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Old Jun 9, 2014, 08:19 AM   #1
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Noncompete clauses and the free market in labor

Non-compete clauses used to apply to people who had unique insider knowledge. No longer. Now, even some camp counselors are required to sign non-compete clauses to get hired:

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BOSTON — Colette Buser couldn’t understand why a summer camp withdrew its offer for her to work there this year.

After all, the 19-year-old college student had worked as a counselor the three previous summers at a nearby Linx-branded camp in Wellesley, Mass. But the company balked at hiring her because it feared that Linx would sue to enforce a noncompete clause tucked into Ms. Buser’s 2013 summer employment contract. Her father, Cimarron Buser, testified before Massachusetts state lawmakers last month that his daughter had no idea that she had agreed to such restrictions, which in this case forbade her for one year from working at a competing camp within 10 miles of any of Linx’s more than 30 locations in Wellesley and neighboring Natick.
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There are plenty of other examples of these restrictions popping up in new job categories: One Massachusetts man whose job largely involved spraying pesticides on lawns had to sign a two-year noncompete agreement. A textbook editor was required to sign a six-month pact.

A Boston University graduate was asked to sign a one-year noncompete pledge for an entry-level social media job at a marketing firm, while a college junior who took a summer internship at an electronics firm agreed to a yearlong ban.

“There has been a definite, significant rise in the use of noncompetes, and not only for high tech, not only for high-skilled knowledge positions,” said Orly Lobel, a professor at the University of San Diego School of Law, who wrote a recent book on noncompetes. “Talent Wants to be Free.” “They’ve become pervasive and standard in many service industries,” Ms. Lobel added.
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Backers of noncompetes counter that they help spur the state’s economy and competitiveness by encouraging companies to invest heavily in their workers. Noncompetes are also needed, supporters say, to prevent workers from walking off with valuable code, customer lists, trade secrets or expensive training.

Joe Kahn, Linx’s owner and founder, defended the noncompete that his company uses. “Our intellectual property is the training and fostering of our counselors, which makes for our unique environment,” he said. “It’s much like a tech firm with designers who developed chips: You don’t want those people walking out the door. It’s the same for us.” He called the restriction — no competing camps within 10 miles — very reasonable.
http://www.nytimes.com/2014/06/09/bu...pgtype=article

It is funny how businesses always cite free-market prices for labor as the explanation for why they shouldn't pay more, and yet, suppress that very free market when it suits their own interests.
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Old Jun 9, 2014, 08:28 AM   #2
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Non-compete clauses are part of the employment contract. An employee is free to refuse to sign them and go to work for someone that doesn't require them. The job belongs to the employer not the employee. Companies do not want to train an employee only to have them go to work for a competitor.
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Old Jun 9, 2014, 08:36 AM   #3
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Non-compete clauses are part of the employment contract. An employee is free to refuse to sign them and go to work for someone that doesn't require them. The job belongs to the employer not the employee. Companies do not want to train an employee only to have them go to work for a competitor.
Good point. In fact, perhaps we should bring back indentured servitude. After all, you can't have people that you have trained to dig ditches and do laundry wandering off the farm and going to work for your neighbor.
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Old Jun 9, 2014, 08:43 AM   #4
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Good point. In fact, perhaps we should bring back indentured servitude. After all, you can't have people that you have trained to dig ditches and do laundry wandering off the farm and going to work for your neighbor.
We're not talking about indentured servitude but thanks for taking it to the extreme. There are many employment positions today that now take a skill level that is higher than before. We don't want to invest in training to have a person go to work for the competitor. Is it unreasonable to ask that an employee not go to work for a competitor for at least a period of time? One year or six months.
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Old Jun 9, 2014, 09:02 AM   #5
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Originally Posted by Southern Dad View Post
Non-compete clauses are part of the employment contract. An employee is free to refuse to sign them and go to work for someone that doesn't require them. The job belongs to the employer not the employee. Companies do not want to train an employee only to have them go to work for a competitor.
Philosophically do non-compete clauses get your stamp of approval? Give them a min time contract instead! In this way they will get their investment back before the employee can leave.

