FTC Bans Non-Competes

[vy65]

The Proposed Rule

The FTC’s proposed rule categorically deems all non-compete agreements with workers “unfair methods of competition” and requires that companies cease using these provisions and rescind any existing agreements (and provide notice to current and former employees). The Commission’s proposal is based on its conclusion that non-compete agreements are inherently exploitative and coercive to employees, suppress wages and harm competition for labor, and harm innovation and new market entry. The rule rejects the traditional fact-specific analysis under federal law that weighs the potential anticompetitive effects and procompetitive benefits of any given restrictions in favor of a bright-line rule prohibiting all non-compete agreements as unfair methods of competition, which is similar to the approach taken in states like California that generally prohibit the use of non-compete agreements. The proposed rule also flatly rejects common business justifications for such provisions, such as the protection of intellectual property, trade secrets, and other proprietary and competitively sensitive information, claiming that other, less restrictive alternatives exist to protect those interests.

There was a way to do this that made sense. A categorical ban is not it.

[FuzzyLumpkins]

It was proposed as a trial balloon not executed. Would be a boon though.

[Will Hunting]

Yeah a full blown ban on noncompetes isn’t it, but I still think there is only a very narrow set of circumstances where they should be allowed (and never for employees below management level).

[Winehole23]

Great, now do arbitration clauses.

[vy65]

Great, now do arbitration clauses.

Yet another well thought out and reasoned response. Thanks!

[Winehole23]

lol

your red ass is showing, does it still hurt?

[vy65]

lol

your red ass is showing, does it still hurt?


Yet another well thought out and reasoned response. Thanks!

[ElNono]

The Proposed Rule

The FTC’s proposed rule categorically deems all non-compete agreements with workers “unfair methods of competition” and requires that companies cease using these provisions and rescind any existing agreements (and provide notice to current and former employees). The Commission’s proposal is based on its conclusion that non-compete agreements are inherently exploitative and coercive to employees, suppress wages and harm competition for labor, and harm innovation and new market entry. The rule rejects the traditional fact-specific analysis under federal law that weighs the potential anticompetitive effects and procompetitive benefits of any given restrictions in favor of a bright-line rule prohibiting all non-compete agreements as unfair methods of competition, which is similar to the approach taken in states like California that generally prohibit the use of non-compete agreements. The proposed rule also flatly rejects common business justifications for such provisions, such as the protection of intellectual property, trade secrets, and other proprietary and competitively sensitive information, claiming that other, less restrictive alternatives exist to protect those interests.

There was a way to do this that made sense. A categorical ban is not it.

Aren’t they completely banned in California already, tbh?

Would like to see the same spread nationwide.

EDIT: never mind, just saw the mention of Cali…

[ElNono]

Why you don’t like a complete ban, OP? Frankly, at least in Silicon Valley, they been almost exclusively used as part of wage reduction and big tech cartelization.

[boutons_deux]

some sandwich shop, jimmy john's?, made their low wage sandwich staff of their super-secret, innovative sandwiches sign NDA

fucking abusive

forced arbitrations are kangaroo courts won by employers 99% of the time. fucking abusive of Labor

[ElNono]

NDAs are extremely capable of protecting IP without causing distortions in the employment market.

[vy65]

Why you don’t like a complete ban, OP? Frankly, at least in Silicon Valley, they been almost exclusively used as part of wage reduction and big tech cartelization.

For higher-level workers, it makes sense. Businesses have protectable interests in the time and resources they expend on key personnel. Non-competes protect that in a way analogous to an NDA. And parties are free to contract - I don’t think the government should have a say in the specific terms of their agreements. There’s a federalism issue here too since this has been handled by the states for forever - and successfully so. There is a very developed body of case law about the scope/geographic/time limitations a non-compete has to satisfy. I do think this makes sense for lower level workers, but the executive branch passing a complete ban is geared to placate ideologues like WH without any tether to the reality of the law or the business world.

[vy65]

NDAs are extremely capable of protecting IP without causing distortions in the employment market.

See above. If IP is protectable (and it is), then so is goodwill.

[ElNono]

For higher-level workers, it makes sense. Businesses have protectable interests in the time and resources they expend on key personnel. Non-competes protect that in a way analogous to an NDA. And parties are free to contract - I don’t think the government should have a say in the specific terms of their agreements. There’s a federalism issue here too since this has been handled by the states for forever - and successfully so. There is a very developed body of case law about the scope/geographic/time limitations a non-compete has to satisfy. I do think this makes sense for lower level workers, but the executive branch passing a complete ban is geared to placate ideologues like WH without any tether to the reality of the law or the business world.

I doubt there’s a demonstrable case of a non-compete that would protect secrets any better than an NDA would, and at the same time wouldn’t disturb the employment market. The reality is that when you force a clause like that into every contract (ie what happened in SV until the practice was outlawed) it simply became a wink wink nod nod tacit agreement between the companies to avoid competition and thus drive wages lower. It also directly hurts the employees as they now have to go for a period of time being unable to work in their field of choice.


See above. If IP is protectable (and it is), then so is goodwill.

I’m not so sure about that. IPs are protected based on a number of rules (ie: ideas alone cannot be patented or copyrighted). Processes also cannot be protected, IIRC.

