Federal Trade Commission Proposes Ban On "Non-Competes"

[Captainant 27309]

Just now, TwiceHorn said:

So medical practice CNCs and related disputes are mostly about "customer lists," and, as mentioned, like law practice where there are some additional ethical and policy concerns about being proprietary about patients and clients, it's a pretty nasty mercantile kind of thing.

Well yeah duh.

Not sure if you've noticed or not, but medical care in this country isn't about good health outcomes. The primary goal of literally everything in the country is about generating the greatest rate of profit and growing it by percentage quarter over quarter. Any healthcare outcomes, good or bad, are just a side effect of the initial profit margin.

This is all pretty logically consistent imo, I wouldn't be surprised to see NC's ultimately upheld by the supreme court, based purely on its history of bias in favor of business interests in opinions

[956 Worldwide 34313]

5 minutes ago, TwiceHorn said:

I have dealt with one and the Texas statute regarding CNC has been amended to specifically address physicians..

I think they're bullshit, frankly, because few if any medical practices develop what I would consider protectable IP that is separable from a medical practitioner's skill and knowledge.

And then you add in that patients should have the right to choose their providers and the general ethics of restricting the availability of health care services and it's a nasty, nasty business.

One thing we have to consider a little bit is that one of the, if not THE, primary intellectual property aspects of a departing employee scenario is "customer lists."   A customer list qualifies as a trade secret, if maintained in secrecy as most are, and is specifically listed as a contemplated trade secret by the Restatement and the UTSA.  But in the grand scheme of things, a customer list is really sketchy in terms of being justifiably protected intellectual property.

So medical practice CNCs and related disputes are mostly about "customer lists," and, as mentioned, like law practice where there are some additional ethical and policy concerns about being proprietary about patients and clients, it's a pretty nasty mercantile kind of thing.

The best way to look at this is from the customer and consumer perspective— that is, people who are being barred from access to a free market. 
 

It is cartel behavior, like all of the health industry. All business will engage in cartel behavior if they are allowed to.

[NotActuallyALonghorn 4965]

1 hour ago, Dahobbs said:

I'm serious. There is a power imbalance between a company and an employee. The current state is that companies will often put likely non-enforceable non-competes in their employment agreements. The employee has no real way to know they are non-enforceable, and even if he suspects they are, has to gamble that the company will not try to enforce if if it is breached. Not having lawyers, in this instance, just means that the sophisticated employer has even more power because it can still pursue legal remedies, whereas the employee has no means to arm himself in defense. 

Obviously we need universal law care.

[Brew 3044]

The proposal excludes non competes on owners in a business transaction, noncompetes for substantial owners of a business interest where it is written into the legal document, and several other things brought up in this thread. It is primarily aimed at NC’s between employers and employees where the employees right to work is limited at exit.

For the lawyers in this thread, you may want to clarify that NC’s are currently enforceable / nonenforceable based entirely on location. I see them get enforced regularly when we are trying to hire. Try hiring someone from MS that has signed one. We paid to take one to court for someone we were trying to hire and relocate that had a 250 mile radius from any of their locations restriction and the individual lost on it because he had signed it.

[Incredulity 11532]

13 minutes ago, Brew said:

Try hiring someone from MS

Morgan Stanley?  Microsoft?  

[Dahobbs 17420]

28 minutes ago, NotActuallyALonghorn said:

Obviously we need universal law care.

That's essentially the European/UK solution. Rather than relying on private actors, bad faith/fair practices violations are aggressively pursued by regulatory agencies on behalf of individuals. That's also what we have on the criminal side, so it isn't that crazy of an idea.   

[Incredulity 11532]

7 minutes ago, Dahobbs said:

bad faith/fair practices violations are aggressively pursued by regulatory agencies on behalf of individuals.

in employment practices or all business practices or ???

We do have regulatory agencies that pursue violations on behalf of individuals.  OSHA, State Labor Bureaus, FDA, USDA,.... 

[Brew 3044]

25 minutes ago, Incredulity said:

Morgan Stanley?  Microsoft?  

Not quite, Mississippi.

