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Non-Compete Pacts Called Bad For Tech Innovation

kdawson posted more than 6 years ago | from the we-know-we-know dept.

Businesses 190

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

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I guess, "No Duh", might be redundant... (4, Insightful)

tjstork (137384) | more than 6 years ago | (#23897615)

Innovation is incremental and people are collaborative. Whenever you stifle that collaboration, the economy as a whole suffers...

Re:I guess, "No Duh", might be redundant... (5, Interesting)

Anonymous Coward | more than 6 years ago | (#23897877)

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

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

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

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

I find your ideas intriguing (-1, Offtopic)

Anonymous Coward | more than 6 years ago | (#23897975)

and would like to subscribe to your newsletter.

In fact, I wrote a song [youtube.com] for you. Merry Christ-mas !!

Re:I guess, "No Duh", might be redundant... (1)

Pig Hogger (10379) | more than 6 years ago | (#23898695)

Innovation is incremental and people are collaborative. Whenever you stifle that collaboration, the economy as a whole suffers...
The sacrosanct "economy" is not all that there is. Too often, other things are sacrificed on the economic altar...

Re:I guess, "No Duh", might be redundant... (0)

Anonymous Coward | more than 6 years ago | (#23899283)

O you mean like the DMCA restricts cooollaboration?

FIST SPORT (5, Funny)

ringbarer (545020) | more than 6 years ago | (#23897617)

So business school cunts and lawyers are detrimental to the progress of society?

Who would have thought it?

Re:FIST SPORT (-1, Offtopic)

KlomDark (6370) | more than 6 years ago | (#23898405)

Happy now LIBERALS?????

Uh, looks to me like the (falsely named) conservatives are at the root of the selling out of America fora cheap buck to no focus on future sustainability of their thieving ways. Howdafuck do you possibly think this is the fault of what you ignorantly call 'liberals'. Liberals==LIBERTY, Conservatives!=CONSERVATION.

Re:FIST SPORT (0)

Arthur Grumbine (1086397) | more than 6 years ago | (#23898829)

Actually,
LIBERAL = LIBERALITY (that means giving stuff away for free, usually by means of our tax dollars)
LIBERTARIAN = LIBERTY (that means freedom to do what you want with, among other things, your income - not being forced to pay for any social program the politicians can think up)

HAY I KNOW, GUYZ (3, Funny)

spazdor (902907) | more than 6 years ago | (#23899003)

Let's have an inane discussion about what WE think overused partisan cliches mean!

I bet then everyone will thank us for being so (+5) Insightful!

Yes, but (4, Insightful)

Mikkeles (698461) | more than 6 years ago | (#23897619)

The point is not to enhance innovation, but to enhance corporate (ok, and shareholders as a side effect) profits. If there happens to be innovation, that's a nice addition.

Isn't that capitalism? (4, Insightful)

EmbeddedJanitor (597831) | more than 6 years ago | (#23898035)

As parent says, a company acts for itself and will happily operate to increase its profits even if that destroys competition,industries or economies ( just look at oil). The only limit is what the company can get away with..

Capitalism is presented as being a healthy economic model because it provides a fitness function that weeks out the unhealthy players. That's fine until people game the system in various ways: monopolies, no competes, undercutting....

Re:Isn't that capitalism? (1)

mrmeval (662166) | more than 6 years ago | (#23899423)

Oil companies could do themselves a world of good by stopping much of their activities in making fuel. They'd not have all the regulatory headaches and they'd still have a market for their product. It is a moments tweaking to crack feedstock rather than fuel.

Re:Yes, but (2, Insightful)

drseuss9311 (789400) | more than 6 years ago | (#23898773)

doesn't innovation bring profits?

Re:Yes, but (1)

siddesu (698447) | more than 6 years ago | (#23899081)

Not necessarily.

Investing in development is a complex undertaking which is very risky, so even a huge potential payout may have a low expectation at the planning stage.

Bribing your government to setup the market rules your way, and passing enforcement costs onto the taxpayer on the other hand is simpler to execute, guaranteed to last (legislation doesn't change as quickly as the market), and without cost to you even if it fails, so it could look like a much better deal to the prospective investor.

The actual detriment to innovation (5, Insightful)

Anonymous Coward | more than 6 years ago | (#23897629)

The actual detriment to innovation is the business community's failure to regularly bring in new talent. The only folks being offered jobs are those who are deeply entrenched in the business.

Re:The actual detriment to innovation (-1, Troll)

Anonymous Coward | more than 6 years ago | (#23897765)

...or any new talent they can get real cheap from another country. Which of course is good for the business.. and the other country.

apropos (5, Interesting)

7-Vodka (195504) | more than 6 years ago | (#23897635)

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

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

Re:apropos (5, Informative)

7-Vodka (195504) | more than 6 years ago | (#23897655)

Oh, and the CEO who was threatening to sue and having legal letters sent to him and his perspective employers was getting some kind of perverse gratification out of it. I guess when you're short on manhood it's the little bits of sadism that keep you happy...

And since the CEO was such a prick, I have no second thoughts about disclosing the company name: Intelligent Biosystems in waltham MA. Please work there if you want to be under payed, sued and have a prick for a boss :)

Re:apropos (5, Funny)

Anonymous Coward | more than 6 years ago | (#23898511)

You will be hearing from my attorney shortly.

