not.

The one problem is that I don't think there is anything in the US Constitution or in general federal law that prevents non-compete contracts. To some degree, I can see valid reasons to have a non-complete clause in a contract for someone paid obscene amounts of money (e.g., a CEO or Senior VP), but they make absolutely no sense for the regular rank and file employees that work at companies. The problem is that they have become so ordinary that they truly are obscene.

Re:The East Coast

[Darinbob]

Not only that, this issue has already been resolved. "Application Group, Inc. v. Hunter Group, Inc.", 1998, dealt with an issue that sounds very similar to this one. It was decided in California court that the out of state agreement was not enforceable within the state.
(http://online.ceb.com/calcases/CA4/61CA4t881.htm)

I'm not sure what is different about this new case.

Just Say No

[MrLogic17]

I thought the People's Republic of California was a paradise for tech workers?

In all seriousness - violating a non-compete (if you're dumb enough to sign one) isn't a crime. It's a contract violation. It only matters if the company you signed with wants to enforce it in civil court. It has nothing to do with your new company- short of them potentially losing you when the old company takes you to court.

This is very easy to fix. Don't sign a non-compete. Ever. Unless the company demanding it pony's up something to make it worth being unemployed the duration of the term- don't. (Golden parachute or the like) And be blunt about it, well before you start your first day.

Re:Just Say No

[MightyMartian]

And when the six other people behind you get jobs and you don't, why, you can always eat your principles!

Sometimes egregious behavior needs to be squashed by the courts or legislatures, and not just simply left up to the free market Invisible Hand.

Re: Just Say No

[Anonymous Coward]

Yes, and that always turns out well. Government always ends up helping the people it intended to. /sarcasm off

Re: Just Say No

[MightyMartian]

Sometimes it does, sometimes it doesn't. I'd say, for instance, limiting the number of hours employees have to work per week was a pretty damned good intervention. I'd say overtime rules and the like are pretty good regulations. Is there some reason you imagine that just leaving everything to the free market is going to magically make everything better? Is there some reason you trust largely unaccountable organizations over governments where there is at least some level of accountability at the elected representative level?

Re:Just Say No

[OrangeTide]

I work in the tech industry and I'm a pretty good negotiator when it comes to payment and other terms for a new job. But I've never been able to refuse to sign a non-compete and still get the job. It is likely impossible for a new college grad to refuse a non-compete, who doesn't have nearly as much power in these situations as I do.

Now if you are a successful executive, then you have way more power and those kinds of things can be negotiated. But I assure you that at least in the Bay Area tech industry, you will find it difficult to negotiate anything like a severance package before your first day.

Now if you're being terminated anyways, you should politely refuse to sign any new paperwork. If they want you to sign something bad enough that's when the severance packages come in. Sadly I've worked at places that cut 10% of their staff to save money, and to save even more money did not give severance to a single one of them. And rather than give them a 2 weeks notice, the company was concerned about employee sabotage and gave no notice other than everyone was invited to a room full of moving boxes and security escort. That's how some of the tech industry operates in my professional experience.

Re:Just Say No

[Anonymous Coward]

If they intend to hire only one of the total of seven, they end up with six competing with them no matter what. Does the non-compete really matter if the required skills are not that unique?
You negotiate about the non-compete, the other six may accept the non-compete but instead negotiate about a higher pay, company car, pensions, etc. If they don't value the non-compete that much, you are the best deal to them.

Re:Just Say No

[Anonymous Coward]

You definately sound anti-profit, even anti-free market. Who set you up to such ideas, and where? Locations, names, provide them NOW, before we lose our temper!

Re: Just Say No

[Anonymous Coward]

If you are bound by a non compete, I will hire you for a million dollars a year. I will time a cut to your pay one nanosecond later. If you quit, you are banned from working with any sector I, my current or any prospective new clients I might seek are relates to. So your new name is BenDover.

That's why non competes are bad for the FREE market.

Re:Just Say No

[Darinbob]

In most states, such overly broad agreements won't hold up. They have to be related to actually competing against the prior company by using trade secrets or confidential information, not just using the same basic skills that any company uses. My guess is that since most people won't bother to expend the resources to take it to the courts, that companies just do this as a boilerplate agreement.