[Dahobbs 17420]

5 minutes ago, Incredulity said:

in employment practices or all business practices or ???

We do have regulatory agencies that pursue violations on behalf of individuals.  OSHA, State Labor Bureaus, FDA, USDA,.... 

To your first question, I'm not sure how far it extends. 

To your second question, yes, we do. What I'm saying is that ours are setup to chase after big ticket issues. They aren't setup to handle the claims of everyone. We rely on private actors for that. In the UK and much of Europe the dynamic is switched. Regulatory agencies handle more of the common person complaints. 

4 minutes ago, Brew said:

Not quite, Mississippi.

Mississippi has laws? Who knew. 

[elfenix 34167]

1 hour ago, TwiceHorn said:

A couple of things people forget with regard to the notion that CNCs are generally difficult to impossible to enforce.  The first is that it is very costly (not in the grand scheme of litigation, but to an average Joe) to defend CNC litigation.  The second is that 15.51(c) of the Business & Commerce Code allows a court to reform a CNC to make it enforceable and to enforce it, under certain circumstances.

So, the idea that you can just visit a lawyer for a couple hundred bucks and rest assured that your CNC problems are not problems, is pretty naive.

blue pencilling as an accepted practice in this but not in pretty much any other contract just goes to show how much the deck is stacked against the little guy. 

[Incredulity 11532]

double

Edited January 19, 2023 by Incredulity

[Incredulity 11532]

3 minutes ago, Dahobbs said:

To your first question, I'm not sure how far it extends. 

To your second question, yes, we do. What I'm saying is that ours are setup to chase after big ticket issues. They aren't setup to handle the claims of everyone. We rely on private actors for that. In the UK and much of Europe the dynamic is switched. Regulatory agencies handle more of the common person complaints. 

I had a job once where I had to deal with complaints directly from the public.  90% of it was utter bullshit.  8% was a waste of time.  2% was valuable feedback.

NEVER AGAIN.  People are the worst.

[TwiceHorn 31184]

50 minutes ago, Brew said:

The proposal excludes non competes on owners in a business transaction, noncompetes for substantial owners of a business interest where it is written into the legal document, and several other things brought up in this thread. It is primarily aimed at NC’s between employers and employees where the employees right to work is limited at exit.

For the lawyers in this thread, you may want to clarify that NC’s are currently enforceable / nonenforceable based entirely on location. I see them get enforced regularly when we are trying to hire. Try hiring someone from MS that has signed one. We paid to take one to court for someone we were trying to hire and relocate that had a 250 mile radius from any of their locations restriction and the individual lost on it because he had signed it.

Lost in a Tennessee court or a Mississippi court?  To be employed where?

I haven't had the (dis)pleasure of doing this under MS law, but most jurisdictions seem to be pretty similar to Texas or ban them outright.  Oklahoma bans them outright, ffs.

[TwiceHorn 31184]

1 hour ago, 956 Worldwide said:

The best way to look at this is from the customer and consumer perspective— that is, people who are being barred from access to a free market. 
 

It is cartel behavior, like all of the health industry. All business will engage in cartel behavior if they are allowed to.

I was listening to a thing on NPR about Adam Smith and how often misunderstood he is/was.  And even he cautioned that businesses would engage in collusive or cartel behavior if unrestrained.

[tx 3 putt 76158]

5 hours ago, Nice Guy Eddie said:

It’s a method to keep wages low by eliminating some job opportunities. Sue a few ex-employees and you get the current ones in line.

you just nailed why they should be banned. It’s a crippling tool against low earning employees. Popular move in Texas 

[AUS-97HORN 11654]

I saw a video by Steve Lehto about 15 days ago or so where he was pointing out that the reason the FTC is getting involved in not for the common low-to-mid level white collar worker bullshit non-competes

 

its because during covid, there were a fuckton of fast food places (plural, not just Jimmy Johns) especially in medium sized towns/small cities that literally were having their minimum wage workers sign a non-compete to block them from working for ANY other fast food company within X miles (usually something like 20)- irregardless of franchise (i.e. a McDonalds worker going to work for Papa Johns), even if that move was a $$ promotion for the employee.

and that is clearly a bullshit move and fucks over the employee who is forced to either keep working for less money per hour, or drive/take the bus to work someplace that clearly is further from their home to begin with, incurring more expense and/or transit time waster.