Steven Gorgoon
CEO Intelligent Biosystems

Re:apropos (0)

Anonymous Coward | more than 6 years ago | (#23898727)

Hm, the web site says Intelligent Bio-Systems and frequently abbreviates the name to "IBS".

But it sounds like a company that gives its employees "IBS" - Irritable Bowel Syndrome...

Re:apropos (5, Interesting)

pacroon (846604) | more than 6 years ago | (#23897841)

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

Re:apropos (1, Interesting)

Anonymous Coward | more than 6 years ago | (#23898761)

the contract forced, that any project, SCHOOL or private, was to be the sole property of this company

I once was presented with a similar contract that said the company claimed ownership of ANY technology developed at any point (even on my own time/equipment) while in their employ, whether or not it related to their busines ... all captured in the phrase "relating to the company's current business segment or any other business segment the company may choose to pursue in the future". It was in California, so I simply crossed out the offending lines and signed. The HR person at first refused to sign and attempted to get me to sign a 'fresh' (un-redacted) copy of the document, which I refused. Eventually, the hiring manager intervened and they signed the redacted agreement.

Re:apropos (5, Interesting)

blantonl (784786) | more than 6 years ago | (#23898777)

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

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

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

I would too if I employed you.

Re:apropos (5, Interesting)

AlXtreme (223728) | more than 6 years ago | (#23899165)

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

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

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

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

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

Re:apropos (1)

Anonymous Coward | more than 6 years ago | (#23899575)

If you ask me to do it, and pay me, consider it yours. But otherwise, get your grubby mitts off of my projects.

Payment for 9-5 work doesn't entitle you to my children, or my after-work projects.

IP contracts are counter productive also (1, Interesting)

Anonymous Coward | more than 6 years ago | (#23898855)

What incentive is there to come up with a better way to do something if you won't be able to use the idea on your next job?

Re:apropos (2, Interesting)

Blakey Rat (99501) | more than 6 years ago | (#23899017)

You do, the difference is that in the Eastern US (you know, IBM territory), those contracts are generally legally enforceable and actually enforced. In the western US (you know, Adobe, Microsoft, Google, et al) these contracts are either not legally enforceable, or they are but never actually enforced.

The west coast doesn't just luck-into having great tech companies, there's a legal and philosophical environment in place which makes it a great place to open a tech company.

(Being from Europe, you might be unaware that the "United States" isn't nearly as united as the name implies; each state (or commonwealth) is responsible for its own affairs, generally, including labor laws.)

Re:apropos (1, Insightful)

reebmmm (939463) | more than 6 years ago | (#23898017)

I'll risk all my karma, but, here goes.

He would have been out of work for 18 months with no compensation

This is simply NOT true. This comment is why discussions like these are frustrating on Slashdot. The economics are simply not true.

First, your friend's compensation priced in this non-compete. If your friend didn't like it, he should have asked for more.

Second, his election to go with that company probably reflected his value at the time. If he was more valuable, he could have gone elsewhere where there was not a non-compete obligation. The fact that he tried to break his contract after taking from the company (time, money, training, know-how, etc.) is not an excuse.

Third, and most importantly, PEOPLE ARE FREE TO STRUCTURE THEIR EMPLOYMENT AS THEY WISH. Whether a person has the clout to get different terms is a factor of their value. The company doesn't have to hire someone and someone certainly doesn't have to work for a company.

Could you imagine a situation in which a company simply decided to ignore a contract because they could just go hire someone else for less?

Finally, I'll just add: there is a good public policy reason for not enforcing non-competes. They're rarely defined by the effect on the individual. In fact, arguable, individuals stand the most to gain, economically, if they're valuable enough to be able to negotiate. The detriment, so the argument goes, is to society as a whole.

Re:apropos (4, Insightful)

schon (31600) | more than 6 years ago | (#23898385)

your friend's compensation priced in this non-compete. If your friend didn't like it, he should have asked for more.
Yes, because it's well known that during employment negotiations, prospective employees hold all the cards, especially during a recession.

he tried to break his contract after taking from the company (time, money, training, know-how, etc.
Exactly! These good-for-nothing people think that just because they spend time doing honest work, that they should get treated like human beings!

PEOPLE ARE FREE TO STRUCTURE THEIR EMPLOYMENT AS THEY WISH.
Yup. Because if you don't like it, you're always free to work somewhere else. Even if they're not hiring.

Re:apropos (3, Insightful)

BarefootClown (267581) | more than 6 years ago | (#23898529)

Yes, because it's well known that during employment negotiations, prospective employees hold all the cards, especially during a recession.

Did it occur to you that the "recession" you mentioned--that is, a condition in which the supply of labor exceeds demand--means that you aren't worth as much as during times of tight supply?

Why is it that people lose the ability to understand simple economics as soon as the commodity is labor?

Re:apropos (3, Insightful)

Pig Hogger (10379) | more than 6 years ago | (#23898737)

Why is it that people lose the ability to understand simple economics as soon as the commodity is labor?
Because commoditizing labor flies in the face of Civilization, perhaps??? (Yes, in Europe, they mostly view the americans as a bunch of unwashed barbarians).

Re:apropos (1)

Free the Cowards (1280296) | more than 6 years ago | (#23898995)

Which must be why my French friends often go over a year between jobs, whereas my American friends tend to simply jump straight from one job to the next. Must be that wonderful European idea of non-commoditized labor.

Re:apropos (4, Informative)

mrchaotica (681592) | more than 6 years ago | (#23898789)

Did it occur to you that the "recession" you mentioned--that is, a condition in which the supply of labor exceeds demand--means that you aren't worth as much as during times of tight supply?