[vy65]

I doubt there’s a demonstrable case of a non-compete that would protect secrets any better than an NDA would, and at the same time wouldn’t disturb the employment market. The reality is that when you force a clause like that into every contract (ie what happened in SV until the practice was outlawed) it simply became a wink wink nod nod tacit agreement between the companies to avoid competition and thus drive wages lower. It also directly hurts the employees as they now have to go for a period of time being unable to work in their field of choice.



I’m not so sure about that. IPs are protected based on a number of rules (ie: ideas alone cannot be patented or copyrighted). Processes also cannot be protected, IIRC.

You’re missing the point. It’s a categorical ban. For every example you give of a case where non-competes are don’t make sense, I can give one where they do. I’ve never said that companies should be given free rein here, but swinging to the opposite end of the spectrum is equal nonsense. And that’s to say nothing of the other concerns I have.

And I meant IP in a very broad sense, including trade secrets. You have Alice issues with patents, but not under state UTSA’s, which is why corporations are shifting the regimes they use to protect their IP.

[FuzzyLumpkins]

Americans love competition everywhere except the labor market it would seem.

[ElNono]

You’re missing the point. It’s a categorical ban. For every example you give of a case where non-competes are don’t make sense, I can give one where they do. I’ve never said that companies should be given free rein here, but swinging to the opposite end of the spectrum is equal nonsense. And that’s to say nothing of the other concerns I have.

And I meant IP in a very broad sense, including trade secrets. You have Alice issues with patents, but not under state UTSA’s, which is why corporations are shifting the regimes they use to protect their IP.

The real question is what does a non-compete brings to the table that NDAs, patents, copyrights (or a combination of those) don't? Most work you do for a company is already deemed as work for hire by default, unless some other arrangement was written into the contract.

IMO, in a capitalist society, anything that directly restricts competition should have an exceedingly high bar (ie: patents and copyrights do have a review process that includes prior art disclosure and a time limit, and I'll admit I don't like one bit the continuous extension of the latter).

But that's not really the case with non-competes, because they get swept into contract law, and as such, it's really largely one sided.

For background, I do have some patents under my name, and I talk to the company IP lawyers every year when they're looking to file some new IP, but I am not a lawyer and this is a California-based company, so non-competes don't really enter the picture.

[Will Hunting]

Great, now do arbitration clauses.
:tu

Arbitration (at least in the US) is a complete joke. Employers that use arbitration clauses usually do in order to keep employment disputes confidential / to prevent class action lawsuits, and that was never the intended goal of arbitration. The goal of arbitration was to provide an alternative court that's more cost efficient and expedient, but in my experience that never happens. The arbitrators love being able to charge by the hour so it's in their financial interest to grant continuances, allow extensive discovery, etc.

Arbitration is also loosely regulated to an insane degree. The dynamic where lawyers get their case in front of an arbitrator who gets tons of mediation business from said lawyers happens all the time, and you'll never convince me that arbitrator rulings aren't impacted by the fact that ruling a certain way could lead to no longer being the preferred mediator for a lawyer who sends you $50,000 of mediation business every year.

[spurraider21]

:tu

Arbitration (at least in the US) is a complete joke. Employers that use arbitration clauses usually do in order to keep employment disputes confidential / to prevent class action lawsuits, and that was never the intended goal of arbitration. The goal of arbitration was to provide an alternative court that's more cost efficient and expedient, but in my experience that never happens. The arbitrators love being able to charge by the hour so it's in their financial interest to grant continuances, allow extensive discovery, etc.

Arbitration is also loosely regulated to an insane degree. The dynamic where lawyers get their case in front of an arbitrator who gets tons of mediation business from said lawyers happens all the time, and you'll never convince me that arbitrator rulings aren't impacted by the fact that ruling a certain way could lead to no longer being the preferred mediator for a lawyer who sends you $50,000 of mediation business every year.
at least in CA, employers are required to cover the cost of arbitration when they have arb agreements with employees, including all arbitrator fees. of course, you still might want to bury a contingency lawyer in paperwork nonetheless.

also it would take a really shitty attorney to agree to an arbitrator who has done extensive business with opposing counsel

that said, yeah, arbitration agreements are bs

[vy65]

The real question is what does a non-compete brings to the table that NDAs, patents, copyrights (or a combination of those) don't? Most work you do for a company is already deemed as work for hire by default, unless some other arrangement was written into the contract.

IMO, in a capitalist society, anything that directly restricts competition should have an exceedingly high bar (ie: patents and copyrights do have a review process that includes prior art disclosure and a time limit, and I'll admit I don't like one bit the continuous extension of the latter).

But that's not really the case with non-competes, because they get swept into contract law, and as such, it's really largely one sided.

For background, I do have some patents under my name, and I talk to the company IP lawyers every year when they're looking to file some new IP, but I am not a lawyer and this is a California-based company, so non-competes don't really enter the picture.

I disagree that the "real question is what does a non-compete bring to the table." The real question is whether a categorical ban is or is not the right thing. The thing people don't understand is that business goodwill is a long-recognized property right that non-competes aim to protect. Goodwill isn't IP, so none of the NDA/confidentiality/non-solicitation stuff applies.

You're absolutely right that anything that restricts competition should have an exceedingly high bar. In Texas, at least, that bar very much exists. There are tons of cases declining to enforce the non-compete because they don't meet the geography, scope, and duration requirements that the courts use. That's a balance that has been struck over 40+ years of litigation, and much better than the ham-fisted approach by the FTC.

Do you really think there is never a case where a non-compete is warranted?