 

that being said, I agree that there would be several instances where the NC is absolutely needed.

 

Like in the case of someone buying out a business where the current owner could still work (i.e. didnt die and isnt 85YO)  and maybe even set up another new company as a direct competitor, the buyor of the business is spending a lot of money to buy the contacts/customers/ existing purchase base and if the current owner turns around after getting paid, and makes company name 2.0 and calls up all their former customers and says hey, I am still working but now as 2.0... come on over... that would fuck over the buyor who spent a lot of money, and they need protection from that kind of move with either a specific time frame (5 years) or a geographic area ( 300 miles or cant open a new company within the current state nor any bordering states, etc)

^and thats part of the reason why in that example almost every company buyout will have a clause that the current owner cant do that and that a direct portion of the buyout amount is an up-front pre-paid non compete portion to agree to that

 

so we need to keep those NC's in place.

 

[Brew 3044]

1 hour ago, TwiceHorn said:

Lost in a Tennessee court or a Mississippi court?  To be employed where?

I haven't had the (dis)pleasure of doing this under MS law, but most jurisdictions seem to be pretty similar to Texas or ban them outright.  Oklahoma bans them outright, ffs.

He lost in a MS court on a suit brought against him for taking a job with us. We have successfully defended ours in a TN court at least once, they just limit time/distance to what they consider reasonable which has typically been 50 miles and 1 year. We don’t use them on low level hires any more though.

[Brew 3044]

19 minutes ago, longhornmatt said:

As I read the proposed rule, it only excludes from the ban non competes in sales on owners who owned at least 25% of the company.  I agree low level employees shouldn’t be subject to noncompetes and most of the ones in place are bullshit hiding behind supposed access to trade secrets which doesn’t even exist.  But the non-compete in sales of businesses is often critical, and that 25% threshold is nuts if the final rule leaves it that way.  

There are plenty of companies where all the partners own less than 25%, plenty where there are minority owners that would be well compensated in a sale and who had active roles in managing the business (and therefore could easily steal business from the buyer after closing) own less than 25%, etc.  

I suppose I can see some justification for not wanting some entry level VP who owns a tiny bit of incentive class c shares and got forced into the sale through drag rights to have to sign a noncompete, but in general if you’re getting purchase price consideration you can deal with it.  And the threshold where that might become murky is certainly way less than 25%.  This would have a chilling effect on a lot of private M&A deals, so I hope it gets revised in the final rule and/or the courts get rid of it as it pertains to sale based noncompetes.

Correct, but the non-solicitation component will hopefully still cover the major issues that come up. We have not enforced a noncompete on partners, we have enforced the non-solicitation component in regards to taking employees and clients.

[Captainant 27309]

It's very strange that the defense of NC's has been framed as protecting the right of a business to protect its interests, while completely ignoring the rights of those workers to have any sort of autonomy in their employment.

It's almost like """free-market""" economies are a bit of a misnomer, or something.

I totally get that there's nuance and many instances where a NC clause makes perfect sense, but we've already seen how businesses will abuse NC's to exert feudalistic control over their slave minimum wage employees. If anything, there should be some sort of market-adjusted metric of NC's only being applicable if that employee is earning more than 50% over the median wage - otherwise it'll just be abused to hell and back as another mechanism of class control.

[troph 24547]

39 minutes ago, longhornmatt said:

As I read the proposed rule, it only excludes from the ban non competes in sales on owners who owned at least 25% of the company.  I agree low level employees shouldn’t be subject to noncompetes and most of the ones in place are bullshit hiding behind supposed access to trade secrets which doesn’t even exist.  But the non-compete in sales of businesses is often critical, and that 25% threshold is nuts if the final rule leaves it that way.  

There are plenty of companies where all the partners own less than 25%, plenty where there are minority owners that would be well compensated in a sale and who had active roles in managing the business (and therefore could easily steal business from the buyer after closing) own less than 25%, etc.  

