Massachusetts Bill to Ban Non-Competes backed by Spark Capital(xconomy.com)
xconomy.com
Massachusetts Bill to Ban Non-Competes backed by Spark Capital
http://www.xconomy.com/boston/2009/04/08/spark-capital-backs-brownsbergers-bill-to-ban-non-competes/
10 comments
I agree. If you feel your employee is a value to you and potentially a competitor, you ought to compensate them accordingly. Personally, I would never sign a non-compete unless there were not only adequate considerations for compensation, but also equity.
I agree with a ban on putting it into an employment contract, however I don't agree with them being banned completely.
I don't think my getting a job should hinge on if I agree not to use my knowledge for my own best interest. If a company wants to offer me something that (from my perception) is of better interest to me than competing with them, then I'd possibly sign it.
If it's that important to a company that I don't compete with them, they should be willing to pay me enough that I have an interest not to compete.
I don't think my getting a job should hinge on if I agree not to use my knowledge for my own best interest. If a company wants to offer me something that (from my perception) is of better interest to me than competing with them, then I'd possibly sign it.
If it's that important to a company that I don't compete with them, they should be willing to pay me enough that I have an interest not to compete.
From an employer's perspective, employees at a competing company are more valuable workers than employees of equivalent skill at companies in other product markets, due to their inside knowledge of competitors' operations. I can understand why some people might think this is unfair and be willing to enforce contracts that make an employee wait a certain time period before working for a competing firm.
Exactly. If you want your employees to be loyal to your 'cause', give them equity. Don't expect them to be a team player without some sort of reward beyond simply keeping their job.
As an employee I 'clock out' when my day is over and are free to pursue whatever I want in my own time. As an owner, I do everything I can to make sure my company survives and thrives around the clock both at work and at home. There's a definite line there that shouldn't be crossed (or you'll get burned)
As an employee I 'clock out' when my day is over and are free to pursue whatever I want in my own time. As an owner, I do everything I can to make sure my company survives and thrives around the clock both at work and at home. There's a definite line there that shouldn't be crossed (or you'll get burned)
I didn't get a job at a startup in MA because they feared my last company's non-compete.
I've been involved in legal posturing between companies over noncompetes before, too. I wonder if, even if courts refuse to enforce noncompetes against individuals, the agreements will still have teeth between companies; just the cost of taking an ultimately doomed lawsuit to court might be deterrent enough.
Indeed. Their fear wasn't the lawsuit, but delaying a product launch by a few months, at best.
To what degree banning non-competes will fuel the tech scene in Massachusetts is tough to say - obviously there are a lot of other variables separating it from Silicon Valley - but it's nice to see that Spark is practicing what it preaches, having stopped requiring non-competes in 2007.
I dislike the government asserting that I am not a fully competent adult, capable of making my own decisions about what agreements I enter into and which I do not.
If I'm not competent to read a non-compete and agree, or not agree, to it, then why do they think that I'm competent to drive a car, or vote, or sign a lease?
If I'm not competent to read a non-compete and agree, or not agree, to it, then why do they think that I'm competent to drive a car, or vote, or sign a lease?
I agree with the core of your argument, however in this instance we have private market manipulation.
In most situations the employers have more leverage then the employee. The very best hires will not accept sub par offers. But a lot of others, including some very good ones, will.
The result being that private companies influence the labor market for their own benefit and everyone else's detriment. That includes other employers and employees.
Think of non competes for utilities, as in only one cable co. can serve your area. Does that make the private market manipulation more obvious? Private market distortion is no better then public market distortion.
Cartels, non-competes, etc, are legitimate targets for government busting from my libertarian perspective.
In most situations the employers have more leverage then the employee. The very best hires will not accept sub par offers. But a lot of others, including some very good ones, will.
The result being that private companies influence the labor market for their own benefit and everyone else's detriment. That includes other employers and employees.
Think of non competes for utilities, as in only one cable co. can serve your area. Does that make the private market manipulation more obvious? Private market distortion is no better then public market distortion.
Cartels, non-competes, etc, are legitimate targets for government busting from my libertarian perspective.
This move doesn't do anything to reduce the "market manipulation" you allege. If employers are negotiating from a position of strength, they'll get all manner of other concessions, starting with wages and benefits --- which is all most people care about. I don't see the principle that you're arguing from here.
Your comparisons are a little silly, too. There are good reasons (right of way, regulation) and bad (monopoly concessions, lobbying, corruption) that private utilities own entire markets. These have nothing to do with the forces behind noncompetes. No noncompete has helped establish any company's monopoly in any product or service you can name, even regionally.
