Federal Trade Commission Proposes Ban On "Non-Competes"

[Murfdogg21 4398]

One of my former employers has an overly broad non-compete that they force every employee to sign on your first day of work with no mention of it during interviews or the job offer. Most sign it because they don’t understand or (as in my case), there weren’t many biotech jobs in Texas (Austin specifically). When I was terminated without cause (a whole other dramatic bullshit story) a week before my wife gave birth to our first child, the CEO and the president made all kinds of wild threats at me about going to a competitor or even within the general orthopedics and spine device field. I think none quote was “it doesn’t matter if we win in court, we will bankrupt you. If you have $200,000 in your bank, I’m willing to spend $200,001 on lawyers!” I was in product development and lab science, not sales. A non-disclosure of confidential information should have sufficed, not something baring me from employment in my field in the 27 states where the company had sales.

I hired an employment attorney who informed me that the NC was overly broad and unenforceable, but recommended I take their severance offer (cash and shorted NC time) even if if my acceptance made it enforceable, because these assholes were batshit crazy. I wish a national ban on NCs would have been in place at the time. 

[TwiceHorn 31085]

16 minutes ago, Murfdogg21 said:

One of my former employers has an overly broad non-compete that they force every employee to sign on your first day of work with no mention of it during interviews or the job offer. Most sign it because they don’t understand or (as in my case), there weren’t many biotech jobs in Texas (Austin specifically). When I was terminated without cause (a whole other dramatic bullshit story) a week before my wife gave birth to our first child, the CEO and the president made all kinds of wild threats at me about going to a competitor or even within the general orthopedics and spine device field. I think none quote was “it doesn’t matter if we win in court, we will bankrupt you. If you have $200,000 in your bank, I’m willing to spend $200,001 on lawyers!” I was in product development and lab science, not sales. A non-disclosure of confidential information should have sufficed, not something baring me from employment in my field in the 27 states where the company had sales.

I hired an employment attorney who informed me that the NC was overly broad and unenforceable, but recommended I take their severance offer (cash and shorted NC time) even if if my acceptance made it enforceable, because these assholes were batshit crazy. I wish a national ban on NCs would have been in place at the time. 

That is a cold reality of this.

Like troph, on the occasion that I have clients that want me to review their IP-related employment agreements, I discourage them from relying on covenants not to compete because a) they're impossible to draft to satisfy the client and be enforceable and b) they don't really accomplish anything that "NDAs," ongoing assignment provisions, and non-solicitation agreements don't accomplish, except to indulge irrationality.  But the client isn't irrational when going over the documents, only when that "key employee" leaves.  And that irrationality is more common than most would probably believe, see above and prior post.

Edited January 20, 2023 by TwiceHorn

[elfenix 34161]

2 hours ago, Hank Scorpio said:

This is great, I had no idea Jimmy John’s retracted the non competes. I’ve been unemployed for 4 years waiting on my Jimmy John’s non compete to expire. I would have been a sandwich artist by now. 

 

[956 Worldwide 34241]

3 hours ago, The Original Greaser Bob said:

Then neither would a court, if there is no protectable interest.

Most companies who routinely use NCs will only make noise if there is a pretty clear potential violation.  They might right a nasty letter but the defendant and the new company will tell them to fuck off. 

 

This is an excellent anecdotal data point for the argument that they’re abusive and should be banned. 

[956 Worldwide 34241]

2 hours ago, TwiceHorn said:

That is a cold reality of this.

Like troph, on the occasion that I have clients that want me to review their IP-related employment agreements, I discourage them from relying on covenants not to compete because a) they're impossible to draft to satisfy the client and be enforceable and b) they don't really accomplish anything that "NDAs," ongoing assignment provisions, and non-solicitation agreements don't accomplish, except to indulge irrationality.  But the client isn't irrational when going over the documents, only when that "key employee" leaves.  And that irrationality is more common than most would probably believe, see above and prior post.

They provide an end-run around proving violations occur.  You have to prove someone violated an NDA or non-solicitation provision. Proving someone took a job is easy, and it’s even better to scare them away from taking a job in the first place.  It’s just shifting the cost of enforcing NDA provisions onto the employee instead of the company— which is, again, bullshit and anticompetitive. 
 

And that’s for stuff like the biotech example above.  When we are talking doctors and nurses and sandwich makers, we are out of the realm of any actual propriety information and secrets and you’re simply trying to squash competition and depress wages. 

[The Original Greaser Bob 2769]

6 hours ago, 956 Worldwide said:

This is an excellent anecdotal data point for the argument that they’re abusive and should be banned. 