[ElNono]

I disagree that the "real question is what does a non-compete bring to the table." The real question is whether a categorical ban is or is not the right thing. The thing people don't understand is that business goodwill is a long-recognized property right that non-competes aim to protect. Goodwill isn't IP, so none of the NDA/confidentiality/non-solicitation stuff applies.

But it isn't though. What courts have long recognized are intangible assets, which have very specific rules (ie: https://www.americanbar.org/content/dam/aba-cms-dotorg/products/inv/book/213938/5070556_SamCh.pdf). Goodwill is simply too ephemeral. And if you look at those rules, they encompass traditional, legal protections such as copyrights, trademarks, pantents, NDAs, etc.

I understand a company trying to protect absolutely everything about their business, but they must do so within the framework afforded to them by law, which includes not pre-empting competition outside of legal protections they've obtained.
If a side-effect of non-competes is diminished competition in the labor market, then non-competes are simply harmful and not properly equipped to deal with the alleged central worry of companies. But companies don't want a more tailored approach, they want non-competes.


You're absolutely right that anything that restricts competition should have an exceedingly high bar. In Texas, at least, that bar very much exists. There are tons of cases declining to enforce the non-compete because they don't meet the geography, scope, and duration requirements that the courts use. That's a balance that has been struck over 40+ years of litigation, and much better than the ham-fisted approach by the FTC.

Do you really think there is never a case where a non-compete is warranted?

I do think there is never a case where a non-compete (as we know it today) is warranted. And I'll posit that proof is in reality: Silicon Valley has perhaps the most vibrant and competitive labor market in the nation, if not the world, and the lack of enforceability of non-competes has not devalued companies' good will or value at all. Is it more complicated for companies due to higher salaries and high turnover? You bet. But that's exactly what a ultra-competitive labor market should look like at it's apex.

[vy65]

But it isn't though.

"We hold that, under the terms of the Covenants Not to Compete Act (Act), the consideration for the noncompete agreement (stock options) is reasonably related to the company's interest in protecting its goodwill, a business interest the Act recognizes as worthy of protection. The noncompete is thus not unenforceable on that basis."

Marsh USA, Inc. v. Cook 354 S.W.3d 764 (Tex. 2011)

"In addition, ACL's goodwill and other business interests are protected by the non-compete because it only covers this specific printing industry, protects contracts and relationships with existing clients, and the asserted violation of the non-compete coincides with loss of business to STD (lol)."

Henson Patriot Ltd. Co. v. Medina Civil Action No. SA-14-CV-534-XR, (W.D. Tex. 2014)

"The Texas Covenants Not to Compete Act states that non-compete agreements are enforceable if they contain "limitations as to time, geographical area, and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee.""

Embarcadero Tech. v. RedGate Software, No. 1:17-cv-444-RP, (W.D. Tex. 2017)

"Both states have found that substantial customer relationships and goodwill are protectable business interests." (Florida & New York): https://www.mavricklaw.com/blog/florida-non-compete-agreement-law-versus-new-york-law-protection-of-customer-relationships-and-goodwill/

"Among an employer`s protected “legitimate interests” are customer relations or goodwill, trade secrets and confidential business information." (New Jersey): https://pinklittlenotebook.com/non-compete-agreement-nj-enforceable/

However, there are a number of legitimate business interests that your non compete agreement may protect, such as: Trade secrets; The relationships you have built with your customers and clients; Confidential information;Goodwill (Michigan) https://millerlawpc.com/noncompete-agreements-michigan/

What you quoted is not case law (I understand the last link above isn't either, but I'm too lazy to do a 50 state survey) and is in the context of IP - which is inapposite. "Goodwill" in this context means something diff


I understand a company trying to protect absolutely everything about their business, but they must do so within the framework afforded to them by law, which includes not pre-empting competition outside of legal protections they've obtained.

There already is a robust framework designed to do exactly this. And it works. A wholesale ban upsets the balance already struck and is horrendous policy and law


If a side-effect of non-competes is diminished competition in the labor market, then non-competes are simply harmful and not properly equipped to deal with the alleged central worry of companies. But companies don't want a more tailored approach, they want non-competes.

Again, I am not saying non-competes should always and forever be enforceable. I've been clear in this thread that I don't think it makes sense for lower-wage, lower-level employees. And I've also already articulated how the law has struck a balance between protecting competition and property rights/freedom to contract. The doom-and-gloom scenario you're articulating, without evidence, doesn't jive with reality.


I do think there is never a case where a non-compete (as we know it today) is warranted. And I'll posit that proof is in reality: Silicon Valley has perhaps the most vibrant and competitive labor market in the nation, if not the world, and the lack of enforceability of non-competes has not devalued companies' good will or value at all. Is it more complicated for companies due to higher salaries and high turnover? You bet. But that's exactly what a ultra-competitive labor market should look like at it's apex.

lol. Can you give another example besides SV to support your claim? Much less account for other anti-competitive behavior that function like non-competes (e.g., anti-poaching agreements from the early 2000s) or other causative factors. Here is a great write-up (https://faircompetitionlaw.com/2019/07/09/correlation-does-not-imply-causation-the-false-comparison-of-silicon-valley-and-bostons-route-128/).

It's also lol-worthy because of the exodus of tech from California to places with robust non-compete laws, like Texas.

[ElNono]

"We hold that, under the terms of the Covenants Not to Compete Act (Act), the consideration for the noncompete agreement (stock options) is reasonably related to the company's interest in protecting its goodwill, a business interest the Act recognizes as worthy of protection. The noncompete is thus not unenforceable on that basis."

