FTC Proposes to Ban Non Compete Clauses

[Corylax18]

I don't know how common non compete clauses are around the world, but in certain industries here in the US they're widely accepted and even standard contract language. (For example, I have non compete language in my current employment contract and signed one when I left my previous job) 

I'm a bit torn on the issue, while the points made in the article below make sense, but it fails to bring up all the different perspectives. I personally benefitted handsomely from signing a 2 year non compete agreement when I left a company about 4 years ago. They where really just concerned about me moving to one of their two direct competitors in the industry, but it was worded much more broadly than that. I had Zero desire to stay in the industry (Wireless Telecom) and it wasn't going to affect my future plans in any way, so it was easy money for me. A lot of money, not quite your job money, but enough that it changed my perspective on the ensuing year or so. The added financial security allowed me to take my time finding a new job, the right job, it allowed me to invest more and spend 6 months focusing on Me, rather then stressed at a job. It was a huge boon to my personal life and career. 

So, while I understand a lot of the arguments the FTC is making, my own personal experience couldn't be any further from what they're describing. I'm firmly on the fence, what do you guys think? 

https://www.nbcnews.com/business/business-news/ftc-bans-noncompete-clauses-wages-rcna64445

[El Presidente]

FTC's are already banned in parts of the US and much of Europe/EU. 

The major issue with FTC's is employer overreach in the drafting and by that I mean the loss of perspective on what is deemed "reasonable". 

FTC's have been used time and time again as a form of handcuffs on key employees. 

2 year + non compete clauses?  Employees who sign and abide are effectively locked into an employer forever or locked out of an industry after two years away. 

There has been a lot of abuse in this area. 

[Corylax18]

10 minutes ago, El Presidente said:

FTC's are already banned in parts of the US and much of Europe/EU. 

The major issue with FTC's is employer overreach in the drafting and by that I mean the loss of perspective on what is deemed "reasonable". 

FTC's have been used time and time again as a form of handcuffs on key employees. 

2 year + non compete clauses?  Employees who sign and abide are effectively locked into an employer forever or locked out of an industry after two years away. 

There has been a lot of abuse in this area. 

All good points, as we often see, its the abuse part that ruins it for everyone. Its the same with unions, ploitical and economical systems, and so on. Perfect on paper, but not un tarnished by the human touch. I was in the unique position of signing my first non compete at the end of my employment, not the. After I made the choice to move on, so I had that company bent over the proverbial barrel. 

However, I choose to sign a 2 Year non compete at the onset of my current position.(more accurately choose to accept the position knowing I would need to sign it) I'm working in satellite internet right now and if I left today and shared everything I know about my current company with my new bosses at Starlink or Amazon or Hughes net, it could easily cause 10s of millions of dollars worth of damage to future competitive advantage. I also had to get a full background check and a cavity search of my past to gain "secret" level government clearance to work on DOD and other Government related projects. I think that process was far greater violation of my rights the the non compete I signed. There are probably 400 to 500 hundred people in similar positions at my current employer. But with Great Power Comes Great Responsibility.  

The more I think about it, the less a complete ban makes sense. To me. But it doesnt make sense that they have become as common as they are. Does someone in the mortgage industry need to sign a non compete? What about Finance? Government work? Where do we draw the line?

 

[Hammer Smokin']

you don't get to work as an insurance broker without a non compete clause. 

we are starting to see the request even on the underwriting side. 

extremely common in Canada, and not going away any time too soon.

we are also seeing courts "poo poo" on existing non compete clauses. So there's that. They often aren't enforceable (assuming your employer is willing to pay the $$$'s to fight it). 

once someone breaks their non compete clause the new hiring company will often pay the old company a sum of money, rater than going to court to try and apply the non compete clause. 

[Cigar Surgeon]

I've had two jobs where the employer tried to get me to agree to a non-compete. My position was simple: if I'm being asked to sign a non-compete then it changes the amount of compensation I'm expecting.

In both cases they dropped the non-compete clause.

[Dr vonPuffenberg]

I'm a sales Arborist at a national tree company (US).  I had to sign a non compete when I took the job.  I happen to be interviewing at another company tomorrow morning for a similar position, albeit in a different sales territory.  If I end up taking the job, I will be in violation of the non-compete and I'm just not that worried about it.  They can come after me if they want, I just don't believe they will.  My friend at my current employer took a job at another large tree company and the regional VP vaguely threatened him but never took any action.

As Prez said, you will be locked into a job forever.  I would have to move out of state to not violate the contract.  How can they reasonably expect a person to make a career?  In my industry there's not really any secret knowledge, just client lists.  I understand the right of the employer to do this, and I'm not really sure the FTC has the right to restrict it.  Whether or not any legal action is actually taken is where the rubber meets the road.

