FTC Bans Non-Competes

[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/ans...anys-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 ing 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 compe ive protections, and once they start ing 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-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 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-compe ive 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/ans...anys-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 ing 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 compe ive protections, and once they start ing 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-compe ive 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 . 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)

pltfrm of bluster

[FuzzyLumpkins]

I'll respond more fully later, but clearly you can't read. I quoted two cases directly refuting your . 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)

pltfrm 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 in your research.

[FuzzyLumpkins]

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

[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 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 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 yourself too please?

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

Andd this is what I was pointing out before. You simply repeat yourself and bluster thus my platform of bluster. Your ing 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 cir stances 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 cir vent 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 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 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 ty 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 su ious. 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.