You can make the same terrible argument about any clause that has general prohibitions - confidentiality, non-disparagement,  etc. where one party has no idea what the other party will do.  Coke doesn't want its flavor scientists to go to Pepsi.  If they go to Pepsi, they might try to enforce.  If they go to Jelly Belly, they won't. 

The consideration is what has made non-competes "unfair".  The clauses themselves can be reasonable -- if the consideration is reasonable.  People are hyperinflating the consideration problem.

[The Original Greaser Bob 2769]

10 hours ago, wildcat09 said:

Man, imagine thinking prices and contracts are two totally unrelated things.

Imagine thinking that words mean things.

[Captainant 27250]

4 minutes ago, The Original Greaser Bob said:

You can make the same terrible argument about any clause that has general prohibitions - confidentiality, non-disparagement,  etc. where one party has no idea what the other party will do.  Coke doesn't want its flavor scientists to go to Pepsi.  If they go to Pepsi, they might try to enforce.  If they go to Jelly Belly, they won't. 

The consideration is what has made non-competes "unfair".  The clauses themselves can be reasonable -- if the consideration is reasonable.  People are hyperinflating the consideration problem.

I feel like you're intentionally not engaging with the case that's actually happened that people are discussing here. NC's have been overly broadly applied and exploited by businesses to suppress wages and materially constrain workers opportunities. Several lawyers have chimed in with their first-hand experience in court working out the ramifications of NC's in practice. 

But sure, let's talk about an idealized and theoretical case instead of a complicated and REAL case, because it supports your position better. 

[The Original Greaser Bob 2769]

10 hours ago, TwiceHorn said:

To the extent employers want protection of "confidentiality" beyond what the law of trade secrets provides, it's something not so confidential and often not worthy of protection.

So finish the story.  In cases where the employer doesn't have a case, you correctly counsel him that the most you can do remind the departing employee and the new company of their continuing obligations.  If there is true confidential information (as distinguished from trade secrets) you might pursue it, with the caveat that these cases are hard to win.

[The Original Greaser Bob 2769]

1 minute ago, Captainant said:

But sure, let's talk about an idealized and theoretical case instead of a complicated and REAL case, because it supports your position better. 

Complicated cases with good attorneys actually supports my case because most of them don't end in litigation but rather clarification of the duties.

But provide a link if I'm underestimating the problem. 

 

[Captainant 27250]

1 minute ago, The Original Greaser Bob said:

Complicated cases with good attorneys actually supports my case because most of them don't end in litigation but rather clarification of the duties.

But provide a link if I'm underestimating the problem. 

 

Do you not understand that simply threatening taking an issue to court is a significant burden for most hourly earners, and represents a significant opportunity cost that puts workers at a huge disadvantage towards management?

I don't need to provide a link, read the thread you're in my dude lol. Twice has chimed in describing a case he was involved with where it was clear the plaintiffs just wanted to spite the worker that had the temerity to leave THEIR business. 

Christ, it's like talking with O&G bros about pollution and climate change with you and NC's lol

[The Original Greaser Bob 2769]

Tell my why the consideration argument I made above doesn't solve the problem -- you kind of ignored that argument. It eliminates the issue related to low paid employees.  It provides adequate compensation for high paid employees.

[Dahobbs 17407]

10 minutes ago, The Original Greaser Bob said:

So finish the story.  In cases where the employer doesn't have a case, you correctly counsel him that the most you can do remind the departing employee and the new company of their continuing obligations.  If there is true confidential information (as distinguished from trade secrets) you might pursue it, with the caveat that these cases are hard to win.

I can tell you from first hand experience that companies attempt to enforce these more often than you suggest. @TwiceHorn has discussed his experiences on these many times in this thread. Sometimes the employer doesn't care if the case can't be won. The point is to make it difficult and expensive for the employee to challenge enforcement. And you continue to completely ignore the abusive practice of requiring non-competes even when the employer knows they aren't really enforceable. You have to acknowledge the differential in power and sophistication between most employers and employees to have an honest discussion regarding non-competes. You haven't approached this thread in good faith, instead preferring to ignore any problems in favor of some idealized version of how the process works. 

4 minutes ago, The Original Greaser Bob said:

Complicated cases with good attorneys actually supports my case because most of them don't end in litigation but rather clarification of the duties.

 

What? This sentence doesn't make sense. How do you imagine duties are getting clarified without litigation? 

What is it that you do? Why do you feel so strongly that non-competes for employees should be allowed on a general basis as opposed to certain exceptional cases like businesses sales? 

[Dahobbs 17407]

5 minutes ago, The Original Greaser Bob said:

Tell my why the consideration argument I made above doesn't solve the problem -- you kind of ignored that argument. It eliminates the issue related to low paid employees.  It provides adequate compensation for high paid employees.