Marsh USA, Inc. v. Cook 354 S.W.3d 764 (Tex. 2011)

"In addition, ACL's goodwill and other business interests are protected by the non-compete because it only covers this specific printing industry, protects contracts and relationships with existing clients, and the asserted violation of the non-compete coincides with loss of business to STD (lol)."

Henson Patriot Ltd. Co. v. Medina Civil Action No. SA-14-CV-534-XR, (W.D. Tex. 2014)

"The Texas Covenants Not to Compete Act states that non-compete agreements are enforceable if they contain "limitations as to time, geographical area, and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee.""

Embarcadero Tech. v. RedGate Software, No. 1:17-cv-444-RP, (W.D. Tex. 2017)

"Both states have found that substantial customer relationships and goodwill are protectable business interests." (Florida & New York): https://www.mavricklaw.com/blog/florida-non-compete-agreement-law-versus-new-york-law-protection-of-customer-relationships-and-goodwill/

"Among an employer`s protected “legitimate interests” are customer relations or goodwill, trade secrets and confidential business information." (New Jersey): https://pinklittlenotebook.com/non-compete-agreement-nj-enforceable/

However, there are a number of legitimate business interests that your non compete agreement may protect, such as: Trade secrets; The relationships you have built with your customers and clients; Confidential information;Goodwill (Michigan) https://millerlawpc.com/noncompete-agreements-michigan/

What you quoted is not case law (I understand the last link above isn't either, but I'm too lazy to do a 50 state survey) and is in the context of IP - which is inapposite. "Goodwill" in this context means something diff


None of the case law you cited above advances that "goodwill" on it's own is a "is a long-recognized property right". As I read it, the understanding there is that goodwill encompasses things such as trade secrets, customer lists (both of which can be readily protected by NDAs), trademarks, copyrights, patents, and other intangible assets (as described in the link I provided). It makes sense to encompass all those things into a single term, but, again, "goodwill" in that context encompasses things that are already protected via other means, and this brings up again the same question I asked before: what does non-competes bring to the table that other protections do not? What's left unprotected from a company that's not already covered via NDAs, trademarks, patents and copyrights? It's not "goodwill", because that's simply a term that encompasses all those items, plus, according to you, some others that apparently cannot be protected via those means. What are those items that non-competes are purportedly protecting? And does the inevitable skew in the labor market justifies protecting such items?


There already is a robust framework designed to do exactly this. And it works. A wholesale ban upsets the balance already struck and is horrendous policy and law

It works in what sense? What alleged benefits have been drawn from non-competes? Are companies in States that have already banned non-competes outright having any kind of competitive trouble?
The few times I recall they've made news, it had entirely to do with companies abusing them to game the labor market (which ended up being one of the prime reasons we have States outright banning non-competes in the first place).


Again, I am not saying non-competes should always and forever be enforceable. I've been clear in this thread that I don't think it makes sense for lower-wage, lower-level employees. And I've also already articulated how the law has struck a balance between protecting competition and property rights/freedom to contract. The doom-and-gloom scenario you're articulating, without evidence, doesn't jive with reality.

It's not doom and gloom, it's very real, with very tangible fines. See, for example: https://venturebeat.com/business/4-tech-companies-are-paying-a-325m-fine-for-their-illegal-non-compete-pact/


lol. Can you give another example besides SV to support your claim? Much less account for other anti-competitive behavior that function like non-competes (e.g., anti-poaching agreements from the early 2000s) or other causative factors. Here is a great write-up (https://faircompetitionlaw.com/2019/07/09/correlation-does-not-imply-causation-the-false-comparison-of-silicon-valley-and-bostons-route-128/).

I can talk about California in general, which has had a ban in non-competes dating back to 1872, and today is the #1 state economy in the nation by a fairly huge margin. If non-competes are so proven and robust, what happened there and how was this state able to flourish without them?
Only in 2008 the California Supreme court provided a more tailored approach to this after Edwards v. Arthur Andersen, which protects against soliciting customers or very narrow protections of trade secrets/confidential information via contractual covenants.


It's also lol-worthy because of the exodus of tech from California to places with robust non-compete laws, like Texas.

The exodus has everything to do with the lack of housing and the fact that if you go to work in Texas, you're getting a pay cut. Plus, some of these tech jobs can be done remotely, so for the companies, that works out. But now Austin is also getting expensive and gentrified...

[vy65]

None of the case law you cited above advances that "goodwill" on it's own is a "is a long-recognized property right". As I read it, the understanding there is that goodwill encompasses things such as trade secrets, customer lists (both of which can be readily protected by NDAs), trademarks, copyrights, patents, and other intangible assets (as described in the link I provided). It makes sense to encompass all those things into a single term, but, again, "goodwill" in that context encompasses things that are already protected via other means, and this brings up again the same question I asked before: what does non-competes bring to the table that other protections do not? What's left unprotected from a company that's not already covered via NDAs, trademarks, patents and copyrights? It's not "goodwill", because that's simply a term that encompasses all those items, plus, according to you, some others that apparently cannot be protected via those means. What are those items that non-competes are purportedly protecting? And does the inevitable skew in the labor market justifies protecting such items?

