The only time I see non-competes as reasonable is when someone sells a business. It seems fair to put a territory restriction on a seller so the new owner doesn't have to immediately start competing against the person they bought out.
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Here in Sweden non-competes without a financial agreement is void. And those that offer some financial are probably OK, but haven't been tried extensively.
The non-competes I've signed have offered 60% of my base pay for six months (the length of the non-compete) if I cannot find a job because of the contract if the company exercise it.
They never have exercised it for me.
Those sorts of agreements are generally still allowed with these anti non-compete laws. If there is a specific non-compete contract that is signed, with money being paid for it directly, that is fine. That is a normal contract where both sides trade something of value.
The types that are banned are ones that set the restriction as a part of a normal employment contract, where there is no specific compensation given for accepting the non-compete and where the employee can't decide to abandon the non-compete in return for not getting the extra money.
Yeah, those contracts are not valid here as the right to livelihood will trump that contract.
So even if you sign that clause you are not bound by it.
The problem is allowing companies to do contracts that their lawyers know are null and void (like the above) but the employee may not know.
Employees thinking they are subject to legal penalties/fight due to a non-enforceable non-compete gets the company 90% of what they want, anyway, and so to prevent that they should be strongly punished.
> So even if you sign that clause you are not bound by it.
Jimmy John's was making its low-level employees sign non-competes, for example. This was ridiculous on its face, and probably wouldn't hold up in court. However, the people affected by it were least able to take it to court.
Right, the way it would work is that you are getting some sort of payment every month for not competing. If you choose to start competing, those payments stop. You can choose to stop the non-compete at any time, you are just giving up that income stream.
In New Zealand it has been like that for ever, but no one knew, and employers used them and employees abide.
Partly it was naked power.
I also see these as reasonable since they are part of the negotiation of selling the business. Non-competes as it relates to most ordinary employees in the US is typically a contract of adhesion: a surprise take it or leave it clause while signing an employment agreement, well after a job offer and salary negotiation.
Non-competes are restrictions on employees by their current employer. A non-compete agreement between a seller and buyer is perfectly fine.
Technically, restrictions on employees by their FORMER employer. In theory (if valid), they could retain power over you for a time AFTER you are no longer employed.
A similar thing is often done during dismissal: sign away your rights to sue for wrongful dismissal in return for severance. In my case, almost a year's worth of pay seemed like a reasonable severance, so I took it and didn't argue.
> A non-compete agreement between a seller and buyer is perfectly fine.
Well, it's up to market protection agencies to look at the specifics.
Not really. Individuals who can build a company are under no obligation to sell it to anyone placing unreasonable conditions on the sale. If I'm buying your company, I have a concern that you might pull of of the customers back (having started a new company) but the price I'm willing to offer you compensates you for the book of business you are selling to me. That's where non-solicitation clauses come in.
I think the operative principal here is that employees are at a disadvantage w/r to employers. Buyers and sellers are not presumed to be at any disadvantage w/r to each other.
You are not always free to sell your business in any way you want. Some times, there are restrictions or you may not be allowed to sell at all.
Anyway, that's not related to the employees contracts.
That's how it works in California. I had a 3 year non-compete with VMware after we sold a business to them. It was restricted to the specific market and technology our business covered but didn't limit activities in other areas. It seemed completely fair to me.
Besides, competing would have meant doing exactly the same thing over again. What's the fun in that?
>Besides, competing would have meant doing exactly the same thing over again. What's the fun in that?
All of the baggage and tech debt gone! THIS TIME WE'LL DO IT RIGHT
It is not unheard of that employees leave a company to start their own precisely because the company is not addressing something specific leaving a gap in services. The startup begins to gain traction to the point the company the employees left buys the startup. It's like this is the only way for the company to "do it right", yet it would have been cheaper if they'd just let the employees do the thing as employees in the first place
> it would have been cheaper if they'd just let the employees do the thing as employees in the first place
Keep in mind the company is probably not refusing to do things because of cost. Often it is because of risk.
A lot of people running businesses have terrible judgement when it comes to risk
But also a lot of people go off and try to create competitive businesses and fail, a lot of people also try to completely rework the business they're in and also fail (it's a disease in early stage startups)
PeopleSoft -> Workday
Apple -> NeXT
Isn't that doable via stay on and holdback clauses?
I think every company with contracts like this should have a well furnished roof for these employees to hang out during the day
Is it reasonable? You clearly have the advantage since you bought a running business where as the other person has to build a new company from scratch. I fail to see how it is reasonable to tell a person what they can or can't do after the transaction is over. Also from a consumer standpoint competition is good.
Why? They started one successful business. It seems good for society if they go on to start another.
Often an acquisition of a company is for the set of customers. If I sell my lawn care business and then turn around and email all my former clients offering them lawn care via my new company, I’ve just undercut what I just sold.
Noncompete shouldn’t be so broad that I couldn’t move to another city and start a lawn care business there, but I shouldn’t be able to compete directly with the business I just sold using my insider information of that business.
There's also a big difference between starting a competing business like your example, and being barred from say working on "cloud infrastructure" because your previous employer also worked on "cloud infrastructure". It can be blurry for executives, but in general noncompetes seem to be used to push pay down more than for any legitimate business purpose.
> Often an acquisition of a company is for the set of customers.
That's a merger. You can, not having any business currently, buy yourself into one. In which case the acquisition is purely for the profits.
> I’ve just undercut what I just sold.
No you've just competed with them. If your prices are lower then you've undercut them. If their prices are artificially high then the market, a.k.a. those customers, are the ones to benefit.
> but I shouldn’t be able to compete directly with the business I just sold
Competition is _competition_. You didn't buy a market you bought an opportunity. You still have to compete against everyone else.
> I just sold using my insider information of that business.
Insider information? On a lawn care business that has no issued securities?
Why would I buy a business if the person im buying it from is just going to create a new one to compete with me?
To have own the business?
Purchases that wouldn't go through if they didn't reduce competition shouldn't happen anyway. Banning those kinds of restrictions would help with that.
That is not even remotely the point OP is arguing.