No, why? Because employers want to tie the hands of employees but not have their own hands tied, that's why. This seems to be another example of employers taking advantage of their position to meddle in employees lives. After you have filled the terms of your contract, you the employee should be free to go within out restriction. IMO non-compete clauses should be sharply restricted.
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Old Jun 9, 2014, 09:26 AM   #6
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Originally Posted by Southern Dad View Post
We're not talking about indentured servitude but thanks for taking it to the extreme. There are many employment positions today that now take a skill level that is higher than before. We don't want to invest in training to have a person go to work for the competitor. Is it unreasonable to ask that an employee not go to work for a competitor for at least a period of time? One year or six months.
Is it unreasonable to ask an employee not to work in their profession for a year or move out of the area? Absolutely. Yes it is unreasonable because it is one sided versus a fair two sided agreement, a contract if drafted properly, serves both parties. This would be more equitable. But you see, when it comes to employees, employers don't like to be held to terms and conditions. If I recall correctly, in the medical profession, I have heard of non-compete clauses for 2years.
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Last edited by Huntn; Jun 9, 2014 at 10:20 AM.
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Old Jun 9, 2014, 09:28 AM   #7
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What needs to happen is a law that requires a verbal explanation of certain criteria. Or maybe a law that imposes a minimum grace period to sign.

She was a barley legal 18yrs when she signed her employment contract. Most people that age would sign anything quickly just to get locked in.
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Old Jun 9, 2014, 09:33 AM   #8
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What needs to happen is a law that requires a verbal explanation of certain criteria. Or maybe a law that imposes a minimum grace period to sign.

She was a barley legal 18yrs when she signed her employment contract. Most people that age would sign anything quickly just to get locked in.
The non-complete clause is primarily an anti-competition mechanism which only serves the employer, and it does nothing to guarantee they will save on training costs as a thread participant has been arguing.
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Old Jun 9, 2014, 09:35 AM   #9
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Originally Posted by Southern Dad View Post
Non-compete clauses are part of the employment contract. An employee is free to refuse to sign them and go to work for someone that doesn't require them. The job belongs to the employer not the employee. Companies do not want to train an employee only to have them go to work for a competitor.
Non compete clauses are completely ridiculous and fortunately here they are almost completely unenforcible. I can't really see how a non compete clause would be valid in this case.
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Old Jun 9, 2014, 09:52 AM   #10
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Originally Posted by Huntn View Post
The non-complete clause is primarily an anti-competition mechanism which only serves the employer, and it does nothing to guarantee they will save on training costs as a thread participant has been arguing.
I've walked away from potential jobs in the past cause employers had a "now or never" attitude when it came to signing employment agreements.

My point is .... You should either have clear verbal explanation of what your signing, or be allowed a grace period to sign.
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Old Jun 9, 2014, 10:05 AM   #11
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Most blanket non-compete clauses employers try and use would not stand up in court.

Generally speaking the non-compete needs to meet three standards:

1) It can be no stricter than necessary to protect the Employer's legitimate business interests.

2) It cannot impose unreasonable hardship on the Employee.

3) It cannot be injurious to the General Public.

Most N/Cs fail test #2.

If you've made your career selling hydraulic pumps, the technical know-how and personal contacts you've made are such that you cannot hope to make a similar income selling - for instance - agricultural machinery or imported cars.

Employee non-disclosure or confidentiality agreements are another thing entirely. You cannot give proprietary technical information, customer lists, cost data, etc. to a new employer. But the former employer cannot usually pro-actively prevent you from taking a job with a competitor.
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Old Jun 9, 2014, 10:08 AM   #12
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IMO non-compete clauses should be sharply restricted.
They are mostly unenforceable in California.
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Old Jun 9, 2014, 10:10 AM   #13
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Originally Posted by vrDrew View Post
Most blanket non-compete clauses employers try and use would not stand up in court.