As for severance packages, you almost never get agreements on those in advance. The sole point of any severance package is that they're paying you to not sue them for unlawful termination. I've never heard of this being a part of an employment agreement to anyone below a C-level.

Re:Just Say No

[OrangeTide]

I had lawyers from Amazon send my new employer and myself envelopes full of bunch of bullshit about non-compete policies. So they really will go to the effort to do some posturing and intimidation tactics. My HR director told me to ignore it, so I hung onto it for a few months before throwing it in the trash.

Someone tried this nonsense on me...

[__aaclcg7560]

I signed an employment contract with an East Coast sub-contractor that was drawn up by a New York City attorney who had no clue about CA labor laws. In particular, a $500 per day fine if I don't give a proper two-week notice ($5,000 max) that wasn't kosher in CA. When a push came to a shove, I told the sub-contractor to run the contract by a CA labor attorney. The contracting agency that hired the sub-contractor bought out my contract to avoid legal hassles. I then got a proper employment contract and a higher pay rate for my troubles.

Re:Someone tried this nonsense on me...

[Anonymous Coward]

I then got a proper employment contract and a higher pay rate for my troubles.

So is that how you finally got to $50k a year?

Re:Someone tried this nonsense on me...

[__aaclcg7560]

So is that how you finally got to $50k a year?

This wasn't my first $50K per year job. However, the extra month of pay that I got as a Christmas bonus last year pushed my income up to $55K per year.

Re:Someone tried this nonsense on me...

[Anonymous Coward]

I got a Black Amazon Dot, which matches my vintage 2006 Black Macbook.

Re: Someone tried this nonsense on me...

[Anonymous Coward]

Don't be so rude to creamer. There are sung beetles that could use his advice on how to eat more shit.

Re:Someone tried this nonsense on me...

[Dragonslicer]

Was that a contract with a specified duration, or an at-will employment agreement? If it was a contract, then I'm surprised that California wouldn't allow agreed-upon penalties for terminating the contract early. If it was for at-will employment, then yeah, imposing a penalty for not giving two weeks notice would be unenforceable, since that directly contradicts the definition of at-will.

Re:Someone tried this nonsense on me...

[__aaclcg7560]

Was that a contract with a specified duration, or an at-will employment agreement?

It was an open-ended contract.

If it was a contract, then I'm surprised that California wouldn't allow agreed-upon penalties for terminating the contract early.

In 20+ years of IT support contracting, I've never seen penalties imposed for terminating the contract early.

If it was for at-will employment, then yeah, imposing a penalty for not giving two weeks notice would be unenforceable, since that directly contradicts the definition of at-will.

A coworker who worked for a different sub-contractor has a provision in his contract to earn an extra month of pay bonus if he gave a four-week notice.

Re:Someone tried this nonsense on me...

[Darinbob]

Why do you waste so much of your time stalking someone online?

Re:Someone tried this nonsense on me...

[Dragonslicer]

Was that a contract with a specified duration, or an at-will employment agreement?

It was an open-ended contract.

I could see how a court would consider an open-ended contract to be equivalent to at-will employment.

jimmy john's will cut you down to 1 hour / week

[Joe_Dragon]

jimmy john's will cut you down to 1 hour / week after you quit / get fired at min wage.

Re:jimmy john's will cut you down to 1 hour / week

[Serge_Tomiko]

Elaborate please.

Are you saying that shitty retail stores have non-compete agreements?

Re:jimmy john's will cut you down to 1 hour / week

[OrangeTide]

Jimmy John's is a sandwich place that was in the news last year for making low-wage employees sign non-competes that prevented them from working at other sandwich shops within 2 miles of a Jimmy John's. And it wasn't clear if working at a restaurant that happened to serve sandwiches also count, so Jimmy John's lawyers would blast ex-employees with scary letters just in case.

Re:jimmy john's will cut you down to 1 hour / week

[Anonymous Coward]

Yeah, saw this, and have not eaten Jimmy John's food since, and have stopped hiring them to cater. We used to have them cater occasional events and lunches. Never again.