Noncompetes are a trade. Companies provide employees with access to resources, client lists, and trade secrets. They want to ensure that rolodexes aren't shopped and product plans aren't bootlegged. These are reasonable goals. Employment contracts are blunt and inefficient instruments for accomplishing those goals, but that doesn't make the intent corrupt.
Your comparisons are a little silly, too. There are good reasons (right of way, regulation) and bad (monopoly concessions, lobbying, corruption) that private utilities own entire markets. These have nothing to do with the forces behind noncompetes. No noncompete has helped establish any company's monopoly in any product or service you can name, even regionally.
Noncompetes are a trade. Companies provide employees with access to resources, client lists, and trade secrets. They want to ensure that rolodexes aren't shopped and product plans aren't bootlegged. These are reasonable goals. Employment contracts are blunt and inefficient instruments for accomplishing those goals, but that doesn't make the intent corrupt.
Noncompetes are a trade. Companies provide employees with access to resources, client lists, and trade secrets. They want to ensure that rolodexes aren't shopped and product plans aren't bootlegged.
Isn't that an NDA?
I see non-competes as nothing but attempts to reduce competition. Except that is exactly how markets are NOT supposed to work. You're supposed to out-compete, not simply reduce competition.
Isn't that an NDA?
I see non-competes as nothing but attempts to reduce competition. Except that is exactly how markets are NOT supposed to work. You're supposed to out-compete, not simply reduce competition.
No. A sales account manager at AcmeTron can dump the entire CRM database, walk it over to WidgetCorp, and run all those same accounts for them without ever once violating an NDA.
Frankly, and I hope respectfully, if you can't see the distinctions here, I'm not sure why you'd expect anyone to take your opinions about noncompetes seriously. You might also consider wording your ideas better: "noncompetes are nothing but attempts to reduce competition", for instance, might not be your best rhetorical play.
I'm pretty ambivalent about noncompetes. They've hurt me more than they've helped me, both as employee and (in concert with) employers. But I don't like shoddy arguments.
Frankly, and I hope respectfully, if you can't see the distinctions here, I'm not sure why you'd expect anyone to take your opinions about noncompetes seriously. You might also consider wording your ideas better: "noncompetes are nothing but attempts to reduce competition", for instance, might not be your best rhetorical play.
I'm pretty ambivalent about noncompetes. They've hurt me more than they've helped me, both as employee and (in concert with) employers. But I don't like shoddy arguments.
I'm not a salesman so I wouldn't know but it seems to me A sales account manager at AcmeTron can dump the entire CRM database, walk it over to WidgetCorp, and run all those same accounts for them without ever once violating an NDA. is the very definition of why you need NDAs.
But again maybe I'm looking at this from an engineer's perspective and it's different for sales.
In either case, I don't think we'll change each others minds here on the Internet.
But again maybe I'm looking at this from an engineer's perspective and it's different for sales.
In either case, I don't think we'll change each others minds here on the Internet.
In a consulting agreement, you may find "Non-use" terms along with "Non-disclosure" terms in the IP language; technically, this would prevent a consultant from stealing the sales rolodex and then using it to contact customers.
Otherwise, you violate an NDA by disclosing to someone not bound under the same NDA actual confidential information. Nothing prevents you from using confidential information to compete "unfairly" with your employer.
You can add whatever terms you'd like to whatever you call a "confidentiality" or IP agreement, but now you're on a slippery slope that leads to de facto noncompetes.
Otherwise, you violate an NDA by disclosing to someone not bound under the same NDA actual confidential information. Nothing prevents you from using confidential information to compete "unfairly" with your employer.
You can add whatever terms you'd like to whatever you call a "confidentiality" or IP agreement, but now you're on a slippery slope that leads to de facto noncompetes.
It has nothing to do with your imputed (in)competence.
All a decision like this would mean is: the state of MA has decided it's not in the interests of the state of MA to enforce noncompete clauses, so from here on out it will not enforce them.
You can still sign whatever you want.
All a decision like this would mean is: the state of MA has decided it's not in the interests of the state of MA to enforce noncompete clauses, so from here on out it will not enforce them.
You can still sign whatever you want.
What does it matter what you can sign, if the contract doesn't have the support of courts to make it binding?
I know what you're getting at.
I was commenting specifically because I hate sloppy language and sloppy thought: there's just no meaningful sense in which "a particular kind of contract becoming non-enforceable" simplifies into "not being able to sign a particular kind of contract"; the latter implies some kind of intrusive intervention -- a noncompete gestapo slapping pen-from-hand should you try to sign such a contract -- which clearly wouldn't be the case under the proposal.