Generally speaking the non-compete needs to meet three standards:

1) It can be no stricter than necessary to protect the Employer's legitimate business interests.

2) It cannot impose unreasonable hardship on the Employee.

3) It cannot be injurious to the General Public.

Most N/Cs fail test #2.

If you've made your career selling hydraulic pumps, the technical know-how and personal contacts you've made are such that you cannot hope to make a similar income selling - for instance - agricultural machinery or imported cars.

Employee non-disclosure or confidentiality agreements are another thing entirely. You cannot give proprietary technical information, customer lists, cost data, etc. to a new employer. But the former employer cannot usually pro-actively prevent you from taking a job with a competitor.
It could be that in a city where these agreements are common place, it may not ever have to go to court if other employers are hesitant to hire you based on one existing, and the likely case that you as a former employee won't get a good letter of recommendation from your former employer if you break the agreement. It's better if these things did not exist.
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Old Jun 9, 2014, 10:14 AM   #14
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Originally Posted by LIVEFRMNYC View Post
I've walked away from potential jobs in the past cause employers had a "now or never" attitude when it came to signing employment agreements.

My point is .... You should either have clear verbal explanation of what your signing, or be allowed a grace period to sign.
Quote:
Originally Posted by vrDrew View Post
Most blanket non-compete clauses employers try and use would not stand up in court.

Generally speaking the non-compete needs to meet three standards:

1) It can be no stricter than necessary to protect the Employer's legitimate business interests.

2) It cannot impose unreasonable hardship on the Employee.

3) It cannot be injurious to the General Public.

Most N/Cs fail test #2.


... But the former employer cannot usually pro-actively prevent you from taking a job with a competitor.
The camp counselor case shows exactly how a larger company, in this case a chain of for-profit camps, can use the clause to its advantage despite its unenforceability. It intimidates its smaller competitors in the area, because they know that the bigger company can afford to sue the smaller company, and, it drives down wages that it has to pay. And the company had the chutzpah to claim not just an investment in training, but, "intellectual property" no less.
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Old Jun 9, 2014, 10:16 AM   #15
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They are mostly unenforceable in California.
I imagine this would be the case in any pro-labor State, better described as fair-labor, but my impression is that fair-labor as a standard is fading as conservative values rebound from the New Deal days.
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Old Jun 9, 2014, 10:24 AM   #16
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The camp counselor case shows exactly how a larger company, in this case a chain of for-profit camps, can use the clause to its advantage despite its unenforceability.
All true.

But no one ever said the cause of liberty was going to be easy. And sometimes part of being an outstanding human being means telling an overly aggressive employer or competitor: So sue me.

America today is full of bullfaeces artists and greedheads. Ever has been.
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Old Jun 9, 2014, 10:28 AM   #17
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I've been in the computer industry over 20 years and have signed dozens of these over the years and have never heard of an employer pursuing legal action when these contracts are broken and I'm sure I've broken several of them. Most of the time a previous employer or an employer I was on contract to does not even know what company I went to after I left.

These type of contracts to me seem to be more of a CYA (cover your ass) for an employer to give them some legal recourse for someone who really burns a bridge if they leave early. Generally I've only seen these tied to higher compensation and information sensitive jobs. So I'm not really sure if it is financially worth pursuing enforcement of these when they are broken for lower paying jobs like a camp consoler or an intern.
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Old Jun 9, 2014, 10:33 AM   #18
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All true.

But no one ever said the cause of liberty was going to be easy. And sometimes part of being an outstanding human being means telling an overly aggressive employer or competitor: So sue me.
Absolutely. But, who would she utter those words to? It was the other employer who withdrew the offer because they didn't want to get sued.
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Old Jun 9, 2014, 10:43 AM   #19
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Absolutely. But, who would she utter those words to?
This is where the outstanding human being needs to call on her resources of creativity.