So when the recession ends and your value goes up, you just find a new job at the new market value, right?

Oh, wait -- the non-compete says you can't, and instead have to keep working at your old, now undervalued, rate or starve to death on the street!

Re:apropos (0)

Anonymous Coward | more than 6 years ago | (#23898825)

Woosh

Re:apropos (1)

schon (31600) | more than 6 years ago | (#23898875)

Did it occur to you that the "recession" you mentioned--that is, a condition in which the supply of labor exceeds demand--means that you aren't worth as much as during times of tight supply?
Yup.

Did occur to you that that is completely irrelevant to the topic of whether people should be treated as objects, rather than human beings?

Re:apropos (4, Insightful)

thomas.galvin (551471) | more than 6 years ago | (#23898901)

Did it occur to you that the "recession" you mentioned--that is, a condition in which the supply of labor exceeds demand--means that you aren't worth as much as during times of tight supply?

It doesn't matter what the market conditions are, slavery is wrong, and that's basically what a non-compete is: slavery. To get a decent job today, you need to spend years of your life, and thousands of dollars, just to get in the door. And then, for the privileged of working for a company, you're supposed to sign a piece of paper that says, essentially, "if you aren't working for us, you aren't allowed to work at all"?

I honestly don't care about the market effect of no-competes. No-competes are inherently immoral. These kinds of studies are just tools to help get rid of them.

Re:apropos (1)

Blakey Rat (99501) | more than 6 years ago | (#23899049)

Why is it that people lose the ability to understand simple economics as soon as the commodity is labor?

Oh no, people lose that ability when the commodity is fuel also. Thus all the hand-wringing over Exxon's record profits (wow, they sold a record amount of gas and therefore made a record profit-- duh!), and the people crying out about gouging when a gas station ups the price of gas.

Re:apropos (0)

Anonymous Coward | more than 6 years ago | (#23899145)

Did you miss the sarcasm dripping from the post you chose to criticize?

Re:apropos (4, Insightful)

TheMCP (121589) | more than 6 years ago | (#23899251)

Why is it that people who have a little money never give a damn about people who don't?

YEAH YOU MORON WE F***ING KNOW WE"RE NOT AS VALUABLE NOW AS WE USED TO BE. DID IT EVER OCCUR TO YOU THAT WE STILL HAVE TO PAY THE BILLS AND FEED OUR FAMILIES?

When you have no job and the unemployment office says there's 98% unemployment in your field and you are facing eviction and maybe you have a kid to feed and an employer offers you a job but it comes with a non-compete that could *theoretically* put you out of work for 18 months someday in the future, YOU F***ING SIGN IT BECAUSE YOU HAVE NO CHOICE. DON'T WHINE AT US ABOUT SUPPLY AND DEMAND AND TELL US IT'S OUR FAULT.

Re:apropos (2, Insightful)

Eli Gottlieb (917758) | more than 6 years ago | (#23899613)

We don't misunderstand the economics. We have notions of structuring the rules of a market around certain rights such as "An employment contract may not regulate what the employee does with their non-working hours."

Re:apropos (4, Insightful)

Courageous (228506) | more than 6 years ago | (#23898537)

I agree with your perspective, and live in California. I think these agreements should be legal in all states, but only at the executive level, and perhaps at the professional level if the company is serious enough to make certain the professional be represented by their own attorney.

Anyway, I digress. It is ordinary for the person being offered such an agreement to request pay for the non-compete period.

I knew someone once who had that kind of agreement draw up. Later, the company, a large one, sort of forgot about it. There was a layoff.

See where this is going?

They tried to un-lay him off, half-heartedly.

No go.

Nice long paid vacation. He worked in an adjacent field for a while. :-)

C//

Re:apropos (5, Interesting)

EdIII (1114411) | more than 6 years ago | (#23898493)

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

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

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

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

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

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

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

Re:apropos (1)

reebmmm (939463) | more than 6 years ago | (#23898637)

Let me say this, an 18 month non-compete is a bit excessive. But, we also don't know the details: level of the position, scope of the exclusion (geographic, types of positions), etc. There are lots of factors that go into the reasonableness of a non-compete; not just duration.

Nevertheless, my point was simply that just about every argument set forth in the grandparent is just wrong.

Re:apropos (1, Interesting)

Anonymous Coward | more than 6 years ago | (#23899083)

Related to the games industry, Criterion UK required people to sign a 18 month Non-Compete Agreement, along with a six month notice of termination of employment. Needless to say, I didn't accept.

Re:apropos (1)

99BottlesOfBeerInMyF (813746) | more than 6 years ago | (#23898757)

This is simply NOT true. This comment is why discussions like these are frustrating on Slashdot. The economics are simply not true. First, your friend's compensation priced in this non-compete. If your friend didn't like it, he should have asked for more.

The reality of your argument is, because of consolidated hiring, where employers have more power, there are two answers. The first is regulation that prevents companies from requiring employees to sign away their rights. The second is workers' unions, to have consolidated labor equal to consolidated hiring. In my mind, the latter has shown how dangerous such consolidation of power is, while the former is inefficient and prone to abuse by the government and anyone who can buy it.

Re:apropos (5, Insightful)

mrchaotica (681592) | more than 6 years ago | (#23898763)

Here's the problem with your argument: for every person who actually does read and understand the non-compete and tries to negotiate, there's N dumbasses who don't. So, essentially, smart people's bargaining power is being eroded by everyone else's stupidity. This externality is not compensated for by the "free" market.