Re:jimmy john's will cut you down to 1 hour / week

[Anonymous Coward]

Jimmy John's is a sandwich place that was in the news last year [fortune.com] for making low-wage employees sign non-competes that prevented them from working at other sandwich shops within 2 miles of a Jimmy John's. And it wasn't clear if working at a restaurant that happened to serve sandwiches also count, so Jimmy John's lawyers would blast ex-employees with scary letters just in case.

This sort of thing is unethical practice of law (both the contracts and the scary letters) and illegal.

The right to reasonable conduct arises under the 9th Amendment, as a fundamental right in itself in any free country, and a consequence of the 9th Amendment right to ethical practice of law. Being able to interfere with reasonable conduct makes people scared of the legal system, and creates an artificial demand for the services of legal professionals. It is certainly reasonable conduct for a person working at one sandwich place to change jobs and work at another. As such, we have a conflict between contract law and the Bill of Rights - and as a matter of hierarchy of law (and also as another consequence of the right to ethical practice of law), the Bill of Rights wins.

It's not just the lawyers doing this kind of thing that are breaking the law - the corporate executives are accessories to the violation of fundamental rights that is occurring under the colour of contract law.

Violation of fundamental rights "under the colour of law" has been illegal since the post-Civil War era - so there are already laws on the books intended to prevent this kind of thing. They just aren't being enforced.

The problem here is that the US legal profession routines violates the right to ethical practice of law in many different ways. Nobody in the system is willing to do anything about this problem - the regular lawyers all benefit from ignoring the issues, and associations of legal professionals give big campaign contributions to the politicians that select judges and prosecutors. The stuff going on here involves the same aspect of human nature that kept slavery alive for so long, and kept Jim Crow laws alive for so long. Study the decisions of the high courts on matters similar to this, and you'll quickly discover that they ignore legal ethics issues on an almost routine basis. At best, they occasional throw somebody to the wolves to create the illusion of ethics, while the majority of ethics problems fester, like a cancer spreading through the body of the legal system.

When the system is corrupt, people within the system will resist change, and change has to come from outside the system.

Unfortunately the public hasn't yet figured out how badly they are being screwed by this kind of thing - and the two big political parties are very successful at using divide-and-conquer tactics to prevent long-overdue reform. This is not an isolated problem unique to lawyers working for sandwich companies, and it's not just a problem with contract law - ethics problems in law now contaminate every major area of US law, with all kinds of negative consequences for society. The economic and social costs of the unethical status quo are extremely high - everything costs more, lives are ruined, people even die. It's time for change.

Make it work both ways

[Alerius]

When I had an employer try to get me to sign a non-compete ( months after I stared working there), I said I would agree if he would agree not to hire my replacement when I left for the same period of time. If I can't replace my employer, he can't replace his employee. That ended that discussion. I left a few weeks later.

Re:Make it work both ways

[Anonymous Coward]

When I had an employer try to get me to sign a non-compete ( months after I stared working there), I said I would agree if he would agree not to hire my replacement when I left for the same period of time. If I can't replace my employer, he can't replace his employee. That ended that discussion. I left a few weeks later.

I'll bet they where looking to can you after that discussion as well... Good on you to move.

I seriously doubt any employer would agree to your terms for obvious reasons.. However, most of us don't have the pull with the employer (or the guts) to say something like this.

Re:Make it work both ways

[Anonymous Coward]

If you don't have the balls to say things like this you will never get ahead.
These weird little contract details are just like shit tests in relationships.
If you accept them the employer knows you don't value yourself and will walk all over you.
If you don't value your skills, why should he?
I would have handled it slightly differently, but most likely with similar outcome.
Signing a non-compete is one of the dumbest things you can do.
You lose an incredible amount of leverage when negotiating when you do, so you need to make them give you leverage somewhere else.
I know some technical people don't like to deal with this kind of politics. But this is the real world, and you have to.