I suppose I can see some justification for not wanting some entry level VP who owns a tiny bit of incentive class c shares and got forced into the sale through drag rights to have to sign a noncompete, but in general if you’re getting purchase price consideration you can deal with it.  And the threshold where that might become murky is certainly way less than 25%.  This would have a chilling effect on a lot of private M&A deals, so I hope it gets revised in the final rule and/or the courts get rid of it as it pertains to sale based noncompetes.

There are other areas of the law where actual dollars or percentages are used to quantify like 280G payments - I could see if you gross less than 5x your salary in the sale you are exempt from the NC so it’s not just 25% of the company. Could use either or / both and type requirements. But you’re right below 25% it could be justified and at 25% it may not be enough. Plenty of earnout MA deals - lock ups with NCs and see what happens. Worst case the team is terminated made no money and has a 5 year NC. There’s a lot of moving parts in the sale of a business arena here.

[Js1 85055]

3 minutes ago, Captainant said:

It's very strange that the defense of NC's has been framed as protecting the right of a business to protect its interests, while completely ignoring the rights of those workers to have any sort of autonomy in their employment.

It's almost like """free-market""" economies are a bit of a misnomer, or something.

I totally get that there's nuance and many instances where a NC clause makes perfect sense, but we've already seen how businesses will abuse NC's to exert feudalistic control over their slave minimum wage employees. If anything, there should be some sort of market-adjusted metric of NC's only being applicable if that employee is earning more than 50% over the median wage - otherwise it'll just be abused to hell and back as another mechanism of class control.

The free market doesn't apply to the slaves, I mean, the workers. 

[Dahobbs 17420]

57 minutes ago, longhornmatt said:

I don’t think a nonsolicitation clause alone gets a buyer what they need in many cases.  Plus, it can be murky to distinguish that some conduct is covered by a nonsolicitation and not a noncompete, and I think the language in the proposed FTC rule about de facto noncompete clauses casts doubt on whether nonsolicitation clauses are even excluded from the ban to begin with.  But even putting that aside, it’s still a problem to set up a spite store competitor right after closing even if you don’t specifically solicit your old clients with targeted communication.

We are we even talking about buyer/seller situations? The proposed regulation has an exception for that:

Quote

The requirements of this Part 910 shall not apply to a non-compete clause that is entered into by a person who is selling a business entity or otherwise disposing of all of the person’s ownership interest in the business entity, or by a person who is selling all or substantially all of a business entity’s operating assets, when the person restricted by the non-compete clause is a substantial owner of, or substantial member or substantial partner in, the business entity at the time the person enters into the non-compete clause. Non-compete clauses covered by this exception would remain subject to Federal antitrust law as well as all other applicable law.

https://www.ftc.gov/legal-library/browse/federal-register-notices/non-compete-clause-rulemaking

[Dahobbs 17420]

5 minutes ago, Dahobbs said:

Why are we even talking about buyer/seller situations? The proposed regulation has an exception for that:

https://www.ftc.gov/legal-library/browse/federal-register-notices/non-compete-clause-rulemaking

Ugh, late typo correction. 

[The Original Greaser Bob 2785]

8 hours ago, wildcat09 said:

Not long ago, Jimmy John’s made all their “sandwich artists” sign noncompetes. They dropped the policy after public pressure, but that’s at least one example of them being used against low-level workers and I'm sure there's plenty more.

Mike's Way but don't drown it.

[The Original Greaser Bob 2785]

1 hour ago, Captainant said:

It's very strange that the defense of NC's has been framed as protecting the right of a business to protect its interests, while completely ignoring the rights of those workers to have any sort of autonomy in their employment.

I'm not sure what you mean by "the autonomy of their employment".  One doesn't have a right to breach confidentiality which is at the heart of NCs.

Solution - you can enforce NC in a rock solid manner as long as you continue to pay 50% of the salary and continue to provide benefits for the duration of the period, not to exceed two years.

 

[TwiceHorn 31184]

1 hour ago, Captainant said:

It's very strange that the defense of NC's has been framed as protecting the right of a business to protect its interests, while completely ignoring the rights of those workers to have any sort of autonomy in their employment.