Let's go ahead and take a look at the positions you've taken in this thread:

11 hours ago, The Original Greaser Bob said:

A solution in search of a problem.  The issue is simply that there should be more consideration in exchange for the restrictive covenant.  I think continued compensation is the cleanest way and would de-incentivize all agreements unless there was a legitimate interest. 

Oh, great. I think in general we agree that at some level requiring higher levels of compensation to make non-competes enforceable. As others have suggested, one option is to require companies to pay the same wages to the employee for however long they wish them not to compete. But, we'll obviously need some sort of enforcement mechanism, you know, like a FTC regulation or law. 

11 hours ago, The Original Greaser Bob said:

Pure unadulterated stupid government meddling in a non-problem.  How about a higher minimum wage and some sound immigration policy?  Then we can fuck with the employment relationship. 

Oh. Well. Drag. Government enforcement is out. I guess we just need to tell employees to require more compensation before signing a non-compete. Problem once again solved by the power of the market, hope, and a lot of unicorn farts!

[The Original Greaser Bob 2769]

So you kind of agree with me on the consideration argument, D?

Edited January 20, 2023 by The Original Greaser Bob

[The Original Greaser Bob 2769]

18 minutes ago, Dahobbs said:

But, we'll obviously need some sort of enforcement mechanism, you know, like a FTC regulation or law. 

Pretty easy.  States could simply make it a wage claim.   Or provide attorneys fees plus liquidated damages.

[Captainant 27250]

this is some bad faith trolling by greasy bob

[Dahobbs 17407]

2 minutes ago, The Original Greaser Bob said:

So you kind of agree with me on the consideration argument, D?

I think that is apparent from this thread that pretty much everyone agrees that requiring an additional compensation as part of a non-compete would be a reasonable solution. But, the question is how much more compensation should be required AND how that is enforced. Pretty much everything else you've said has been wishy-washy gobbledygook. 

[Dahobbs 17407]

5 minutes ago, The Original Greaser Bob said:

Pretty easy.  States could simply make it a wage claim.   Or provide attorneys fees plus liquidated damages.

Great. How are you making every single state do that without federal action? Your solution is garbage because it cannot be done the way you are suggesting. And I suspect you know that. 

Also, I just want to be clear, you are in fact asking for government action, right? You just want it to be state government action and not federal?

And you agree that this is in fact NOT a non-problem like you've previously stated? 

Edited January 20, 2023 by Dahobbs

[The Original Greaser Bob 2769]

 

18 minutes ago, Dahobbs said:

Also, I just want to be clear, you are in fact asking for government action, right? You just want it to be state government action and not federal?

To be clear I never said anything about "no government action".  I think the federal plan is a poor plan - it doesn't go the the real issue, and since most contracts are a matter of state law, I think it should stay a state issue.  IF the feds decide to get into the issue, I think a simple consideration law would make the most sense.  But I personally would be fine with the states dealing with the contractual issue.

[Dahobbs 17407]

2 minutes ago, The Original Greaser Bob said:

 

To be clear I never said anything about "no government action". 

"stupid government meddling in a non-problem" is a weird way to say you're not against government action. At best your positions have been inconsistent. 

Quote

But I personally would be fine with the states dealing with the contractual issue.

Right, so you don't actually want a solution. Got it. 

[TwiceHorn 31085]

27 minutes ago, Captainant said:

this is some bad faith trolling by greasy bob

Nah, he's an in-house labor/employment lawyer IIRC that favors CNCs in some form. 

[Dahobbs 17407]

5 minutes ago, TwiceHorn said:

Nah, he's an in-house labor/employment lawyer IIRC that favors CNCs in some form. 

Both can be true. 

[wildcat09 29146]

1 hour ago, The Original Greaser Bob said:

Imagine thinking that words mean things.

What sets prices if not contracts?

[956 Worldwide 34241]

2 hours ago, The Original Greaser Bob said:

You can make the same terrible argument about any clause that has general prohibitions - confidentiality, non-disparagement,  etc. where one party has no idea what the other party will do.  Coke doesn't want its flavor scientists to go to Pepsi.  If they go to Pepsi, they might try to enforce.  If they go to Jelly Belly, they won't. 

The consideration is what has made non-competes "unfair".  The clauses themselves can be reasonable -- if the consideration is reasonable.  People are hyperinflating the consideration problem.

This is actually a really good example to dive into more and try to find out why Coke might not want a flavor scientist at Pepsi. 
 