Re:apropos (1)

AaxelB (1034884) | more than 6 years ago | (#23899619)

This externality is not compensated for by the "free" market.

Isn't it, though? Presumably the "smart" people who read and understand the non-compete are worth more to the company than the dumbasses who don't.

So, yeah, you have less bargaining power because of all the people who will sign anything you put in front of them, but that's mitigated somewhat because the people who pay attention to that sort of thing would theoretically be more competent.

nonsense: Re:apropos (3, Insightful)

Anonymous Coward | more than 6 years ago | (#23898955)

First, your friend's compensation priced in this non-compete.
Care to back it up? Are you saying that companies with non-competes pay more on average than companies without non-competes.

Seems like a total nonsense to me. The premium would be very high. With an average duration of employment being 2-3 years, an 18 month non-compete would require a 50-80% salary premium. If you take taxes into account, the premium would go to more than 100% (there is a big tax penalty if you get your 3 year income in just 2 years).

Not everything you can put your signature on is considered to be a valid contract and rightly so.

Re:apropos (2, Insightful)

Anonymous Coward | more than 6 years ago | (#23899161)

PEOPLE ARE FREE TO STRUCTURE THEIR EMPLOYMENT AS THEY WISH.

With Uncle Sam having tied health insurance to employment and specifically your unique employer's unique plan, your statement is not as true as it otherwise would be.

Re:apropos (4, Informative)

TheMCP (121589) | more than 6 years ago | (#23899223)

First, your friend's compensation priced in this non-compete. If your friend didn't like it, he should have asked for more.
You obviously are too rich to have a clue.

There have been a number of times in the last couple decades when unemployment for geeks in Massachusetts was so high that you darned well took whatever job was offered to you because the alternative was starving. And if they said "sign this", you asked for a pen, not more money, because you damn well knew that the employer knew that there were 500 people desperate for the job you just got who would be delighted to sign if you wouldn't.

I had several periods of being unemployed for 18 months. I had one in which I lost my home and had to live on a friend's couch for six months. When I finally got a job, my employer advertised an open position for my staff, paying 1/4 of what the "market rate" for that job was, and they got 2000 applications.

Turning down a job over a non-compete is something people can do when times are great. For techies in Massachusetts, that hasn't always been an option lately.

Re:apropos (0)

Anonymous Coward | more than 6 years ago | (#23899401)

Third, and most importantly, PEOPLE ARE FREE TO STRUCTURE THEIR EMPLOYMENT AS THEY WISH.
Uhh. No. Slavery, for instance, is illegal now. Nor would anyone but a Randroid suggest it should be otherwise. So no.

Re:apropos (4, Insightful)

syousef (465911) | more than 6 years ago | (#23899603)

Third, and most importantly, PEOPLE ARE FREE TO STRUCTURE THEIR EMPLOYMENT AS THEY WISH. Whether a person has the clout to get different terms is a factor of their value. The company doesn't have to hire someone and someone certainly doesn't have to work for a company.

No they're not. People and companies are bound by the law, which still applies. Putting it in caps doesn't make it so. People modding you up for such a stupid statement doesn't make it so. All it takes is proof by counter example and you've got egg on your face. So...

For example, everywhere as far as I know, a company can't offer you a contract that requires you to give them any children you conceive while working for them. Likewise I can't imagine a condition of employment being that you go out and murder your neighbours being legally binding (with perhaps the exception of an extremist military regime that also holds power).

So no, people are not free to act as they wish. That isn't the definition of freedom. Freedom does not mean you're allowed to do whatever you want no matter how it impacts others. You still have to be at least benign to the society in which you live, based on the laws that society has passed. At least that's the theory. I'm guessing you're American? When America's founding fathers fought for freedom they did not fight for lawlessness and hedonistic disregard for their fellow man.

Re:apropos (2, Insightful)

Wrath0fb0b (302444) | more than 6 years ago | (#23898027)

It's a shame he signed such a shitty contract -- perhaps this can be a lesson to read your contracts wisely instead of complaining about clauses you don't like after the fact.

By the way, since I presume your friend is an intelligent chap, I wouldn't dare insult him to insinuate that he is incompetent to enter into a binding contract. It seems much more plausible that he made an error of judgment, that's all.

Re:apropos (2, Insightful)

7-Vodka (195504) | more than 6 years ago | (#23898641)

Or how about the fact that the contract is being abused however he cannot afford the time in years and money in thousands of dollars in order to contest it and would gain nothing in the end.

Who decides who is a competitor? Or if the position you're going to take is involved in the competition? You want court battles over these?

Like any other legal tactic, these contracts can be abused and misused and the small fish is shit out of luck. I guess if you've never been in the position you wouldn't know then would you?

Is he supposed to sue them because they unduly threatened prospective employers and cost him jobs? He wants income to pay bills, not more bills and a protracted legal battle. Prospective employers also do not want legal battles.

Re:apropos (1)

TheMCP (121589) | more than 6 years ago | (#23899181)

I'm really surprised by this, because in 18 years of working in Massachusetts I've only ever been asked to sign a noncompete once, and it was only for three months, and I showed it to a lawyer and they advised me to go ahead and sign it on the grounds that it was not enforceable unless I quit. (The company ended up laying me off, and the boss threatened to sue me if I went to any of their competitors, but I told him what the lawyer said and left, and that was that.)