It's almost like """free-market""" economies are a bit of a misnomer, or something.

I totally get that there's nuance and many instances where a NC clause makes perfect sense, but we've already seen how businesses will abuse NC's to exert feudalistic control over their slave minimum wage employees. If anything, there should be some sort of market-adjusted metric of NC's only being applicable if that employee is earning more than 50% over the median wage - otherwise it'll just be abused to hell and back as another mechanism of class control.

Or we could just ban the damned things altogether. 

[TwiceHorn 31184]

49 minutes ago, The Original Greaser Bob said:

One doesn't have a right to breach confidentiality which is at the heart of NCs.

Is it really though? ** And doesn't trade secret law protect confidential information pretty well?

As I have said dozens of times over the years, my experience with and observation of CNC lawsuits shows that they usually devolve into trade secret litigation, that is, did the departing employee take something he shouldn't have?  And the CNC falls by the wayside as unimportant.

So, it seems like free enforcement of CNCs protects some employer interest that isn't coextensive with "confidentiality" or other IP concepts, and I think the danger there is that it lets the employer "lock up" talent, skill, and knowledge or other desirable employee characteristics that fall below any proprietary protection threshold.

**Yes, I am aware that that is an oft-cited interest of employers that is worthy of protection, but as my follow-up question implies, there's a whole regime for protection of confidential information independent of CNCs.

Edited January 19, 2023 by TwiceHorn

[TwiceHorn 31184]

23 minutes ago, longhornmatt said:

Because the ban only excludes sales “when the person restricted by the non-compete clause is a substantial owner of, or substantial member or substantial partner in, the business entity at the time the person enters into the non-compete clause.”  And then the rule defines “substantial owner/member/partner” as someone who owned at least 25% of the business.  So, noncompetes are prohibited even in sales for any seller who owned less than 25% of the company.

That does seem rather arbitrary and potentially problematic.  I'm reasonably certain that was some kind of attempt to define a minority owner that may not fully consent to the sale of the business, but I think theyre going to have to parse it a little finer than that.

[troph 24547]

32 minutes ago, longhornmatt said:

Because the ban only excludes sales “when the person restricted by the non-compete clause is a substantial owner of, or substantial member or substantial partner in, the business entity at the time the person enters into the non-compete clause.”  And then the rule defines “substantial owner/member/partner” as someone who owned at least 25% of the business.  So, noncompetes are prohibited even in sales for any seller who owned less than 25% of the company.

It’s a proposed rule, I’m saying that’s insufficient to accomplish the intended goals.

[Dahobbs 17420]

34 minutes ago, longhornmatt said:

Because the ban only excludes sales “when the person restricted by the non-compete clause is a substantial owner of, or substantial member or substantial partner in, the business entity at the time the person enters into the non-compete clause.”  And then the rule defines “substantial owner/member/partner” as someone who owned at least 25% of the business.  So, noncompetes are prohibited even in sales for any seller who owned less than 25% of the company.

What are the business where:

1) The seller is an individual as opposed to a business entity;

2) You have individual ownership of less than 25% among members with sufficient knowledge and ability to start a "spite" store;

3) The business is small enough/uncomplicated enough where an individual or a handful of individuals could quickly replicate the business; AND

4) There is some form of legitimate proprietary business information that the non-compete is protecting?

It seems like if you're in a situation where all 4 above apply, then you're better off entering into an employment/consulting contract with the individual sellers for however long you want to avoid them setting up shop against you. 

Anyway, I agree the 25% is arbitrary. But any line is going to be arbitrary. Is 10% better? 5%? 

Edited January 19, 2023 by Dahobbs

[Captainant 27309]

5 minutes ago, The Original Greaser Bob said:

I'm not sure what you mean by "the autonomy of their employment".  One doesn't have a right to breach confidentiality which is at the heart of NCs.

Solution - you can enforce NC in a rock solid manner as long as you continue to pay 50% of the salary and continue to provide benefits for the duration of the period, not to exceed two years.

