California has proven for decades now that getting rid of non-competes is good for the economy and good for workers. It's bizarre that this move hasn't been copied in every other state, especially among those who routinely invest large amounts of money to try and become "the next silicon valley".
Unfortunately sometimes laws are made not for the best benefit of society as a whole but for the benefit of a powerful or well positioned minority. Now check out the Colorado law. It says that non-competes are forbidden except for four exceptions. Check out the fourth exception:
4. Contracts with executive and management personnel and employees who constitute professional staff to executive and management personnel.
There is an actual clause covering secretaries! So you can be sure your secretary will not go working for a competitor. You do not have to think hard to guess who had this law written for themselves.
… or it could (reasonably) be that secretaries to executives tend to have access to highly privileged information, much more so than most employees of the company, on a level similar to the executive themselves.
You're right, instead of treating them(secretaries) like a trusted confidant and rewarding them well financially - thus ensuring their loyalty (even after their employment!) and compensating them for their truly valuable contribution - we should instead create a law that hamstrings an entire industry and continue to bend the knee to the rich and whatever is convenient for them.
I’m no fan of noncompetes — and I would also rather generate (and have previously generated) loyalty through compensation, goodwill and camaraderie, but this entire argument strikes me as disingenuous.
- The almost conspiracy-esque malice of bending ‘to the rich’ that the grandparent poster was talking about is much more easily explained by ‘these people also have unusually privileged information’.
- I think the thinking (perhaps unfairly) went like this: Whilst there is such a thing as domain skill, a noncompete should affect a secretary or assistant minimally in practice, as they generally have a broad, non-domain-specific skillset, unlike the executive they report to.
> Whilst there is such a thing as domain skill, a noncompete should affect a secretary or assistant minimally in practice, as they generally have a broad, non-domain-specific skillset, unlike the executive they report to.
These aren't what people think of as 'secretaries'. These are highly skilled executive assistants with WAY more domain-specific skills than you're giving them credit for. I have friends that do this for C level executives. Including at $100bn+ companies. A non-compete within a given industry would severely hamstring their future career.
Ugh, I think this is the curse of Internet comments, where you can never include enough disclaimers.
I knew this (correct) case would be made as I was writing my comment, but thought I could avoid including a sub-clause to deal with this topic.
So yes — I know folks like this too and fully acknowledge the skillset involved. Some of those folks have a deep skillset and yet don’t have any particular knowledge such that a noncompete would make sense to keep them from spreading it.
Per my comment I don’t like noncompetes — but I do think that this is the thinking that was used to define policy around this.
I also do think that there is an exclusion zone, whereby folks are either:
- Non-specific and not affected by this materially.
- Highly skilled and /would/ take material privileged information with them.
- High skilled and /would not/.
I suspect the last category is just elided in the thinking that led to this coming to be.
At the risk of deflating this highly-charged discussion, I think the reason for the "executive staff" carve-out might be a little more ho-hum: they are often employed via the same contract as the executive they support.
Yup -- I actually am inclined to agree with my sibling commenter all the way up top.
I don't think the answer here is necessarily all that clever -- charged conversation notwithstanding, I just wanted to get at the fact that it's likely /not a conspiracy/.
I would love to deflate this mess of a subthread. :)
> At the risk of deflating this highly-charged discussion, I think the reason for the "executive staff" carve-out might be a little more ho-hum: they are often employed via the same contract as the executive they support.
Huh? The VP of Engineering has a hefty stock plan, a guaranteed bonus, and a three-year contract. Do you really think that her secretary has anything comparable? Heck, her secretary doesn't even have a three-year contract.
It depends on the executive contract. Some of them will offer a guaranteed number of support staff of the executive’s choice (now whether the admin has to negotiate a separate contract with the exec, I don’t know) and you’ll often see admins move along with the exec from job to job.
But I don’t know if that is why the carve-out is there or not. I doubt it, but some exec contracts absolutely allow for a guaranteed support staff of the exec’s choosing.
