Realist, not conformist analysis of the latest financial, business and political news

American Job Non-Compete Clauses

There’s a simple solution to this problem:

It takes the form of non-compete clauses in job contracts.

One might expect these to be used for chief executives, client relationship managers or top researchers – the clauses restrict their ability to jump straight over to a competitor, taking crucial business knowledge and contacts with them.

But the contracts have spread throughout the economy to a terrifying extent.

This chart shows it may be becoming more regular – almost one-quarter of young workers may be barred from competing, compared to just over one-in-six for older staff.

American job contracts all too often contain a non-compete clause. This does indeed reduce labour mobility at cost to the economy as a whole.

OK, what’s the solution?

Courts typically only enforce non-compete clauses in the UK when a “genuine business interest” is under threat, and common law rejects restraints on workers’ rights to practice their trade.

American common law is very similar to UK – no, that’s not the reason it’s called common – so that underlying principle is still there. All that needs to happen is that courts enforce that idea.

As, in fact, they largely do.

That is, sure, the clauses shouldn’t be there in the contracts in the first place but as they’re, at those lower levels, entirely unenforceable they don’t matter all that much.

0 0 vote
Article Rating
Total
0
Shares
Subscribe
Notify of
guest
6 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Esteban
Esteban
1 year ago

It’s been a while since I retired, but my last employer, a large widely known business, had all employees sign them. Employees were completely free to go work anywhere else they wanted, but were restricted from luring away the clients they personally worked with or other staff. And those restrictions could be evaded fairly easily if both parties so desired. In exchange for signing the agreement the staff were given severance payment guarantees that were 100% enforceable.

jgh
jgh
1 year ago

How on earth can a contract prevent somebody taking skills and knowledge with them? We don’t have the technology to wipe people’s memories – at least, not while keeping them alive.

BlokeInTejas
BlokeInTejas
1 year ago
Reply to  jgh

US law, if I remember correctly, allows you to leave with that general collection of Stuff you were bound to learn how to do while doing your job (there’s a word for that sort of knowledge that I’ve misplaced).

What you’re NOT allowed to export to your new employer is specific business info – product plans, market strategies, customers, pricing, the neat new trick in the microarchitecture to get the branch prediction improved by 50%, and so forth. Plus, employees names. And often, you mustn’t recruit folk you knew.

Not enormously burdensome for folk with ethics.

jgh
jgh
1 year ago
Reply to  BlokeInTejas

I learned this great trick to do an 8-bit rotate when only 9-bit rotates are available while in job A. I’m not allowed to use it in job B? That’s….. brain-melting.

BlokeInTejas
BlokeInTejas
1 year ago
Reply to  jgh

Nah. The law’s not that stupid. It’s **biznis** related stuff above all. The great new trick would be something that was previously unknown, and effective, and was a significant competitive advantage. My view is that it’d apply in a case like out of order execution: if Tomasulu hadn’t published his algorithm for out of order execution, and there wasn’t a patent filed (etc), then he’d have been in trouble had he gone to Amdahl. On the other hand, if you’d come up with a neat method of renaming the registers – different from published AND the company classed it internally… Read more »

Steve Fleischer
Steve Fleischer
1 year ago

Yes, those contracts are unenforceable, but…

I have used them to punish an employee who burned bridges on the way out.

Using corporate resources, I have sued, forcing the defendant to hire a lawyer. Plus his new employer doesn’t want to be caught in the middle, so he is typically let go (more trouble than he is worth).

Then we settle with each side agreeing to pay legal our own legal expenses (he is so relieved that he accepts the c. $5,000 hit).

“Pour encourager les autres”.

Sends a clear message to the troops.

Can you help support Continental Telegraph?

If you can spare a few pounds you can donate to our fundraising campaign below. All donations are greatly appreciated and go towards our server, security and software costs. 25,000 people per day read our sites and every penny goes towards our fight against the Establishment. We don't take a wage and do what we do because we enjoy it and hope our readers enjoy it too.


Donate
6
0
Would love your thoughts, please comment.x
()
x