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Too Many Workers Are Trapped By Non-Competes (bloomberg.com)
Why have wages been so slow to rise at a time when demand for workers has pushed the U.S. unemployment rate to its lowest point in nearly half a century? One answer: contracts that tie millions of unspecialized workers to their jobs. Bloomberg reports: In far too many cases, these so-called noncompetes are an unwarranted restriction on freedom to transact and a drag on growth. If Congress won't act to narrow their scope, states should take the lead. The desire to keep workers from defecting to rival employers is as old as employment itself. As far back as the 15th century, English masters, such as dyers or blacksmiths, made apprentices promise not to set up shop nearby. Courts often refused to uphold such agreements, viewing them as coercive. As a House of Lords decision put it in 1893, "There is obviously more freedom of contract between buyer and seller than between master and servant or between an employer and a person seeking employment."
More than a century later, the idea is back in vogue, as companies exploit the power that comes with increasing size and market concentration. In the U.S., new employees are commonly required to sign contracts that forbid them to work in the same industry for a given period. The practice makes sense for highly paid jobs involving big investments in training, and for staff with valuable proprietary knowledge. But it isn't being limited to those kinds of employees. A 2014 survey found that about two in five workers were or had at some point been bound in this way, including workers such as security guards and camp counselors. Some 12 percent of employees without a bachelor's degree and earning less than $40,000 a year were tied down.
More than a century later, the idea is back in vogue, as companies exploit the power that comes with increasing size and market concentration. In the U.S., new employees are commonly required to sign contracts that forbid them to work in the same industry for a given period. The practice makes sense for highly paid jobs involving big investments in training, and for staff with valuable proprietary knowledge. But it isn't being limited to those kinds of employees. A 2014 survey found that about two in five workers were or had at some point been bound in this way, including workers such as security guards and camp counselors. Some 12 percent of employees without a bachelor's degree and earning less than $40,000 a year were tied down.
10 years ago, non-competes were invalid under Georgia law. Then we had a referendum on a ballot to put them in. You'd think that normal people would vote against this, right? But here's how it was worded (from ballotpedia.org) on the November 2, 2010 ballot:
And 68% of the idiot voters fell for it.
Perhaps that's a little unfair to the voters. The wording was clearly insanely misleading; to the point where if I were challenging a non-compete in court, I'd probably start with attacking the validity of the ballot referendum as fraudulent (probably a hopeless avenue, I know).
Want to find out if these Non-Compete contracts will hold up in court? Just ask if you can take the NC contract to a lawyer for evaluation. If the company says, "No, you have to sign it now", the contract is not enforceable. They are forcing you sign the NC contract under duress and that won't hold up in courts. It the company says, "Yes, you can have a lawyer check it", you may have an enforceable contract. I asked at many places and was always told "No" so I signed the NC contract (if I wanted the job) knowing that it meant nothing.
I don't agree that non-competes are what is currently stopping employees from jumping ships. I know plenty of friends not under any contractual loyalty, that could easily switch companies for higher salaries, but never will.
We live in a much different world than 25 years ago.
In the past, when you wanted more money out of your career, you wanted that more money for something real. Maybe you wanted to pay for a boat. Or a car. Or a wife. Or a child.
But these days, most of what people want in their l life is pretty cheap. Watch movies from home. Music collections cost nothing. Good speakers cost little. Cars are way cheaper, and alternative transportation is too -- zipcars, scooters, bike rentals, ride-sharing. Houses are cheaper in that mortgage interest rates are a tenth of what they used to be. Air travel is way cheaper and more accessible. Vacations are cheaper, especially with airbnb options.
In short, going through the effort to change jobs, and the risk that the salary won't actually be higher, and the risk that there might be a week without pay between jobs, isn't worth the actual pay increase at the end of the day -- no one with an existing job is missing out on any popular cultural opportunity.
If you already have all the music in the world, all the movies you want, all the knowledge on the internet you want, all the transportation that you need, and can afford your mortgage payments, well then who really cares to put in the work to get more money? What you want is more time to enjoy your stuff.
Hey, I'm in that position in a very different way. I've owned and operated my own small business for those same 25 years. I've amassed enough hobbies to fill a full year. I'm not looking for more work to make more money. I'm not even working full-time on the work that I have now. I'm desperately searching for more time to enjoy the hobbies that I have waiting for me -- most of which cost nearly zero dollars at this point -- I already own the toys/cars/instruments/hammocks/gardens/tvisions/computers/games, and it costs almost nothing to play with them all; but it costs a lot of time to play with any of them.
Actually, this is pretty much required. You'd need to have some pretty special cases for a judge to enforce a non-compete that lacks compensation.
As such, non-competes are actually very good for the employees -- they are golden handcuffs.
Um.. Depends on the local jurisdiction's stance on non-competes. All that is required in some jurisdictions is that you be compensated to sign the agreement and "continued employment" can be sufficient compensation in some cases. I know it is in Kansas.
How do I know this? I got sued over a supposed non-compete violation by a past employer. Even though I didn't do what they claimed, had no money they could collect AND the agreement was significantly flawed, it's a painful and expensive experience to deal with civil law suits like this. Take my advice, don't go there if you can help it.
"File to fit, pound to insert, paint to match" - Aircraft Maintenance 101
I knew a contractor that refused an "updated" contract that changed the non-compete agreements. It essentially covered anything to do with software or devices that used software. And the company wasn't even in the software business. Since he worked on multiple contracts he couldn't afford to agree to it. It was a boilerplate agreement and HR wouldn't budge, and legal wouldn't allow any changes to the boilerplate, even after the VP of R&D claimed that it was essential that they retain this contractor.