> The VP's contract is irrelevant when we're talking about staff.
No it's not. If the VP's contract says "The company will hire an assistant for you" then the assistant negotiates with HR for their salary like a regular employee. If the VP's contract says "You get $100K/yr to hire an assistant" then the assistant can't get a raise until the VP's contract changes.
> The VP's contract reasonably protects the VP from the consequences of a non-compete.
It might, or it might not. Contracts do whatever they say they do. If the contract says "You and your staff can't work for any of our competitors unless it's a leap year and you say Pretty Please" then that's what it says.
More generally, above a certain level, executives are more like a small agency than a single person. If you hire Tim Cook to be the next CEO of your startup, he's going to bring his current assistant(s) with him, he's not just going to inherit whoever the old CEO's assistant was.
I don’t see it as the governments job to ensure the loyalty of those with privileged information through legal force, that should be ensured through higher salaries. It’s an example of a law which exists purely to facilitate inequality and to ensure that people paid so little they will never become homeowners can be threatened with joblessness and poverty if they get a competitor to increase their salaries because of the value of the information they know. These non-competes make it companies can expense enforcing loyalty through legal force to the public purse, instead of actually having to pay for loyalty.
Most laws revolving around protecting corporate secrets are enablers of inequality that the public pays for. It’s one of these services the government provides to business that it really shouldn’t.
As per line one of my comment — I also don’t much like non-competes.
The only reason I commented was to dispel and push back on the conspiracy-esque style that the parent commenter used to characterise /how/ the law got written this way.
I don't really understand what noncompete clauses are for. I would have thought that the law already provides for suing an "unfaithful servant". Surely when you take paid employment, there's an implied obligation to take due care of trade secrets.
The last contract I signed (1 sheet of A4) bound me not to take work with a "competitor" for 6 months after quitting. Since the employer's clients were all local, I took that as meaning I was not to take a job with a web-shop in the same town. And I thought 6 months seemed reasonable - after all, we weren't developing patentable inventions, we were just making websites.
[Edit] I think the purpose of the clause was mainly to stop me taking customer lists to the competitor. I'd have thought that fell squarely into the "unfaithful servant" bag - it's a scummy way for an employee to carry on.
So do legal teams, anyone that touches or creates IP, accounting, IT staff etc. NDAs suffice and "they have access to information" isn't a reason to use anticompetitive laws against secretaries. If a company is worried about "highly privileged information" leaking because an employee is now answering phones at another company, then they've got some serious security problems that non-competes won't fix.
This is a common misconception. “Reasonable” does have a specific meaning in many legal contexts, and courts typically have a more specific test for what constitutes “reasonable”
For example, a state that has a law which says non-competes much be “reasonable”, may be enforced by the courts as “1 year in duration and within 50 miles”.
The problem is that 50 miles seems reasonable on its face; however, it ignores context.
Let's say you work for a consultancy in a large metropolitan area covering 5MM+ people and this area has 100+ consultancies. There are many groups of these consultancies and they all service different verticals. There are no other major areas with concentrations of business within hundreds of miles (see middle America).
A person may have been working exclusively within the healthcare vertical at one consultancy and would move to another to work in a completely different vertical (e.g., retail). Would 'reasonable' cover this nuance? Probably not, particularly not in the favor of the worker.
Yes, I have lived that exact situation before and I think non-competes should be outlawed entirely. I’m just saying that the word “reasonable” doesn’t make a law open-ended.
It's only subjective until the judiciary establishes a standard test or interpretation. Which they have done in every state that has language like this in their laws.
In practice, you can call up a lawyer in any state that requires non-competes to be "reasonable" and they can tell you more specifically what the court will enforce.
I'm pretty sure secretaries know a great deal about their boss's business. It behind that, I assume executive staff can transition industries a lot easier than most employees.
Why would rich and powerful executives lobby to make sure there is an 'exception' that keeps them bound by these contracts?