I will double my salary if I get this new job.  If I ever want to smoke Cohibas again, I need to get hired here 😉.  If I find myself getting sued into the poor house, I'll update this thread.

 

[El Presidente]

9 minutes ago, Dr vonPuffenberg said:

I will double my salary if I get this new job.  If I ever want to smoke Cohibas again, I need to get hired here 😉.  If I find myself getting sued into the poor house, I'll update this thread.

Good luck!!!! 

[Dr vonPuffenberg]

17 minutes ago, El Presidente said:

Good luck!!!! 

Thanks!!

[Corylax18]

The enforceability angle is interesting. In most cases, the juice isnt worth the squeeze for the company being "wronged". 

I think many people violate non competes currently and I rarely hear about anyone suffering consequences for violating it. I'm not a lawyer, but I have a feeling that the company would need to prove that they where actually negatively affected to gain any real monetary award. A simple violation, without proven harm seems like a tough sell to a judge. 

50 minutes ago, Cigar Surgeon said:

I've had two jobs where the employer tried to get me to agree to a non-compete. My position was simple: if I'm being asked to sign a non-compete then it changes the amount of compensation I'm expecting.

In both cases they dropped the non-compete clause.

 This. 100%. I insisted on compensation of some form before I signed either of the two I did. 

[Ken Gargett]

what i always found interesting about non compete clauses was that back when i was a lawyer, i worked in firms in the London, Washington DC, Sydney and Queensland. not once was i, or anyone i ever knew at these firms or any others, asked to sign a non compete clause. i always believed that was because lawyers actually knew their value. 

[MrBirdman]

They can be quite difficult to enforce even in jurisdictions where they aren’t expressly banned - but that’s the thing, lower wage employees are unlikely to know that or have the resources to litigate it. Hence the potential for abuse. The employees become trapped, in effect, by an unlawful contract.

For very high paid individuals with proprietary knowledge I can see validity. For a run of the mill salaried employee, it’s usually just a form of exploitation with little broader economic benefit. But employers also shouldn’t be left holding the tab for training someone who jumps ship immediately. So there needs to be a little give on the employee side too. 

[El Presidente]

28 minutes ago, Ken Gargett said:

what i always found interesting about non compete clauses was that back when i was a lawyer, i worked in firms in the London, Washington DC, Sydney and Queensland. not once was i, or anyone i ever knew at these firms or any others, asked to sign a non compete clause. i always believed that was because lawyers actually knew their value. 

....it is used for valued employees only

 

 

 

[Ken Gargett]

2 minutes ago, El Presidente said:

....it is used for valued employees only

as i was writing this, i nearly added a note to save you embarrassing yourself. my fault for not doing so. 

[LLC]

Pay like I’m working to not work and I’ll sign, otherwise pound sand. 

[PuroDiario]

Good luck working in high finance without a pretty punitive non-compete which even if “non-enforceable” or whatever is sure to cause major disruption if you move to another firm or try to set up your own. Look at what Goldman is doing with a couple of traders that left last year for example. Even if not an ultimate problem it will create risk for you and anyone willing to do business with you potentially. It’s an issue. 
 

edit: also I find interesting the “pay me crazy money and I’ll sign it”, seems the forum has a disproportionate share of the world Michael Jordan’s of each industry with an individual impressive ability to pick and chose across a myriad of employment offers across a career span. If this is the case, we should set up a subsidiary of Nudies for headhunting @Elpresidente, we will crash it and can create some boot camps for jobseekers in this nasty layoffs environment! 😊

[El Presidente]

13 minutes ago, PuroDiario said:

edit: also I find interesting the “pay me crazy money and I’ll sign it”, seems the forum has a disproportionate share of the world Michael Jordan’s of each industry with an individual impressive ability to pick and chose across a myriad of employment offers across a career span. If this is the case, we should set up a subsidiary of Nudies for headhunting @Elpresidente, we will crash it and can create some boot camps for jobseekers in this nasty layoffs environment! 😊

 

...first thing I will do is offer  Ken a.position and insist on a non compete. His role would be to go infiltrate and help Habanos.

[rcarlson]

2 hours ago, Ken Gargett said:

what i always found interesting about non compete clauses was that back when i was a lawyer, i worked in firms in the London, Washington DC, Sydney and Queensland. not once was i, or anyone i ever knew at these firms or any others, asked to sign a non compete clause. i always believed that was because lawyers actually knew their value. 

In the U.S. constitutional right to choice of counsel would surely make a non-compete unenforceable.  Probably unethical to require one as a condition of employment in most if not all jurisdictions anyway.    

Guessing non-solicitation is different, certainly for in-house.   Both NC nd NS are state specific.  Still controlled by US constitutional reasonable limitations on geography, scope, duration (yada), and of course local ethics rules.      

