It’s been a long time in coming, and it took a lot of discussion and persuasion – but the House listened! And it passed a strong non-compete reform, voted 150-0, limiting non competes to 12 months, with a ‘garden leave provision’: 1/2 of salary, or some mutually agreed upon compensation, to be paid until the non-compete expires.
Notification of any non-compete clause must be served before employment starts – and not weeks later, as it is usually done, at the discretion of the employer. Yay!
The Senate, I hope, will close the loop and pass its own version, including the garden leave provision.
This is good for the employees – and good for the high tech economy, allowing workers to mingle more easily from startup to startup. Cross-pollination is good for a healthy high tech economy!
This is a half measure made to keep EMC happy. We should have followed CA’s lead. Of course pass this, but there’s not a ton to cheer about when the 6th largest economy and tech center of the world has banned them and we’re just trying to play tech hub.
The whole noncompete debate has exposed some of the hypocrisy of the VC community here. At any point over the last few years, VCs could have agreed to limit or ban the use of noncompetes in their portfolio companies. They didn’t. They spoke publicly about the deep unfairness and irrationality of noncompetes, all while still allowing them and using them in their companies. (Hilariously, a local tech publication whose editors regularly railed against noncompetes not only had them but aggressively used them against employees who left.) It’s funny that these investors and companies who so often fight against government regulation were desperately trying to get a government regulation that they could have made unnecessary by choice. Let the startup world choose to ban them and the few larger employers, like EMC, would lose out on talent.
Also, if you’re in the Boston startup world, you know that this is coming pretty late. Unlike in 2000 when the startup bubble burst in spectacular fashion, we’re currently undergoing a deep contraction, but it’s not making the news because it’s not failing public companies. There are many more companies going out of business day to day than getting funding (that was not the case from 2010-mid-2015). It’s not a good time, and any additional freedom for software developers isn’t going to change things much.
It”s not bad, doubleman. The garden leave provision effectively kills the non competes. No company will be willing to pay 1/2 salaries for 12 months after an employee left, it is simply not worth it.
Non-competes are in other industries as well, notably insurance and real estate. There, they are designed to prevent a producer from taking a book with them to another company when they leave. (Disclosure: I have had to sign these). The agent commission is only part of premium, which enhances the value of the agency book overall and sometimes is the difference between percentages from companies TO the agency itself.
I am assuming this is a non-compete reform for ALL industries, not just the ephemeral high tech?
Limits on solicitations of customers/partners/employees I believe are still ok. Also, standard non-disclosure agreements prohibiting use of important company information are ok (as they should be).
These changes put limits on the blanket noncompetes that prevent people from working in the same industry (for a competitor or otherwise) for some period of time.
Non-disclosure and non-solicitation agreements prevent what companies are worried about losing, but proving a violation is hard, so they want these noncompetes as a sure way to make sure they don’t lose a competitive advantage. The agreements often go too far and lock people into jobs unfairly, though.
You are talking about trade secrets and non-discloure agreements, which are already used to police the concerns you raise, and are a separate agreement. Non-compete is a lousy way to control that, particularly if your customer list isn’t worthless once it is a few months old. If businesses in insurance and real estate are using non-competes for this, they are getting bad advice, even without this reform.
The garden leave (assuming it even survives reconciliation) doesn’t really kill non-competes entirely because there are in fact industries willing to pay that kind of severance and 1/2 your salary is only a good deal if you can still get a job somewhere that doesn’t violate the noncompete. Really, there is absolutely no reason not to go all the way.
Personally, I would be extremely reluctant to take a job with a company that wanted me to sign a noncompete. It almost certainly indicates that the company is more interested in setting the parameters of their eventual failure than in actually recruiting the best talent and keeping them happy.
What are EMC and VC?
EMC is the MA tech company recently bought by Dell. It’s notorious for its use of noncompetes.
VC = Venture Capitalist
It seems there was an additional amendment that significantly weakened the garden leave provision.
The biotech world has some of the most egregious non-competes I’ve seen. Much worse than run-of-the-mill hi-tech startups.
The language of what constitutes a competitor is unintentionally hilarious — essentially, “anybody who does anything that we might even someday contemplate doing in any field, market, domain, or universe”.
As someone who has worked in several high-tech startups, and at various times 1) signed them, 2) stuck them in a drawer without signing them, 3) negotiated terms, and 4) wondered whether when a company folded my noncompete still applied to the company who bought the assets (my boss and I decided it didn’t), I applaud ANY effort to eliminate or weaken noncompetes.
Jimmy John’s employees, who have to sign a non-compete so they don’t take their precious knowledge of putting meat in between slices of bread over to Subway’s?
http://www.cnbc.com/2016/06/22/jimmy-johns-drops-non-compete-clauses-following-settlement.html
I had an interesting wrinkle in my agreements with my current employer, a private (not publicly traded) company.
I had a stock agreement (now moot because of an acquisition) that included a SIGNIFICANT non-compete in the language of the stock agreement. In essence, I could buy the stock (at a very attractive price) — the company retained the right to repurchase that stock at the same price for FIVE YEARS if I violated the (typically unbounded) non-compete clause in the stock agreement.
Thankfully, we’re being acquired and all our stock agreements and options have been replaced with an attractive cash purchase deal. My job might not last very long after the acquisition, but I’ll get a nice cash bonus along the way.