Not sure if you noticed, but the problematic NC's I was gesturing towards were the ones being used against minimum wage earners as a means to stop them from moving between employers for better pay - when they're already far below median pay. 

I think your solution wouldn't fix anything, because getting a few hundred bucks a month in """non-compete pay""" is cold comfort to being legally prohibited from working anywhere else by a NC if you hate your employer. And it's a pittance to pay for abusive employers to stick it to their labor, which is a plus too

[troph 24547]

50 minutes ago, The Original Greaser Bob said:

I'm not sure what you mean by "the autonomy of their employment".  One doesn't have a right to breach confidentiality which is at the heart of NCs.

Solution - you can enforce NC in a rock solid manner as long as you continue to pay 50% of the salary and continue to provide benefits for the duration of the period, not to exceed two years.

 

100% of comp plus benefits and a maximum term of 1 year.  Make companies pay fair market value for a lock up and no one will ask for a lock up except the most critical positions…. Or ban them entirely. But again, I’m quite opposed to banning non-solicitation of employees and customers, I find those restrictions to be quite justifiable in many, many more instances. I have not reviewed to see if those covenants are on the chopping block or not.

[troph 24547]

2 minutes ago, Dahobbs said:

What are the business where:

1) The seller is an individual as opposed to a business entity;

2) You have individual ownership of less than 25% among members with sufficient knowledge and ability to start a "spite" store;

3) The business is small enough/uncomplicated enough where an individual or a handful of individuals could quickly replicate the business; AND

4) There is some form of legitimate proprietary business information that the non-compete is protecting?

It seems like if you're in a situation where all 4 above apply, then you're better off entering into an employment/consulting contract with the individual sellers for however long you want to avoid them setting up shop against you. 

Anyway, I agree the 25% is arbitrary. But any line is going to be arbitrary. Is 10% better? 5%? 

That’s why I said a multiple of salary or SE income. If you get *paid* then you can afford the lock up in the sale of the business. If they are taking a flyer on the business with a near 100% earnout and very little down and it craters and you’re stuck with a 5 year NC, that suuuucks. 

[Brew 3044]

25 minutes ago, Dahobbs said:

What are the business where:

1) The seller is an individual as opposed to a business entity;

2) You have individual ownership of less than 25% among members with sufficient knowledge and ability to start a "spite" store;

3) The business is small enough/uncomplicated enough where an individual or a handful of individuals could quickly replicate the business; AND

4) There is some form of legitimate proprietary business information that the non-compete is protecting?

It seems like if you're in a situation where all 4 above apply, then you're better off entering into an employment/consulting contract with the individual sellers for however long you want to avoid them setting up shop against you. 

Anyway, I agree the 25% is arbitrary. But any line is going to be arbitrary. Is 10% better? 5%? 

Engineering firm, insurance companies, accounting firms with the new PE interest, the list could easily be long and includes anything with a personal service component. I’m looking at PE deals, have 27 partners, and am locked into a 5 year NC if I take PE money. Those valuations may change substantially if the NC goes away and I can walk post sale and just operate under a non solicitation agreement.

Edited January 19, 2023 by Brew

[Brew 3044]

2 hours ago, longhornmatt said:

I don’t think a nonsolicitation clause alone gets a buyer what they need in many cases.  Plus, it can be murky to distinguish that some conduct is covered by a nonsolicitation and not a noncompete, and I think the language in the proposed FTC rule about de facto noncompete clauses casts doubt on whether nonsolicitation clauses are even excluded from the ban to begin with.  But even putting that aside, it’s still a problem to set up a spite store competitor right after closing even if you don’t specifically solicit your old clients with targeted communication.

Agreed, although it depends on what is selling. Ultimately, in a sale situation or a partner situation the NC should be honored and not subject to a 25% ownership base. If the goal is to protect employees, then protect them with the elimination of the employee/employer component.

[Dahobbs 17420]

3 minutes ago, Brew said:

Engineering firm, insurance companies, accounting firms with the new PE interest, the list could easily be long. I’m looking at PE deals, have 27 partners, and am locked into a 5 year NC if I take PE money. Those valuations may change substantially if the NC goes away and I can walk post sale and just operate under a non solicitation agreement.