First, you're moving goal posts. At first, you said "business goodwill is not a long-recognized property right." The cases cited say the exact opposite -- goodwill is a business interest long since protected. Business interests are property rights: "We have recognized goodwill as a valuable property right. Peat Marwick v. Haas, 818 S.W.3d 381 (Tex. 1991). Even the article you cited speaks of goodwill as an "asset." You're wrong on the law.

Second, if you read the cases, you'd understand that they treat goodwill separately from IP. The link to the Michigan article even lists them out separately. You can't rely on ABA article about IP to argue in a disparate, non-IP, context something that is rejected by the cases. Whether it makes sense to you or not is besides the point. You can't show me a case from the jurisdictions I've mentioned (Texas, New York, New Jersey, Florida, Michigan) that articulate your view -- and that's because it isn't the law.

Third, I've repeatedly answered your question and now given you several cases from several states. Non-compete protect long-since recognized business interests in their goodwill. NDAs don't. Non-solicitations don't. Trademarks, patents, and copyrights don't.

Fourth, shifting to an un-supported view of what non-competes may or may not do to the market is utterly irrelevant to the question of whether business goodwill is a recognized property right (it is) and whether that right is sufficient to support an enforceable non-compete (again, it is).


It works in what sense? What alleged benefits have been drawn from non-competes? Are companies in States that have already banned non-competes outright having any kind of competitive trouble?

The few times I recall they've made news, it had entirely to do with companies abusing them to game the labor market (which ended up being one of the prime reasons we have States outright banning non-competes in the first place).

In the sense that jurisdictions like Texas have struck a balance between protecting businesses and protecting workers. You are aware that non-competes have to meet pretty stringent requirements that they be i) limited in time, geography, and scope; ii) that the business has the burden of proof to show that they have legitimate interests in enforcing the covenant; and iii) get reformed all the time. They are oftentimes difficult to enforce, much less in a way that results in an award of damages.
The few times I recall they've made news, it had entirely to do with companies abusing them to game the labor market (which ended up being one of the prime reasons we have States outright banning non-competes in the first place).

I've never seen a case where a company abused a non-compete and got relief from a court. Whether it's in the news is one thing - but the reality in court is much different.



It's not doom and gloom, it's very real, with very tangible fines. See, for example: https://venturebeat.com/business/4-tech-companies-are-paying-a-325m-fine-for-their-illegal-non-compete-pact/

It is doom and gloom. The way you talk about how anti-competetive the covenants are doesn't make sense given how strong the economies of states like Texas, New York, and Florida are.


I can talk about California in general, which has had a ban in non-competes dating back to 1872, and today is the #1 state economy in the nation by a fairly huge margin. If non-competes are so proven and robust, what happened there and how was this state able to flourish without them?
Only in 2008 the California Supreme court provided a more tailored approach to this after Edwards v. Arthur Andersen, which protects against soliciting customers or very narrow protections of trade secrets/confidential information via contractual covenants.

The exodus has everything to do with the lack of housing and the fact that if you go to work in Texas, you're getting a pay cut. Plus, some of these tech jobs can be done remotely, so for the companies, that works out. But now Austin is also getting expensive and gentrified...

I'd read that Beck article and circle back on this. Nothing you can say or show will indicate that the absence of non-competes is the cause of the Californian economy's strength - it's at best correlation without causation. Second, you can't account for factors like other anti-competitive practices (like anti-poaching agreements) or the cluster effect. You've cherry picked one thing and singled it out as the sole cause for a really complicated phenomena -- and that's just not believable at all. And the exodus has everything to do with both housing -- and -- the more business friendly climate of places like Texas. There's plenty of housing in places all over the country, but Californian companies are choosing Texas -- why do you think that is?

[BD24]

I would have to agree with Nono that this is a good thing. Non competes give far too much power to employers. Maybe there is cases where they are warranted, but I’ve yet to see those personally.

[ElNono]

First, you're moving goal posts. At first, you said "business goodwill is not a long-recognized property right." The cases cited say the exact opposite -- goodwill is a business interest long since protected. Business interests are property rights: "We have recognized goodwill as a valuable property right. Peat Marwick v. Haas, 818 S.W.3d 381 (Tex. 1991). Even the article you cited speaks of goodwill as an "asset." You're wrong on the law.

Second, if you read the cases, you'd understand that they treat goodwill separately from IP. The link to the Michigan article even lists them out separately. You can't rely on ABA article about IP to argue in a disparate, non-IP, context something that is rejected by the cases. Whether it makes sense to you or not is besides the point. You can't show me a case from the jurisdictions I've mentioned (Texas, New York, New Jersey, Florida, Michigan) that articulate your view -- and that's because it isn't the law.

Third, I've repeatedly answered your question and now given you several cases from several states. Non-compete protect long-since recognized business interests in their goodwill. NDAs don't. Non-solicitations don't. Trademarks, patents, and copyrights don't.

Fourth, shifting to an un-supported view of what non-competes may or may not do to the market is utterly irrelevant to the question of whether business goodwill is a recognized property right (it is) and whether that right is sufficient to support an enforceable non-compete (again, it is).

First, the claim that "business goodwill is a long-recognized property right" was yours, and if we're talking about moving goalposts, now we're shifting to "goodwill is a business interest". Is it a property right or an interest? don't answer, keep reading.

The problem here stems from the fact that you don't know what business goodwill is, that's why, no, you haven't answered the question at all. But fret not, I'll help you and I'll answer the question as well, so we can discuss this in context.