I also talk with many of my former colleagues, and they tell me hardly anyone asks for a non-compete here, and NDAs are usually verbal.

Non-competes may be *enforceable* here, but in practice I think hardly anyone actually uses them here.

this might be a small part of it (5, Interesting)

Anonymous Coward | more than 6 years ago | (#23897707)

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

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

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

Re:this might be a small part of it (4, Informative)

Curlsman (1041022) | more than 6 years ago | (#23898205)

But DEC then sued MS:
http://www.businessreviewonline.com/blog/archives/2005/10/index.html [businessreviewonline.com]

"Microsoft hired Cutler, who immediately started work on what would become Windows NT. DEC sued because it believed Cutler had put Mica or even VMS code in NT, and Microsoft eventually paid up $150m. As part of the settlement Microsoft agreed that Windows NT and its BackOffice applications would offer support for DEC's Alpha processor, which is why DEC Alpha was the only RISC chip that supported both Digital's version of Unix and Windows NT - quite a coup for DEC."

And
http://www.vanwensveen.nl/rants/microsoft/IhateMS_1.html [vanwensveen.nl]

"As a result, many design principles found in the VMS kernel ended up in Windows NT. (The number and splitting of priority levels in the scheduler, the use of demand-paged virtual memory and the layered driver model are only a few examples of many, many similarities.) The first version of VMS was released in 1977. Without trivializing the efforts of Cutler and his team (they did a lot of work on the project) one has to wonder what Microsoft really means with "New Technology". To illustrate, in a little known out-of-court settlement Microsoft paid DEC $150 million in compensation for using portions of old Digital OS code in Windows NT."

As an employer, I abhor them (5, Insightful)

dada21 (163177) | more than 6 years ago | (#23897759)

I have a business consulting corporation (founded in 1993, incorporated in 1997) that works in large scale construction and tech. We will never require an employer to sign a non-compete. We don't even require them to sign anything preventing them from "stealing" our business. What you do on your own time is yours. If you go off on your own and take our customers, all it does is teaches us to be more efficient, competitive and effective for our clients. I openly motivate my own employees to discover how to become their own bosses: save money, learn basic business skills, gain confidence, discover a niche market. Capitalize.

A true capitalist welcomes competition, and also pushes themselves, not their employees, to be a motivator and an expert in their field. I would refuse employment if I had to sign anything that stifles my freedom to produce, invent or perfect a current product or service.

Re:As an employer, I abhor them (4, Insightful)

Opportunist (166417) | more than 6 years ago | (#23897833)

That's the right way of doing it.

The easy way is to abuse laws to protect your biz.

Re:As an employer, I abhor them (2, Insightful)

DrMrLordX (559371) | more than 6 years ago | (#23898289)

A true capitalist can and will be utterly destroyed by a company in China that miraculously reverse-engineers every product produced by said true capitalist's corporation.

If you have an employee that leaves the company and then takes a suspicious "personal vacation" to Shanghai or Shenzhen while taking along engineering samples of your products that he was not meant to take with him when he quit, expect your company to fail and fail quickly.

A non-compete might scare the guy into not doing that. Maybe. Either way your patent and patent lawyers will be useless against anyone or anything in China unless you have the right influence in the right places. The non-compete will at least let you sue the defecting employee into oblivion if he's stupid enough to return to the states after selling off your business overseas.

It should also be noted that non-competes can be used as an added layer of protection along with an NDA when disclosing technology/products/IP on a limited basis during the normal course of doing business.

Re:As an employer, I abhor them (2, Insightful)

Chandon Seldon (43083) | more than 6 years ago | (#23898545)

If you have an employee that leaves the company and then takes a suspicious "personal vacation" to Shanghai or Shenzhen while taking along engineering samples of your products that he was not meant to take with him when he quit, expect your company to fail and fail quickly.

Bullshit.

If you aren't incompetent, you should be able to compete with a company that's late to market with a knockoff of your product.

Re:As an employer, I abhor them (1)

rossz (67331) | more than 6 years ago | (#23898665)

I want a job at your company and I would like to subscribe to your newsletter.

Despicable (4, Informative)

the eric conspiracy (20178) | more than 6 years ago | (#23897779)

I really hate non-compete agreements. In an at-will employment state they are indefensible, and Massachusetts would do well to make them unenforceable.

BUT I think that conclusions of this article are very far fetched. With the exclusion of Silicon Valley, Metro Boston is the #1 startup hotbed in the United States. It is one of the best places to create a startup, with immense intellectual capital available from the biggest concentration of 4 year universities in the world. And the geography of the startup area covers 4 states, not just Massachusetts - NH, CT and RI as well.

The article gave no numbers, and no comparisons of the laws of the various states in the region and their effects. Where are the facts, Jack? The article is just speculation without substance to back it up.

I call Bullshit.

Re:Despicable (0)

Anonymous Coward | more than 6 years ago | (#23897831)

I call Bullshit.
I raise you Horse-shit.

Re:Despicable (0, Redundant)

Free the Cowards (1280296) | more than 6 years ago | (#23897835)

With the exclusion of Silicon Valley, Metro Boston is the #1 startup hotbed in the United States.
I have no objection to the general content of your post, but it struck me that this is a really weird and long-winded way to say "Metro Boston is the #2 startup hotbed in the United States."