One answer: It helps them. If you're in demand, you can extract more money by promising to keep the secrets. This gives "executives" and "secretaries to executives" a special way to extract a little more.
I'm not versed in secretarial terms-of-art, but given the unusual grammatical construction, I believe the "to" you left out of that list is actually doing the heavy lifting. Assumedly there is a difference between working under executive and management personnel and being staff TO executive and management personnel.
Though a real quick search did turn up a case where what the lawmakers intended by "management" was in question, so there is a distinct possibility they wrote their terms badly. It's weird reading a law that introduces terms like that without defining them.
Sounds like bad law whether I say FOR or TO, both programmers and secretaries work for them. I am still professional staff to their whims. If they want me to dump medical records in this way or another way, I am required to do so towards their whims.
I feel like the lawyers writing the law felt bad about saying: The people directly responsible for scheduling lunches and making sure executives have time to poop between calls.
I think the reality of it is that secretaries are a form of excessiveness and they are afraid of losing that.
One of the major assumptions of market economics is a competitive environment. Here is a study on the policy of non-competes from the Office of Economic Policy in the US treasury.
First I had no idea how prolific non-competes are.
> Non-competes are a central labor market institution, with nearly one fifth of all American workers currently bound by such a contract.
After the policy recommendations, here is the conclusion from that paper.
> Though non-compete contracts can have important social benefits, principally related to the protection of trade secrets, a growing body of evidence suggests that they are frequently used in ways that are inimical to the interests of workers and the broader economy. Enhancing the transparency of non-competes, better aligning them with legitimate social purposes like protection of trade secrets, and instituting minimal worker protections can all help to ensure that non-compete contracts contribute to economic growth without unduly burdening workers.
Yes, the ability to prohibit an employee from choosing who to work for, while costing the company nothing at all does indeed lead to worse outcomes for the worker.
Any non-compete clause must come with a requirement to pay that employee to not compete. That will quickly get rid of non-competes that aren't actually their for the purpose of protecting trade secrets.
On Wall Street we often have Garden Leave, where an employee continues to receive salary and benefits for a period of time after resigning to go to a competitor. Seems pretty fair to me.
It bothers me that they needed a study to figure this out. It's almost a law of the universe that businesses will attempt to accumulate as much advantage and leverage as possible. Simply put, why would a business choose not to have a non-compete? It costs them nothing and reduces employee leverage and options which will obviously lead to them accepting poorer working conditions and inferior compensation. The only reasons not to have this standard legal boilerplate on every contract are: it's literally illegal or otherwise unenforceable, or the employee already has so much leverage they can negotiate terms of the contract.
> It's bizarre that this move hasn't been copied in every other state, especially among those who routinely invest large amounts of money to try and become "the next silicon valley".
Some states are more friendly to labor exploitation than others.
They didn’t really exist yet (they did, but they were tiny, not on anybody’s radar, and not really competing for top end experienced / senior talent for example, they were just vacuuming up new college grads)..
The defendants were high-technology companies Adobe, Apple Inc., Google, Intel, Intuit, Pixar, Lucasfilm and eBay, each of which was headquartered in Silicon Valley, in the southern San Francisco Bay Area of California.
The civil suit was filed by five plaintiffs. It accused the tech companies of collusion between 2005 and 2009 to refrain from recruiting each other's employees.
Ahh, thanks for the correction. I missed that he stepped down in 2019. My point was that Google failed to remove someone who engaged in criminal activity for several years even after it was made public, which seems to me like tacit approval by the Google board.
Here in Japan, the whole industry colludes as a matter of course. Every company will ask you your current compensation, and then calculate an offer no more than +10%~15%. I'm sure there are exceptions, but that seems to be the widely accepted practice.
I can think of several patented medicines that are not being pursued commercially in the US despite their approval in other countries and proven efficacy. I can think of one that's sat on by a company that already produces a similar medication.