Goodwill absolutely includes IP, and the Michigan article (which is NOT case law, BTW) doesn't separate IP, it doesn't include it at all (since they're implied as part of goodwill). You need to first understand what goodwill is. For that, you can go to accounting, since companies do need to calculate and put a value to goodwill. This is a good primer:
https://www.investopedia.com/ask/answers/010815/how-does-goodwill-increase-companys-value.asp

Goodwill is indeed the sum of property and intangible assets, which includes IP. A company that's has high name recognition derives increased goodwill if that name is trademarked. Similarly, a company derives increased goodwill if it has a war chest of patents, employs highly qualified professionals, has a lucrative list of clients, an increasing amount of trade secrets, etc. Business goodwill is the umbrella term for all those things that cause the value of a company to be perceived above market value.

The answer to the question is fairly simple: non-competes try to protect things within that umbrella that might not have traditional protection, either because the mechanism doesn't exist or by omission. For example, trade secrets can be protected by NDA, but some companies might find difficult or forget to issue NDAs to all it's employees. Generally companies only issue NDAs to third parties. Another example is somebody working on something that's not patented yet since it's in development and you can't patent an idea. Another case is Johnny in sales taking his customer list to a new company. The last two cases don't have traditional protections, but I would actually argue they shouldn't have them (and this is certainly opinion and something tangible we can discuss).

Now, onto the meat of the conversation here, why do I have that opinion? Because you're directly fucking with the employee, and at least on the patent case, you're trying to extend a protection by contract that Congress (via patents) never gave you. The Johnny case is even more dubious since the burden falls entirely on Johnny, and if the clients decide to do business elsewhere, what's wrong with that? So, again, what does non-compete bring to the table compared to traditional protections? Trying to cover some bases that I don't think should be covered. I understand that's convenient for companies, but they're already afforded competitive protections, and once they start fucking with employee mobility, I do have a problem with that. I don't think that's a balanced approach at all.


In the sense that jurisdictions like Texas have struck a balance between protecting businesses and protecting workers. You are aware that non-competes have to meet pretty stringent requirements that they be i) limited in time, geography, and scope; ii) that the business has the burden of proof to show that they have legitimate interests in enforcing the covenant; and iii) get reformed all the time. They are oftentimes difficult to enforce, much less in a way that results in an award of damages.
The few times I recall they've made news, it had entirely to do with companies abusing them to game the labor market (which ended up being one of the prime reasons we have States outright banning non-competes in the first place).

I've never seen a case where a company abused a non-compete and got relief from a court. Whether it's in the news is one thing - but the reality in court is much different.

But "it's working in Texas" isn't a benefit of non-competes. I'm asking what benefits have been drawn from non-competes? I understand how they work, and I understand companies don't like this ban. but what's in it for us mere mortals/consumers?
If you defend non-competes so effusively, you must have reasons to believe that they bring something that can be quantified that is lost with a non-compete ban. What is it?

If you tell me this area of law is good for business, I would understand and your position would be more clear to me.


It is doom and gloom. The way you talk about how anti-competetive the covenants are doesn't make sense given how strong the economies of states like Texas, New York, and Florida are.

But that's exactly the point. You argue that non-competes have little to do with California being the top economy in the nation, and then argue states that allow non-competes like Texas, New York, and Florida are also strong economies.

What that's telling me is that non-competes don't really move the needle in the overall economy, so why should they exist at all, other than cozying up to the corporate overlords?


I'd read that Beck article and circle back on this. Nothing you can say or show will indicate that the absence of non-competes is the cause of the Californian economy's strength - it's at best correlation without causation. Second, you can't account for factors like other anti-competitive practices (like anti-poaching agreements) or the cluster effect. You've cherry picked one thing and singled it out as the sole cause for a really complicated phenomena -- and that's just not believable at all. And the exodus has everything to do with both housing -- and -- the more business friendly climate of places like Texas. There's plenty of housing in places all over the country, but Californian companies are choosing Texas -- why do you think that is?

I was merely pointing out how wholly unnecessary non-competes appear to be to the overall health of a state economy. I also agree there are substantially more important factors to a state's economy, but that's exactly the reason I question what's the reason to keep these anti-competitive arrangements?

As far as the 'exodus', as you called it, we need to also qualify that. The big hoopla was in 2020 when 11 Forbes 1000 companies 'left' California. Of those, 3 (HPE, Oracle, Tesla) went to Texas. All 3 moved their corporate HQ. None of them actually 'left' California. Tesla's factory is still in Fremont, California. Oracle still has the same exact offices in San Francisco, Los Angeles, San Diego, etc, same with HPE. I suspect the 'move' has to do with being financially advantageous to the corporation. Taxes are high in California, and I wouldn't be surprised one bit if they suckered Abbott or local officials into a subsidy and/or a tax holiday as well, tbh.

[FuzzyLumpkins]

Seems that vy has abandoned any rights argument which should not even be in play from corporations as opposed to the rights of an individual but it's abandoned anyway. He isn't really arguing the empirical reality angle of what is going on in Cali.

I wouldn't waste my time any more with the dissembling. You made your point and demonstrated he won't stand by his.

[leemajors]

First, the claim that "business goodwill is a long-recognized property right" was yours, and if we're talking about moving goalposts, now we're shifting to "goodwill is a business interest". Is it a property right or an interest? don't answer, keep reading.