Re:Despicable (1, Flamebait)

CodeBuster (516420) | more than 6 years ago | (#23898079)

Why would anyone want to live in Massachusetts anyway? High taxes, non-competes, mandatory purchase of health insurance from a state selected slate of "pre-approved" companies (i.e. they screw you because you have to choose one of them), did I mention the high taxes?

Re:Despicable (1)

amRadioHed (463061) | more than 6 years ago | (#23898265)

People would want to live there because it's a really good place to live. And yes you did mention taxes. Twice. Get a clue.

Re:Despicable (0)

Anonymous Coward | more than 6 years ago | (#23899041)

And yes you did mention taxes. Twice. Get a clue.

Oh my God, did you actually think that when he wrote "did I mention the high taxes?", that he didn't know he already mentioned taxes before? You didn't know that by mentioning it twice was a way to emphasize that taxes were high? His post structure was a common method for emphasizing a point. Wow you are daft. You should get out more.

Re:Despicable (1)

the eric conspiracy (20178) | more than 6 years ago | (#23898365)

Then don't live there.

How about Silicon Valley? That would be cool. Let's see... higher taxes than Massachusetts, check. Higher real estate prices, check. MUCH worse traffic, check.

Re:Despicable (0)

Anonymous Coward | more than 6 years ago | (#23898589)

Ah, a Masshole, or former Masshole; no one that's ever lived in both would choose Boston Metro (which I'll refer to as BM) over SV, unless they had a good reason to do so. So I guess you're married like me, and your partner dragged your sorry ass back here, or you've never lived in both places, or you weren't employable out West. I've lived in both, so let's compare again.

Expensive, old, overpriced real estate that sucks? BM check. Traffic? You obviously don't drive around here, b/c if you know the traffic is as bad, if not worse. Cost of living is quite similar.

But let's move beyond these somewhat trite arguments. Higher-paying jobs? SV. More jobs? SV. Higher quantity of startups? SV. More VC money? SV. Better weather? SV. More to do? SV. on and on and on....

Re:Despicable (0)

Anonymous Coward | more than 6 years ago | (#23899407)

I despise SV and I'd move to MA in a heartbeat if it weren't for my job (and I expect be able to negotiate remote work in a year or two).

Terrible dry weather, fires, earthquakes. It's the brown season until November. Way too expensive bunker-like houses on a slab. Taxes from hell. I bike to work, so I can't comment on the traffic.

As an east coaster with a PhD, I can't stand SV.

Re:Despicable (1, Interesting)

Anonymous Coward | more than 6 years ago | (#23898813)

State tax in Mass is lower than California. Sales tax, I think, is lower as well. Car insurance is lower than California. Yeah, the winters suck, but the ground doesn't wiggle so much and there's way less wildfires. There's also working public transit (at least to American standards) and housing's not all that horribly expensive.

I've lived all over the us, and just can't figure out the Taxichusetts bit. 5% state tax, which is lower than Kansas, California, Maryland and Missouri (to take just those states I've lived in).

Re:Despicable (1)

dr2chase (653338) | more than 6 years ago | (#23899249)

State and local taxes are below the US average, as percentage of wage income [massbudget.org] .

If your employer covers you with health insurance (as mine does) or if your spouse has insurance that covers, you then you need not purchase insurance.

It's much cheaper to buy a house here than in California.

The weather's worse, not much to be done about that, but you can avoid the non-compete's here by working for a California company. And yes, some I've negotiated, some I've signed, and one I turned down after failing to get anywhere negotiating.

Re:Despicable (0)

Anonymous Coward | more than 6 years ago | (#23898507)

I call bullshit. Back your claim up with numbers.

Agreed, also consider Chicago as a flipside (1)

VampireByte (447578) | more than 6 years ago | (#23898643)

In Illinois non-competes are pretty much unenforceable. Does this mean the tech & startup environment in Chicago is good? Nope, the tech environment is a joke here and the startup community is at best composed of blow-hards, failure, and new talent that soon finds out that they need to move elsewhere to accomplish anything useful.

Re:Despicable (1)

Otter (3800) | more than 6 years ago | (#23898697)

Where are the facts, Jack?

In fact, the article specifically states:

However, Fleming repeatedly cautioned that empirical data regarding the effect of non-compete agreements is scant.
I agree with you: imbecilic story, even if the conclusion is actually true.

Thank you Captain Obvious (2, Insightful)

HitekHobo (1132869) | more than 6 years ago | (#23897787)

The entire concept of a non-compete clause is to discourage brain drain and startup competition from previous employees. Isn't it obvious that this would reduce new startups where enforceable and have no impact where its not? Sorry, but this just isn't news to me.

Re:Thank you Captain Obvious (4, Insightful)

maxume (22995) | more than 6 years ago | (#23897817)

They aren't trying to inform you, they are trying to paint the ground. If people in Mass. start thinking that the law is costing them jobs...

Re:Thank you Captain Obvious (3, Insightful)

tietokone-olmi (26595) | more than 6 years ago | (#23898479)

Well yes, that's the market idealist's view. Market idealism falls over and breaks in three on its first encounter with a fluffy ol' feather.

The real deal is that more often than not, non-competes are applied with a breadth that cannot be described as anything but abusive. In general an US-style non-competition agreement bars one from practicing his profession at any company other than the one that the person happens to be working at. Thus the employee is restricted from applying e.g. market forces to gain things such as higher pay: a switch of companies means a switch of careers unless the employer happens to go under for good and doesn't get bought out.

