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It was proposed as a trial balloon not executed. Would be a boon though.
The Proposed Rule
The FTC’s proposed rule categorically deems all non-compete agreements with workers “unfair methods of compe ion” 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 compe ion for labor, and harm innovation and new market entry. The rule rejects the traditional fact-specific analysis under federal law that weighs the potential anticompe ive effects and procompe ive benefits of any given restrictions in favor of a bright-line rule prohibiting all non-compete agreements as unfair methods of compe ion, 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 compe ively 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.
It was proposed as a trial balloon not executed. Would be a boon though.
Yeah a full blown ban on noncompetes isn’t it, but I still think there is only a very narrow set of cir stances where they should be allowed (and never for employees below management level).
Great, now do arbitration clauses.
Yet another well thought out and reasoned response. Thanks!
lol
your red ass is showing, does it still hurt?
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…
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.
some sandwich shop, jimmy john's?, made their low wage sandwich staff of their super-secret, innovative sandwiches sign NDA
ing abusive
forced arbitrations are kangaroo courts won by employers 99% of the time. ing abusive of Labor
Last edited by boutons_deux; 01-07-2023 at 08:20 PM.
NDAs are extremely capable of protecting IP without causing distortions in the employment market.
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.
See above. If IP is protectable (and it is), then so is goodwill.
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 compe ion 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.
Americans love compe ion everywhere except the labor market it would seem.
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 compe ion 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.
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.
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.
also it would take a really ty attorney to agree to an arbitrator who has done extensive business with opposing counsel
that said, yeah, arbitration agreements are bs
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 compe ion 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?
But it isn't though. What courts have long recognized are intangible assets, which have very specific rules (ie: https://www.americanbar.org/content/...0556_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 compe ion outside of legal protections they've obtained.
If a side-effect of non-competes is diminished compe ion 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.
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 compe ive 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-compe ive labor market should look like at it's apex.
"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/flor...-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-c...j-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
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
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 compe ion and property rights/freedom to contract. The doom-and-gloom scenario you're articulating, without evidence, doesn't jive with reality.
lol. Can you give another example besides SV to support your claim? Much less account for other anti-compe ive 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://faircompe ionlaw.com/2019/...ons-route-128/).
It's also lol-worthy because of the exodus of tech from California to places with robust non-compete laws, like Texas.
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?
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 compe ive 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).
It's not doom and gloom, it's very real, with very tangible fines. See, for example: https://venturebeat.com/business/4-t...-compete-pact/
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...
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).
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 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'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-compe ive 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 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.
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