I'm not convinced that in those examples the non-compete is protecting a proprietary business interest as opposed to just artificially shrinking the market of competitors. But, again, in those instances, if the individual employee is truly valued for their experience and know how, isn't the better arrangement to condition the sale on the continued work of these individuals for some period of time? It accomplishes the same goals, secures talent to be loyal to the bought business, and doesn't risk the same kind of abuse that we see with non-competes. 

[Dahobbs 17420]

3 minutes ago, Brew said:

Agreed, although it depends on what is selling. Ultimately, in a sale situation or a partner situation the NC should be honored and not subject to a 25% ownership base. If the goal is to protect employees, then protect them with the elimination of the employee/employer component.

I agree that in general focusing on employee/employer relationship makes the most sense. I think the idea behind the 25% is avoiding situations where some grunt with some stock options is stuck with a non-compete and isn't really compensated from the sale. But, you can probably solve that same problem by focusing on degree of control as opposed to just ownership interest. It could look something akin to how we define which employees are exempt from overtime requirements. 

[elfenix 34167]

maybe you should use the comment section on the FTC's site, they're not reading these. 

[Captainant 27309]

20 minutes ago, elfenix said:

maybe you should use the comment section on the FTC's site, they're not reading these. 

Well as we know, it's not REAL speech unless you're spending money while you do it

[The Original Greaser Bob 2785]

4 hours ago, TwiceHorn said:

Is it really though? **

Yes, it really is.

 

4 hours ago, Captainant said:

Not sure if you noticed, but the problematic NC's I was gesturing towards were the ones being used against minimum wage earners as a means to stop them from moving between employers for better pay - when they're already far below median pay. 

I think your solution wouldn't fix anything, because getting a few hundred bucks a month in """non-compete pay""" is cold comfort to being legally prohibited from working anywhere else by a NC if you hate your employer. And it's a

It would fix everything.  You think Jersey Mike's would want to pay have year of salary to someone who has a 95% chance of getting a job at a non-sandwich shop -- thus earning his new pay pay plus the 50% that Jersey Mike's is paying him.  It would eliminate such NCs with low paying jobs.

BUT it would allow a big company to pay a hefty equivalent to garden leave to an employee -- who could use that time to either take a leave or could immediately get a job with a company who is non-competitive. 

 

Edited January 20, 2023 by The Original Greaser Bob

[The Original Greaser Bob 2785]

4 hours ago, TwiceHorn said:

Or we could just ban the damned things altogether. 

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. 

[The Original Greaser Bob 2785]

3 hours ago, Dahobbs said:

I'm not convinced that in those examples the non-compete is protecting a proprietary business interest as opposed to just artificially shrinking the market of competitors.

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. 

 

[TwiceHorn 31184]

9 minutes 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. 

Well, courts have struggled with the things for decades without coming to that solution.  Seems like about half the states ban them outright.

I'm not a giant fan of uniformity for uniformity's sake by federal edict.  But this would make life simpler for a lot of folks.

[The Original Greaser Bob 2785]

6 hours ago, Js1 said:

The free market doesn't apply to the slaves, I mean, the workers. 

Free Market has to do with prices.  This has to do with contracts, confidential infomration and the duty of loyalty.

[The Original Greaser Bob 2785]

1 minute ago, TwiceHorn said:

I'm not a giant fan of uniformity for uniformity's sake by federal edict.  But this would make life simpler for a lot of folks

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. 

States can handle their own contract law. 

So I have to buy the BNA 50 state survey books on Covenants Not to Compete and Duty of Loyalty?  So what?

[Dahobbs 17420]

5 minutes 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. 

 

Most may not. Many do. I can tell you companies try and and enforce these more often than you suggest. You're suggestion to tell them to fuck off only works if 1) the employee is sophisticated enough to know, and 2) the company doesn't try to enforce. Fighting costs money. The employer has more. 

[TwiceHorn 31184]

21 minutes ago, The Original Greaser Bob said:

Free Market has to do with prices.  This has to do with contracts, confidential infomration and the duty of loyalty.