The problem here stems from the fact that you don't know what business goodwill is, that's why, no, you haven't answered the question at all. But fret not, I'll help you and I'll answer the question as well, so we can discuss this in context.

Goodwill absolutely includes IP, and the Michigan article (which is NOT case law, BTW) doesn't separate IP, it doesn't include it at all (since they're implied as part of goodwill). You need to first understand what goodwill is. For that, you can go to accounting, since companies do need to calculate and put a value to goodwill. This is a good primer:
https://www.investopedia.com/ask/answers/010815/how-does-goodwill-increase-companys-value.asp

Goodwill is indeed the sum of property and intangible assets, which includes IP. A company that's has high name recognition derives increased goodwill if that name is trademarked. Similarly, a company derives increased goodwill if it has a war chest of patents, employs highly qualified professionals, has a lucrative list of clients, an increasing amount of trade secrets, etc. Business goodwill is the umbrella term for all those things that cause the value of a company to be perceived above market value.

The answer to the question is fairly simple: non-competes try to protect things within that umbrella that might not have traditional protection, either because the mechanism doesn't exist or by omission. For example, trade secrets can be protected by NDA, but some companies might find difficult or forget to issue NDAs to all it's employees. Generally companies only issue NDAs to third parties. Another example is somebody working on something that's not patented yet since it's in development and you can't patent an idea. Another case is Johnny in sales taking his customer list to a new company. The last two cases don't have traditional protections, but I would actually argue they shouldn't have them (and this is certainly opinion and something tangible we can discuss).

Now, onto the meat of the conversation here, why do I have that opinion? Because you're directly fucking with the employee, and at least on the patent case, you're trying to extend a protection by contract that Congress (via patents) never gave you. The Johnny case is even more dubious since the burden falls entirely on Johnny, and if the clients decide to do business elsewhere, what's wrong with that? So, again, what does non-compete bring to the table compared to traditional protections? Trying to cover some bases that I don't think should be covered. I understand that's convenient for companies, but they're already afforded competitive protections, and once they start fucking with employee mobility, I do have a problem with that. I don't think that's a balanced approach at all.



But "it's working in Texas" isn't a benefit of non-competes. I'm asking what benefits have been drawn from non-competes? I understand how they work, and I understand companies don't like this ban. but what's in it for us mere mortals/consumers?
If you defend non-competes so effusively, you must have reasons to believe that they bring something that can be quantified that is lost with a non-compete ban. What is it?

If you tell me this area of law is good for business, I would understand and your position would be more clear to me.



But that's exactly the point. You argue that non-competes have little to do with California being the top economy in the nation, and then argue states that allow non-competes like Texas, New York, and Florida are also strong economies.

What that's telling me is that non-competes don't really move the needle in the overall economy, so why should they exist at all, other than cozying up to the corporate overlords?



I was merely pointing out how wholly unnecessary non-competes appear to be to the overall health of a state economy. I also agree there are substantially more important factors to a state's economy, but that's exactly the reason I question what's the reason to keep these anti-competitive arrangements?

As far as the 'exodus', as you called it, we need to also qualify that. The big hoopla was in 2020 when 11 Forbes 1000 companies 'left' California. Of those, 3 (HPE, Oracle, Tesla) went to Texas. All 3 moved their corporate HQ. None of them actually 'left' California. Tesla's factory is still in Fremont, California. Oracle still has the same exact offices in San Francisco, Los Angeles, San Diego, etc, same with HPE. I suspect the 'move' has to do with being financially advantageous to the corporation. Taxes are high in California, and I wouldn't be surprised one bit if they suckered Abbott or local officials into a subsidy and/or a tax holiday as well, tbh.

This had a lot to do with it, and also less worker protections figured in esp for Tesla

[vy65]

Seems that vy has abandoned any rights argument which should not even be in play from corporations as opposed to the rights of an individual but it's abandoned anyway. He isn't really arguing the empirical reality angle of what is going on in Cali.

I wouldn't waste my time any more with the dissembling. You made your point and demonstrated he won't stand by his.

I'll respond more fully later, but clearly you can't read. I quoted two cases directly refuting your shit. I'll re-post them so you can avoid them, again.

"We have recognized goodwill as a valuable property right. Peat Marwick v. Haas, 818 S.W.3d 381 (Tex. 1991).

"We hold that, under the terms of the Covenants Not to Compete Act (Act), the consideration for the noncompete agreement (stock options) is reasonably related to the company's interest in protecting its goodwill, a business interest the Act recognizes as worthy of protection. The noncompete is thus not unenforceable on that basis."

Marsh USA, Inc. v. Cook 354 S.W.3d 764 (Tex. 2011)

pl:loltf:lolrm of bluster

[FuzzyLumpkins]

I'll respond more fully later, but clearly you can't read. I quoted two cases directly refuting your shit. I'll re-post them so you can avoid them, again.

"We have recognized goodwill as a valuable property right. Peat Marwick v. Haas, 818 S.W.3d 381 (Tex. 1991).

"We hold that, under the terms of the Covenants Not to Compete Act (Act), the consideration for the noncompete agreement (stock options) is reasonably related to the company's interest in protecting its goodwill, a business interest the Act recognizes as worthy of protection. The noncompete is thus not unenforceable on that basis."

Marsh USA, Inc. v. Cook 354 S.W.3d 764 (Tex. 2011)

pl:loltf:lolrm of bluster

I do find it amusing that the dig has kept in your mind for most of a decade. That is encouraging in terms of the staying power of my rhetoric. You cannot forget it apparently.