Of course the practice tends to spread. Any company that does not require a non-compete of all employees soon finds itself in a worse position in labour negotiations. Therefore there's no realistic chance to "just find a contract that doesn't involve a NCA": chances are that within a state that permits them every company abuses them in exactly the same manner.

And just so you know, this is one of the reasons why Europe laughs at the US. The right to profession is basically enshrined in every EU member country's contract law. Only extremely specific and time-limited forms of non-competition agreement are permitted, such as concerning a company's existing clients for up to six months after resignation (or immediately after termination).

Sounds like a form of slavery... (5, Interesting)

parabyte (61793) | more than 6 years ago | (#23897873)

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

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

p.

patents applied to people (0)

Anonymous Coward | more than 6 years ago | (#23897893)

They stifle innovation in exactly the same way patents stifle innovation. You can create X for us, but if you should leave, you cannot create X for someone else. We hold a monopoly over you. Much like a patent holds a monopoly over a piece of technology. Its created once, and then is never able to be improved upon, unless you have bucketloads of cash. That starts immediately making it exclusive to wealthy (usually business). Innovation can only then be done by fewer and fewer people. Usually with non-competes though, the hell only lasts a few years (and a few chairs [wikipedia.org] . Patents last practically forever. Its stupid and bad for society, but businesses give governments money to do their bidding. Fuck the people is the mission statement.

you're awesome, now starve (1)

themushroom (197365) | more than 6 years ago | (#23897925)

If you move to where your job was outsourced, is it considered noncompetative? :)

You have to picture what noncompetes come down to as this statement:
"You are good at what you do, someone with valuable skills -- and since we don't want you to do it for us anymore or you have chosen not to do it for us anymore, we don't want you to do it for anyone else. Have a nice day."

And in other exciting news, gravity exists. (5, Insightful)

RustinHWright (1304191) | more than 6 years ago | (#23897943)

How can anybody be surprised by this?

I'm sorry, but as a former consultant, occasional inventor*, and business owner, I've always thought that non-competes were mostly b.s. If you're afraid that they'll steal your IP, register and enforce your IP. If you're afraid that they'll provide better services, well then, best you do a good job there, cobber. Seems to me that non-competes usually just protect those with lots of lawyers against those competing on the basis of value for the dollar.

*See patent 4,808,204.

Re:And in other exciting news, gravity exists. (0)

Anonymous Coward | more than 6 years ago | (#23898001)

Non-Competes Considered Harmful. Film at eleven.

Non-competes CAN BE legal in California (2, Interesting)

btarval (874919) | more than 6 years ago | (#23897981)

Like everyone else, I was under the impression that non-compete agreements were illegal in California. It turns out that there's an end-run around them. Here's the article: Mattel, rival slug it out over rights to Bratz [mercurynews.com] . Registration required, just use bugmenot.com. Yeah, it's about dolls, and not software. But you know the sleezy Valley lawyers will be looking at this one for ideas.

In short, this guy signed an "Exclusivity" contract. Apparently that's different from a "Non-compete", though how in the world that's possible is beyond me.

Perhaps someone other than the IANAL types can educate me here. But, in short, if this one holds up, you can bet that you're going to see Exclusivity Contracts start popping up among software and hardware designers, instead of just doll designers.

Re:Non-competes CAN BE legal in California (1)

maxume (22995) | more than 6 years ago | (#23898245)

IANALBIARA. The article says that he is getting paid royalties. The contract likely applies to creative works. I don't think software and hardware are really considered such, they are work for hire.

Those things are getting so silly (0)

Anonymous Coward | more than 6 years ago | (#23898293)

Every tech company in this area wants you to sign a non-compete and they're just getting ridiculous. They cover the earth, moon and stars from the beginning to the end of time. Most times I just can't sign them. It's a little easier when you start your own company and negotiate as a sub-contractor, but now companies and wanting very similar language in b-2-b partner agreements and it's getting to be a real pain.

It's so much easier to work with small groups of independents than try to partner up with any big tech company on projects. You always have to spend two days reading the paperwork and there's one deal breaker and they won't negotiate the language. The irony is that I then spend my time competing with them for business instead of billing hours they could make a margin on. All because of some over-reaching non-compete that some HR person copied off a boilerplate of legal documents.

It's just such a massive waste of effort because they got screwed on one project five years ago and from then on everyone has to jump through their legal hoops. The good news is customers are starting to catch on that a lot of tech companies are bill mills that add cost but not much value and they're entertaining more indies and part-timers. But it's a surprisingly slow transition.

I'm through with the East Coast (4, Interesting)

linefeed0 (550967) | more than 6 years ago | (#23898393)

The whole eastern seaboard, at least from Massachusetts to Florida, is a cesspool of snobby lawyers and greedy big money people. But the southeast is worse than anywhere; it is especially laughable that so many states proclaim the "right to work [blogspot.com] " (without a union, possibly for peanuts or for a tyrannical boss) but you don't actually have a legal right to work in your occupation if you've signed a broad non-compete that forbids it. These are often "at will" states as well, where your employer can fire you and hire someone else to do what you do, but you can't necessarily work for another company doing what you know how to do.

I've lived in VA and in PA most of my life, and I'm just about finished with the eastern US forever. My next home will be either in Europe or west of the Mississippi. By the way, the states that will not enforce non-competes include CA, OR, CO, MT, ND, SD, OK, LA, and probably a couple others. Nearly all of them are in the western US.