Companies will sit on new medications until right before/after the similar, but older, medications they own/license are off patent, that way they always have another patented medication waiting in the wings for when they're done squeezing every cent they can out of their old ones.
As someone who has worked in the industry, this hasn't been my observation at all. There is never "one" patent for a drug and candidates tend to be patented quite early, so the clock starts ticking. A company may be lucky to get several more patents, but it's not guaranteed.
Plus, there is nothing stopping another company from making a similar drug and beating you to market - there were over 6 -statin drugs in the market at one point.
I don't think it is surprising at all. It needs someone to champion the cause. While it isn't good, it doesn't really effect that many people. At least it isn't as obvious. So no one really takes up the cause
Why does it need a champion? Suppose some legislator is drunk one night and decides to introduce a bill banning non-competes. Who would vote against it?
I can only hope that California follows Colorado's lead here. We cannot have a competitive gap. More jail time for labor exploitation, please! Especially given all the news stories about people leaving California, I think vigorously enforced criminal penalties for execs mistreating workers would be great for the economy, great for workers, and something states like Texas and Florida would have hard time getting passed.
There are few trading firms in california because of the non-compete situation. There are costs to everything even feel-good populism that seems like a no-brainer.
There are few trading firms in California because (i) most trading in the US is done in New York and surrounding areas during New York hours, and (ii) New York is very far from California.
If a trading firm is going to use human traders they would not do it in Cali, because they will have to force their traders to work at uncomfortable hours. If a trading firm is going to use solely computers, they would not do it in California because the time a network signal takes to reach California from New York actually matters in computer based trading.
> There are few trading firms in california because of the non-compete situation.
That doesn't make sense. If that were true, there would be one trading firm in California that only existed to hire traders from other firms and copy results.
Unfortunately, you can’t get out of a noncompete with an employer in state A that allows noncompetes by taking a job with a competitor in a different state B that doesn’t allow noncompetes.
The trading center of the world is NYC and/or Greenwich, CT if you want to be cheeky about it. If the NYSE was in SF, you'd see a lot more trading firms there. Fintech is largely not in cali, as well.
Oh, and you forgot anything that requires child labour in the 21st century. I love these OP type of comments. They always give me a chuckle. I feel like everything reverts to child labour or tragedy of the commons (pollution, excessive harvesting of natural resources). Seriously, can you imagine what businesses said in Victorian England when the child labour acts were proposed? And how about the environmental laws in 1970s in United States? "Oh, how can we continue our filthy, harmful business under these new laws?" This kind of thinking promotes "race to the bottom" mentality that I reject. You said it best: "Some kind of businesses aren't worth having."
On a more positive note: I wish wealthy countries would pass laws to ban ship breaking in countries with weaker environmental laws. It seems like a terrible loop hole today that would not be very expensive to patch. When you look at how chemical plants operate in wealthy (mostly environmentally clean) places, pollution controls are front and center for the whole staff. They well know the fines easily exceed profits, and they don't want to wreck their own communities with pollution.
Citadel, Jump, IMC, Optiver, DRW, Susquehanna International are some of the largest trading firms in the world, and the vast majority of their operations are outside NYC
I'm confused by this comment. I am assume you are not talking about physical commodity trading firms, but rather securities trading firms. If yes, this comment makes no sense. Anyone worth anything in the securities markets is covered by a non-complete clause, but you are paid for it. For example: If your contract says you cannot move to a competitor for six months after you leave, then your current employer is contractually obligated to keep you as a paid employee for those six months. Yes, these contracts have been reviewed by state's attorneys in New York, where most trading firms are based in the US.
The real issue is when firms won't pay workers for this privilege. This should be outlawed. It is harmful to workers and competition ("free movement of labour").
Thats because many trading firms have a handful of key algorithms that took a lot of time and money to develop the first time, but that could be re-implemented with not much effort at a new employer.
This applies to pretty much any valuable information that fits in one person's head.