- If he walks to Pepsi and brings over the Coke flavor formulas, that’s clearly protected and doesn’t need a broader non-compete

- If he walks to Pepsi and tells them the next year’s Coke flavor introductions that’s he’s worked on, that’s also clearly protected and needs no non-compete. 
 

- If he walks and explains the new process to get more flavor from fewer raw ingredients— ditto. 
 

- If he’s just received training from Coke on new ways to make fuzzy sugar water taste good— they can ask him to sign a repayment agreement if he leaves employment within a reasonable time. 
 

Coke can have him sign an enforceable NDA that would allow him to work at Pepsi and protect ALL that shit and similar shit. 
 

But if he’s just really good at making fizzy sugar water taste great and Pepsi wants to pay him more to do it for them then that’s just the market, baby. And it’s completely unreasonable for any firm to claim that they are owed more than their employees’ labor due to the simple fact that people generally get better at their skills with experience.  Hell, you take jobs to GAIN marketable experience and not just cash. 
 

And “consideration” for a broad non-compete doesn’t really help everything.  It may help and the individual level but at scale, these things gum up the labor market and introduce inefficiencies that are borne by consumers and other workers beyond just one worker. 
 

This whole argument really reveals the fundamental reason you need government regulation— capitalism depends on competition to work correctly, but if left to their own devices capitalists will act to destroy competition because they hate it. 

[Captainant 27250]

21 minutes ago, 956 Worldwide said:

But if he’s just really good at making fizzy sugar water taste great and Pepsi wants to pay him more to do it for them then that’s just the market, baby. And it’s completely unreasonable for any firm to claim that they are owed more than their employees’ labor due to the simple fact that people generally get better at their skills with experience.  Hell, you take jobs to GAIN marketable experience and not just cash. 

You must not be familiar with modern american business culture. ANYTHING of value is the sole property of the business, and you're a goddamn commie pinko if you think otherwise. 

 

...

 

Yes, of course that include the hours of laborers time, and the laborers, and particularly the valuable hours of training they STOLE from the company upon leaving! It took the company VALUABLE RESOURCES(!!!!!) to acquire those people, you can't expect the business to continue to create JOBS if they're busy hiring and training people!

Spoiler

/s

 

[956 Worldwide 34241]

While we are at it, non-recruitment of current employees as a clause is one of the most ethically dubious provisions you can cook because it involves two separate parties colluding to restrict the employment opportunities of third parties that don’t get any consideration at all. It casts a different light on things if you think of it in terms of your current employer and a potential employer getting together and agreeing that you won’t get a raise. 
 

[The Original Greaser Bob 2769]

23 minutes ago, Dahobbs said:

think that is apparent from this thread that pretty much everyone agrees that requiring an additional compensation as part of a non-compete would be a reasonable solution. But, the question is how much more compensation should be required AND how that is enforced. Pretty much everything else you've said has been wishy-washy gobbledygook. 

Your doing good with my gobbledy gook, so kudos. 

Trying to be clear:

1) Contracts are generally a matter for states, so preference would be for states to handle.  Especially true since in this federal environment, fed law is subject to greater change than state.
2) If Feds have to act, would prefer them making it simply about increasing consideration and allow for attorneys fees and damages if there are violations. As stated previously, making 50% of wages and retaining benefits is pretty good for doing nothing if your only restriction is not to violate a non-compete. 

[The Original Greaser Bob 2769]

2 hours ago, Dahobbs said:

"stupid government meddling in a non-problem" is a weird way to say you're not against government action.

If you can't tell the difference between being against a specific government action and anarchy, I bet that did sound weird.

[The Original Greaser Bob 2769]

2 hours ago, wildcat09 said:

What sets prices if not contracts?

Supply and demand. 

Now we are talking about four concepts.  Supply and demand, prices, free market, and contracts.

[wildcat09 29146]

1 minute ago, The Original Greaser Bob said:

Supply and demand. 

Now we are talking about four concepts.  Supply and demand, prices, free market, and contracts.

Supply and demand affect what prices people will be willing to purchase and sell goods and services for, but they don't actually set prices. Prices are set by contractual agreement between a buyer and seller. Yes, even when someone buys a product in a store that is on display to the public.  So it's incredibly silly to say something like "Free Market has to do with prices.  This has to do with contracts..."

[TwiceHorn 31085]

2 hours ago, 956 Worldwide said:

While we are at it, non-recruitment of current employees as a clause is one of the most ethically dubious provisions you can cook because it involves two separate parties colluding to restrict the employment opportunities of third parties that don’t get any consideration at all. It casts a different light on things if you think of it in terms of your current employer and a potential employer getting together and agreeing that you won’t get a raise. 
 

Yep, I've had a federal judge reject a non-raiding provision in a settlement as restraint of trade.