I am going to have to disagree with you a bit on confidentiality.  I have been on both sides of these things and never "in-house," so as far as that goes, I have never been privy to the deepest, darkest aspects of corporate-think.

Nonetheless, when representing an employer, the only real harm they can articulate, and the result they seem to want from me and my colleagues is to protect "valuable information" and to punish the departing employee and scare other employees.  The latter are not things I'm really comfortable with as valid anything.  And the valuable information is usually something that should be or is a trade secret. 

But, sometimes, even often, employers didn't treat the valuable information as valuable prior to the employee's departure.  That is, it didn't maintain confidentiality sufficiently to prevail on a trade secret claim, or the alleged trade secrets are really just knowledge and skill and generally known to those knowledgeable and skillful.  And the lawyers are asked essentially to "invent" trade secrets that the departing employee misappropriated.

One of my all-time favorites is the customer list, half of which the departing employee brought with him, especially many of the whales, and the ones that followed "their boy" to his new employer.  Half the time, the employer struggles to come up with their own version of the customer list, apart from what their sales people maintain individually (their "rolodex") and can offer about about zero evidence of maintaining it in confidentiality.  It just happens not to be generally known.

In almost every serious case of a departing employee with actually valuable trade secret or other confidential information, the departing employee gets his peepee whacked pretty hard on the basis of that misappropriation and not on a covenant not to compete theory.  Most currently: https://ipwatchdog.com/2018/02/14/waymo-uber-theft-trade-secret-litigation/id=93528/

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.

Edited January 20, 2023 by TwiceHorn

[wildcat09 29187]

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

[Hank Scorpio 17711]

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. 

[TwiceHorn 31184]

23 minutes ago, TwiceHorn said:

I am going to have to disagree with you a bit on confidentiality.  I have been on both sides of these things and never "in-house," so as far as that goes, I have never been privy to the deepest, darkest aspects of corporate-think.

Nonetheless, when representing an employer, the only real harm they can articulate, and the result they seem to want from me and my colleagues is to protect "valuable information" and to punish the departing employee and scare other employees.  The latter are not things I'm really comfortable with as valid anything.  And the valuable information is usually something that should be or is a trade secret. 

But, sometimes, even often, employers didn't treat the valuable information as valuable prior to the employee's departure.  That is, it didn't maintain confidentiality sufficiently to prevail on a trade secret claim, or the alleged trade secrets are really just knowledge and skill and generally known to those knowledgeable and skillful.  And the lawyers are asked essentially to "invent" trade secrets that the departing employee misappropriated.

One of my all-time favorites is the customer list, half of which the departing employee brought with him, especially many of the whales, and the ones that followed "their boy" to his new employer.  Half the time, the employer struggles to come up with their own version of the customer list, apart from what their sales people maintain individually (their "rolodex") and can offer about about zero evidence of maintaining it in confidentiality.  It just happens not to be generally known.

In almost every serious case of a departing employee with actually valuable trade secret or other confidential information, the departing employee gets his peepee whacked pretty hard on the basis of that misappropriation and not on a covenant not to compete theory.  Most currently: https://ipwatchdog.com/2018/02/14/waymo-uber-theft-trade-secret-litigation/id=93528/

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.

I had another case where departing employees founded a competing company and scrupulously avoided contact with customers or their old colleagues.  But word got out, and a couple dozen of the best went to work for them.  They really, honest-to-God, took nothing with them other than the contents of their brains.

The case got kind of shitty though when they got drawings on the former employers title box from their customers, who also found them without solicitation.

So, the case went from covenant not to compete, to theft of trade secrets, to design patent infringement, to copyright infringement.  And my client may well have infringed copyright by duplicating those drawings.

In the end, though, it became clear that the CEO of the former employer just wanted "revenge" and would use any legal theory to attempt to obtain it.  The case settled when it became clear to parent company management and the boards that the litigation was unlikely to succeed in proportion to the millions they had spent on legal fees and the CEO was terminated shortly thereafter.

Fun fact.  One of the departing employees was the father of Texas Volleyball Libero Cat McCoy.

Edited January 20, 2023 by TwiceHorn