[gcman68]

This topic interests me in that awhile back everyone was "asked" by a litigious employer to sign a more aggressive non-compete contract after I had been with the company for 1.5 years. I asked for compensation to sign it and was rejected and told if I didn't sign it they would have to let me go regardless of my performance. In the interim I used it as motivation and had negotiated to go to a competitor who had an issue with my previous non-compete potentially ruining my deal. Ultimately, I was officially let go for not signing the document and I started my new job at a significantly higher wage 4 days later. 

I was told myself and another colleague were the only two who didn't sign it out of 900 employees.  I personally think they hold down people and as long as a person at a new job doesn't utilize any trade secrets they should be allowed to work where they want to.  

[Hammer Smokin']

6 hours ago, Dr vonPuffenberg said:

Thanks!!

so in our case that happens, but your new company pays a sum to your prior company in order not to go to court. 

the amount of business your are expected to take from old company to new company will determine how much new company is paying old company. 

pretty common around here.

[bishop532]

11 hours ago, rcarlson said:

Probably unethical to require one as a condition of employment in most if not all jurisdictions anyway. 

They get around that. It’s not a condition of employment but they make it seem so (hence the ability for ppl above to get them to drop it by pushing back). It’s one of those things companies use as mental handcuffs. Even tho it’s rarely enforced at lower levels, many people worry about it and let it affect their employment decisions.

That’s my take on it anyways, working in software. Everywhere I’ve worked has pushed it. I’ve generally signed it, though I did ignore it once and it just kind of went away bc HR never brought it up again. 

[Fuzz]

One of my former managers quit the company we were working for (one of the 2 major supermarket chains in Aus), and went to work for the other side. Decided he was going to share some of our company practices and implement them there. During implementation, somebody stupidly asked the ATO about a grey area in the Wine Equalisation Tax (WET) and how it was meant to be applied. ATO asked what they were doing and how did they come up with this idea, idiot manager said his former company had been doing it for years. Put both companies in the firing line of the ATO and cost our company millions to change the way we handled WET.

Okay, we exploited a loophole, but it was creative thinking. Would have really benefited from a non-compete clause in that case.

[rcarlson]

1 hour ago, bishop532 said:

They get around that. It’s not a condition of employment but they make it seem so (hence the ability for ppl above to get them to drop it by pushing back). It’s one of those things companies use as mental handcuffs. Even tho it’s rarely enforced at lower levels, many people worry about it and let it affect their employment decisions.

That’s my take on it anyways, working in software. Everywhere I’ve worked has pushed it. I’ve generally signed it, though I did ignore it once and it just kind of went away bc HR never brought it up again. 

Here in Georgia, it can be a condition of employment in the commercial context.  My comment was really focused on the ethics rules governing the practice of law, which is quite distinct from the law applied to businesses.  The rules governing the practice of law are relegated to the state Bars and courts.  One similarity is that these things are very state specific for both. 

Simply put, I am not surprised that Ken never heard of NC or NS in his former legal glory days.  I believe it is likely in many jurisdictions that it would unethical for a law firm to even present an NC. 

FWIW, some businesses are very aggressive on NC and NS enforcement.  I have some corporate clients that have asked me to go after employees of little consequence to send a message that they take the obligations seriously.    

[zuhaib]

I live and work in California and state law already prohibits noncompete.  But it has not stopped companies from finding ways around it.  NDA are common and are used to limit what trade secrets you can talk about with a new employer (or starting your own company)  Also I have had to sign non-poach agreements for 6 months when i leave which I have been told by others (but never verified with a lawyer) are not enforceable. But its still considered good practice here in tech to not try and poach your co-workers for that 6 months time unless they reach out first.

But the worst thing in CA that got exposed a few years back was when all the tech companies got together to make backroom deals to agree not to poach Engineers from each other (https://fortune.com/2015/09/03/koh-anti-poach-order/). This was a sort of noncompete in the background as Engineers from one company would have zero chance to join a competitor as a deal had been made behind the scene.

So its great they might ban noncompete on a federal level but more needs to be done to not allow companies from trying to treat their employees as property they can control.

[BrightonCorgi]

My thought is I am going to work where I want to work and if they want to chase after me in court on a non-compete; let them.  It's only really valid if one has IP that could be used by competitor if one switched jobs.  Preventing someone from working in the same industry is a crock.

 

[BrightonCorgi]

I am in cyber security and our product is for protecting a company's crown jewels.  We've sent plenty to prison and our clients have won 100's of millions suits based on our forensic evidence. 

Stepneygate drama between Ferrari and McLaren was won in court based on our forensic data.  Ferrari is one of our oldest customers and consider us to be the most valuable investment in the company's history.  He was fine to go to McLaren, just not with print out's of Ferrari's IP.  Being able to determine when an employee is going to leave before he gives notice is quite valuable, and forensic data of what they are doing before they leave is critical in case they need to "return some items".