There are probably a thousand avenues to pursue: She could start out by quietly calling her former employer and asking to be released, in writing, from the N/C. Its amazing what you can get if you ask for something with a smile. She could also say, sotto voce that it sure would be a shame if a former camp counselor started dropping nasty stories about what goes on at their facilities on Facebook, etc. Or she could simply say: If you are going to prevent me from working for your competitor, I expect to be offered a job with your organization in return.

In my experience, it is almost always in everyone's interest to part as friends with a former employer. At least publicly.
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Old Jun 9, 2014, 11:00 AM   #20
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Originally Posted by vrDrew View Post
Most blanket non-compete clauses employers try and use would not stand up in court.

Generally speaking the non-compete needs to meet three standards:

1) It can be no stricter than necessary to protect the Employer's legitimate business interests.

2) It cannot impose unreasonable hardship on the Employee.

3) It cannot be injurious to the General Public.

Most N/Cs fail test #2.

If you've made your career selling hydraulic pumps, the technical know-how and personal contacts you've made are such that you cannot hope to make a similar income selling - for instance - agricultural machinery or imported cars.

Employee non-disclosure or confidentiality agreements are another thing entirely. You cannot give proprietary technical information, customer lists, cost data, etc. to a new employer. But the former employer cannot usually pro-actively prevent you from taking a job with a competitor.
Non-compete clauses are often used at the higher levels of a company, so that the founder, for example, doesn't go off and start a competing business in the same area. I never liked them, and I really don't like them at the lower employee level. These are not the folks that the non-compete is really targeted for. On the other hand, I think a nondisclosure agreement would be the more reasonable way to go at all levels. With an NDA, the employee simply promises not to disclose the business methods or confidential intellectual property of their former employer to their new employer or anyone else. It does not prevent them from working for a competitor and earning a living. This is especially important today where people jump from employer to employer, particularly in the tech/computer industry.
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Old Jun 9, 2014, 11:48 AM   #21
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In a Free Market™, anti-competitive practices wouldn't exist.

Wait...
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Old Jun 9, 2014, 11:51 AM   #22
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It's completely obvious to any reasonable person that non-compete clauses are completely over the top for rank and file employees.
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Old Jun 9, 2014, 11:58 AM   #23
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We're not talking about indentured servitude but thanks for taking it to the extreme. There are many employment positions today that now take a skill level that is higher than before. We don't want to invest in training to have a person go to work for the competitor. Is it unreasonable to ask that an employee not go to work for a competitor for at least a period of time? One year or six months.
And we're not talking a CIO, a project manager, or even a bookkeeper. We're talking about a freaking camp counselor, or any of hundreds of other jobs where a non-compete clause is completely pointless and serves no purpose. It is actually the antithesis of free-market, and the irony is not lost on me that most free-market supporters probably support non-compete clauses as well.

Seriously...a camp counselor is a seasonal job. On the last day of camp, they should have no control over what you do following that, for any reason at all.

I'm not surprised in the slightest that you would support this, however.
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Old Jun 9, 2014, 05:02 PM   #24
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On the other hand, I think a nondisclosure agreement would be the more reasonable way to go at all levels. With an NDA, the employee simply promises not to disclose the business methods or confidential intellectual property of their former employer to their new employer or anyone else. It does not prevent them from working for a competitor and earning a living. This is especially important today where people jump from employer to employer, particularly in the tech/computer industry.
NDAs are much more reasonable, and they prevent certain distortions in the labor market. Non-compete agreements, especially those that are in effect for a period of time after an employee leaves a certain company have the effect of potentially depressing wages and salaries. In the case of an NDA, it ensures that companies can't purchase the IP of another company by hiring their employees. In that sense they have opposite effects.
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Old Jun 9, 2014, 06:04 PM   #25
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I think it's pretty obvious:

1) Whoever runs these camps and made up this non-compete policy is an idiot
2) If they are a private company, they should be allowed to be idiots.
3) We don't need laws shielding people / companies from being idiots. The market / karma will take care of that.

Moving along.

-t
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