As for the most ridiculous non-compete ever, how about a membership agreement for an outdoors club [outdoorsocial.com] that forbids former members not only from operating a competing club, but even using a google group to organize similar activities? The original version [stashbox.org] was even worse, if you want to read some lawyerspeak that will make your head spin, and prompted this article [readthehook.com] in a local newspaper.

Zero sum game. (5, Insightful)

Anonymous Coward | more than 6 years ago | (#23898431)

As an employer, you lose as much (in terms of failing to recruit experienced staff from your competitors) as you gain in terms of preventing the loss of experienced staff to your competitors.

In an industry where these clauses are common, everyone would be better off if there were to be a law disallowing them.

The trouble is - if you're the only employer who doesn't do it, you lose staff and can't easily recruit replacements.

It's a classic "crisis of the commons" issue - and that means that you need a law to prevent it.

Mod parent up plz (1)

tietokone-olmi (26595) | more than 6 years ago | (#23898657)

I'd do it myself but have already posted in this discussion.

don't make a law forbidding them (0)

Anonymous Coward | more than 6 years ago | (#23899429)

Just like in some country, just regulate them. Here around the law force you to pay the person signing the NCA a fix sum, and is quite clear in how the NCA applies (same customer base, same product).

I was hit with one of these (4, Interesting)

phorm (591458) | more than 6 years ago | (#23898577)

I have one of these, and I haven't been impressed with it. First of all, it's very generic, without being specific as to what knowledge I can't use in future employers, etc. It was also handed to me *after* I moved across the country about 4300km to my new employer, and after I had received and accepted the job offer (which I had before I left). Since I had already quit my former job and moved 4300km, there wasn't much I could do but accept. I even asked to append more specific details and was turned down.

Luckily, my company doesn't have any history of trying to enforce these idiotic things, and I have no plans on doing anything dumb like jumping ship and taking company-specific info or customers with me, but I do wonder how enforceable these boilerplate contracts are. From what I've researched, they're not very enforceable if they aren't rather specific (what the actual 'competition' would be, the competitive region, etc) , or if alternate methods would have sufficed (say to prevent stealing proprietary info or customers).

I do wonder of the legality of hitting somebody with this *after* the job offer has already been given and accepted. I had requested the contract before moving but had assumed that it was more or less in the offer.

Re:I was hit with one of these (3, Insightful)

Watson Ladd (955755) | more than 6 years ago | (#23898671)

IANAL, but always get it in writing. Always. Especially if moving across the country.

Re:I was hit with one of these (1)

phorm (591458) | more than 6 years ago | (#23899481)

Yup. The question is, what happens when what you receive in writing at arrival (the contract) is different than what you receive in writing prior to (the job offer and acceptance letter). If I'd known that the two differed so greatly, I'd likely have held back for a less onerous contract before signing the offer/acceptance. In other places I've accepted employment the two were pretty much the same thing, with the exception of union rules etc in shops I worked that were unionized.

Re:I was hit with one of these (1)

rohan972 (880586) | more than 6 years ago | (#23899565)

Yup. The question is, what happens when what you receive in writing at arrival (the contract) is different than what you receive in writing prior to (the job offer and acceptance letter).
That's the point. You get the contract in writing before coming. Why would you move across country for employment without knowing the terms of your employment and making sure you will be adequately compensated if the employer doesn't stick to them?

Re:I was hit with one of these (1, Informative)

Anonymous Coward | more than 6 years ago | (#23898685)

Courts tend to look askance at overly broad non-compete agreements that basically prevent workers from getting another job in the field for which they've been trained. I doubt they can enforce a clause such that you can't work as a programmer of Windows business applications in the greater metro area, for example. And the duration of the non-compete has to be clearly defined, and probably would be suspect if it exceeded one year - unless the company was bought out, and these terms were part of the buyout agreement with the founders.

They might be able to enforce an NCA where they prevented you from going to one of their top three or four competitors, or a startup in the same market segment, within a year of your termination, unless you were clearly working in an area that had nothing to do with your former work.

tools of the trade (4, Insightful)

ncmathsadist (842396) | more than 6 years ago | (#23898703)

A noncompete clause is akin to telling a sculptor never to take up the chisel again. These should be illegal. They strangle the ability of someone skilled in an art to earn a gainful living. Stinko.

Always take a red pen to negotiations (4, Interesting)

asackett (161377) | more than 6 years ago | (#23898853)

When I was foolish enough to work for wages, I always took a red pen to the salary negotiations. With it, I struck out every non-compete clause before signing the employment contract. Some HR folks freaked out over it, but it never cost me the job.

If it had ever cost me the job I was seeking, I would have considered it a very cheap exit out of what could otherwise have been a very expensive experience.

Never (1)

maz2331 (1104901) | more than 6 years ago | (#23898957)

My policy is that I never, ever, under any circumstances even consider thinking about signing an NC. Period. End of story. They are a deal-breaker.

I don't trust anyone who doesn't trust me.

Of course... (1, Informative)

Anonymous Coward | more than 6 years ago | (#23899389)

The whole point of a non-compete is to stifle further innovation in service to profitability of the last idea. The idea being that it will encourage spending on research if we up the gains for a successful research project.

Maybe it works, maybe not and I'm not saying it's a good or a bad thing from a holistic point of view but this is kinda like "discovering" that pesticides act as a deterrent to insects. It maybe bad and cause an imbalance in the ecosystem, it may be good and increase crop yeilds, but the idea that you've discovered that something does what it was designed to do seems silly.

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