I read the first case and the court was clear in pointing out that it needs to be judged case by case. In this case they pointed out that when the defendant left the firm there was an additional loss of clients creating an additional dynamic to consider. That is not quite the argument you think it is. I like how you just pull out blurbs and don't make an argument with context.

In the second case there was a quid pro quo arrangement that was negotiated for the non compete contract. Again not the argument you think it is because you were lazy as fuck in your research.

[FuzzyLumpkins]

I forget completely about Counselor Crayon. Thanks for reminding me, cc. :lol

[vy65]

I do find it amusing that the dig has kept in your mind for most of a decade. That is encouraging in terms of the staying power of my rhetoric. You cannot forget it apparently.

I read the first case and the court was clear in pointing out that it needs to be judged case by case. In this case they pointed out that when the defendant left the firm there was an additional loss of clients creating an additional dynamic to consider. That is not quite the argument you think it is. I like how you just pull out blurbs and don't make an argument with context.

In the second case there was a quid pro quo arrangement that was negotiated for the non compete contract. Again not the argument you think it is because you were lazy as fuck in your research.

Wait, I thought I "abandoned any rights argument," but now we're looking into the cases I cited for the proposition that goodwill is a property interest? I don't think there's enough bluster to fill in the space between those moved goal posts.

Pray tell counselor, does Hass and Marsh support the claim that a covenant not to compete is an enforceable way to protect business goodwill or not? While you're doing so, will you also kindly go fuck yourself too please?

[FuzzyLumpkins]

Wait, I thought I "abandoned any rights argument," but now we're looking into the cases I cited for the proposition that goodwill is a property interest? I don't think there's enough bluster to fill in the space between those moved goal posts.

Pray tell counselor, does Hass and Marsh support the claim that a covenant not to compete is an enforceable way to protect business goodwill or not? While you're doing so, will you also kindly go fuck yourself too please?

As nono pointed out, that was not your original argument. I was just showing how your new ones were shit too.

Andd this is what I was pointing out before. You simply repeat yourself and bluster thus my platform of bluster. Your fucking yourself well enough on your own, Crayon.

[ElNono]

Seems that vy has abandoned any rights argument which should not even be in play from corporations as opposed to the rights of an individual but it's abandoned anyway. He isn't really arguing the empirical reality angle of what is going on in Cali.

I wouldn't waste my time any more with the dissembling. You made your point and demonstrated he won't stand by his.

Just having a conversation with him, tbh…

I can be wrong and I’m certainly not going to die on the non-compete hill.

Sometimes it’s just disagreements, which are normal, tbh

[pgardn]

Just having a conversation with him, tbh…

I can be wrong and I’m certainly not going to die on the non-compete hill.

Sometimes it’s just disagreements, which are normal, tbh

Its interesting. So keep going.
I am attempting to understand some stuff I did not understand before.

[Millennial_Messiah]

Yeah a full blown ban on noncompetes isn’t it, but I still think there is only a very narrow set of circumstances where they should be allowed (and never for employees below management level).
exactly. And never for anyone with a company salary under 200k

[Will Hunting]

exactly. And never for anyone with a company salary under 200k
Certainly never anyone with total compensation below $200k. If someone has a base salary less then 200k but gets tons of stock options and bonus compensation then maybe it’s appropriate in certain situations.

[Millennial_Messiah]

Certainly never anyone with total compensation below $200k. If someone has a base salary less then 200k but gets tons of stock options and bonus compensation then maybe it’s appropriate in certain situations.

What if you decline said extra benefits because they're too expensive out of pocket and/or too long term centric? I.e. life insurance, 401ks, legal insurance, pet insurance, different scenario leaves etc. Just like with gerrymandering House districts, I could easily find a way to gerrymander a $200k compensation to circumvent such a soft rule... pay a guy a $70k base salary, no guaranteed bonus and yet have the "total compensation" in the offer letter be well above $200k.

Base salary plus guaranteed installment bonus >= 200k should be the delimiter. Honestly company 401ks can go fuck off. I want my money now and I want to invest it the way I want, not sacrifice it for "retirement" only to die randomly in my sleep of cardiac arrest or hit a deer at age 43 and never live to enjoy it.

[scott]

Non-competes = small dick energy

[Will Hunting]

at least in CA, employers are required to cover the cost of arbitration when they have arb agreements with employees, including all arbitrator fees. of course, you still might want to bury a contingency lawyer in paperwork nonetheless.

also it would take a really shitty attorney to agree to an arbitrator who has done extensive business with opposing counsel

that said, yeah, arbitration agreements are bs
In some cases the arbitrators you’re provided to choose from have all done extensive business with opposing counsel…not employment stuff but I know lawyers who have mandatory JAMS arbitration for all malpractice disputes as part of their engagement letter because they’ve given business to damn near most of the JAMS arbitrators in their city.

[FuzzyLumpkins]

Any free market supporter should see the word non-compete and automatically become suspicious. It literally suppresses labor supply. Most conservatives aren't really free marketeers but rather corporate tribalists who parrot propaganda.

I don't mind them being part of a negotiation where you are not compelled to take one as a condition of employment. If you give me a juicy golden parachute and stock options I would certainly consider that for additional compensation beyond my employment contract. The problem is that corporate culture colludes to make it an industry standard across a broad array of industries. On a macro level it is a huge labor value suppressor.