Re:Make it work both ways

[Darinbob]

Too often these are boilerplate agreements, and the legal department just isn't set up to handle exceptions. I know someone that had a dispute with his contract and got some changes made and approved. Later on it surprised the newer legal department that it wasn't standard, and it seemed to put them into an impasse on what to do (follow the contract, or follow the procedures).

With someone else I know they wanted to move all contractors to a temp agency to simplify things. He disagreed with the new temp agency contract, which had a clause that assigned patents to the temp agency(!). When pointed out how absurd it was, that the temp agency would get the patent and not the main company, the legal department kept saying "it's a standard contract". Eventually someone more senior in legal looked at it and agreed it was a stupid clause but then it all got stuck in the muck of trying to change a boilerplate contract. Even the VP of engineering couldn't get things to budge, so my friend just left after awhile as he had other contracts.

Contract law [Re:Voluntary Contract]

[XXongo]

Why does CA think it can unilateral terminate a voluntary contract between an employee and employer?

CA is not "terminating" a contract. It is declaring that the contract was not valid in the first place.

What Makes a Contract Invalid? :

When a contract is void, it is not valid. It can never be enforced under state or federal laws. A void contract is null from the moment it was created and neither party is bound by the terms. Think of it as one that a court would never recognize or enforce because there are missing elements.
A contract can be void for the following reasons:
The terms of the agreement are illegal or against public policy (unlawful consideration or object)
A party was not of sound mind while signing the agreement
A party was under the age of consent
The terms are impossible
The contract restricts the rights of a party

Re:Contract law [Re:Voluntary Contract]

[mr.mctibbs]

You can absolutely contract rights away, just not those that would cause the court to deem the contract substantively unconscionable.

Attract skilled/high-value employees

[Anonymous Coward]

Sounds also like a way to attract and retain talent within the state. If you aren't going to be taxed for being an engineer (West Virginia) and your former employer can't kick you out of the job market, then maybe you would want to stick around even if taxes were pretty high.

Contracts have to have consideration to be valid

[Solandri]

A voluntary agreement is not sufficient to form a contract. Contracts must also have consideration - something you receive in exchange for something else. Often it's money, but it can also be products or services. For a contract to be valid, there must be consideration given by both sides. e.g. A contract saying all you transfer all your assets to me and that you willingly become my slave until the day you die is invalid, even if you willingly want the contract. I'm getting everything of yours, but you're not getting anything from me. So you are not receiving any consideration, and thus the contract is invalid.

A non-compete requires the employee to give up something (their ability to work in their chosen field for a number of years) in exchange for nothing. If the company continued to pay you for the duration of the non-compete, then it could be valid. But because they company's lawyers are trying to get something for nothing, they refuse to give you any consideration in exchange for your non-compete, thus invalidating the non-compete as a legal contract.

How A C-Level Sees This:

[Anonymous Coward]

"These agreements limit employment opportunities. They suppress wages. They keep employees trapped in jobs they do not want, and they keep employees from fairly competing with their former employers. These agreements restrict fair and robust competition for employees."

"So....what's your point?"

Good luck with that

[Impy the Impiuos Imp]

I'm going to assume they mean for people coming to work in California.

Well, other state courts will rule the non-competes still apply as state X laws, where it was agreed to, apply.

No Worries Here

[WankerWeasel]

A Minnesota judge hasn't upheld a non-compete in over 40 years. As long as you're not taking trade secrets with you, feel free to move to the competition.

Re:Contracts have to have consideration to be vali

[Anonymous Coward]

They could easily argue that a portion of your pay is compensation for that non-compete. Trivial.

Contracting away rights [Re:Contract law]

[XXongo]

What Makes a Contract Invalid? :
...A contract can be void for the following reasons: ...The contract restricts the rights of a party

You can absolutely contract rights away, just not those that would cause the court to deem the contract substantively unconscionable.

in this particular instance, the contract restricts the rights of an entity that was not part of the contract (the company that would otherwise hire you).

Re:Easiest solution

[Anonymous Coward]

I can't eat "freedom of choice".

Re:Easiest solution

[argStyopa]

Yes, of course, in Slashdot saying that you have to abide by your word is "-1 Troll"...