I was commenting specifically because I hate sloppy language and sloppy thought: there's just no meaningful sense in which "a particular kind of contract becoming non-enforceable" simplifies into "not being able to sign a particular kind of contract"; the latter implies some kind of intrusive intervention -- a noncompete gestapo slapping pen-from-hand should you try to sign such a contract -- which clearly wouldn't be the case under the proposal.
Exactly. The OP was suggesting that Mass. is taking an action to prevent him signing contracts. On the contrary, it is saying it will stay out of the way an refuse to take action to enforce a certain sort of contract.
There are already plenty of things that can't be enforced by contract. You can't sell yourself into slavery, for instance, because the state isn't allowed to make sure you submit to your agreement.
As another commenter said, sign whatever you like. Some companies make you sign non-competes in California, we just all know they don't mean anything.
As another commenter said, sign whatever you like. Some companies make you sign non-competes in California, we just all know they don't mean anything.
Is slavery the only comparison you've got? Because slavery isn't remotely like a noncompete, which makes your argument sound weak.
Um, slavery is one of those things that've been outlawed -- meaning the courts will not recognize it as an institution. It makes his argument look strong. Outside of the state of nevada, he could've also said prostitution.
Slavery wasn't a matter of contract law.
Indeed, and once non-compete agreements are no longer enforced in Mass., non-compete agreements will no longer be a matter of contract law.
You're not addressing my point. Slaves (in the most obvious case) didn't enter into unfair contracts to make themselves slaves. So, you get points for snark, but not for advancing an argument.
(It doesn't matter what slaves did in the past.)
Slavery would be a matter of contract law in the present day if it was permitted -- since people would be allowed to sign themselves into slavery in return for whatever they could get out of it.
You're not "allowed" to sign yourself into slavery, even if you want to (because the state won't enforce the contract).
Non-competes will have the same properties above (if this bill is passed), therefore I suggest that slavery is a valid analogy for non-compete agreement in this context.
This opens up the opportunity for further discussion. For example it can be argued that the state is defending your freedoms by refusing to enforce a slavery contract. On the other hand, it can be argued that the state is denying you the freedom to sell yourself into slavery.
It is interesting to consider the case of non-compete agreements in a similar fashion.
(Please don't be rude or I'll be uninterested in discussing with you further, and don't tell me what I get "points" for: I'm not in a competition with you.)
Slavery would be a matter of contract law in the present day if it was permitted -- since people would be allowed to sign themselves into slavery in return for whatever they could get out of it.
You're not "allowed" to sign yourself into slavery, even if you want to (because the state won't enforce the contract).
Non-competes will have the same properties above (if this bill is passed), therefore I suggest that slavery is a valid analogy for non-compete agreement in this context.
This opens up the opportunity for further discussion. For example it can be argued that the state is defending your freedoms by refusing to enforce a slavery contract. On the other hand, it can be argued that the state is denying you the freedom to sell yourself into slavery.
It is interesting to consider the case of non-compete agreements in a similar fashion.
(Please don't be rude or I'll be uninterested in discussing with you further, and don't tell me what I get "points" for: I'm not in a competition with you.)
That's an interesting argument tactic. Slavery is a valid analogy to noncompete contract terms if you redefine the concept of slavery to be a contractual obligation between slave owners and slaves. Indeed, then, you are right: Massachusetts would not enforce that contract clause. Good catch!
(I take it you're being sarcastic, and thus I shall try to explain more clearly.)
The OP made an argument of this form:
"I dislike the government asserting that I am not a fully competent adult, capable of making my own decisions about what agreements I enter into and which I do not.
If I'm not competent to read a <contract of form X> and agree, or not agree, to it, then why do they think that I'm competent to drive a car, or vote, or sign a lease?"
The reply by toby noted "You can't sell yourself into slavery" by way of pointing out that the argument does not hold when X = selling yourself into slavery.
Thus toby was demonstrating the OP's argument was not valid as it stands for all forms of contract X, and so it needs to be clarified to indicate why it is valid for X = non-compete agreement (for example by reframing the argument from one based on competence to: "I don't believe the state should refuse to enforce contracts merely on economic grounds")
The OP made an argument of this form:
"I dislike the government asserting that I am not a fully competent adult, capable of making my own decisions about what agreements I enter into and which I do not.
If I'm not competent to read a <contract of form X> and agree, or not agree, to it, then why do they think that I'm competent to drive a car, or vote, or sign a lease?"
The reply by toby noted "You can't sell yourself into slavery" by way of pointing out that the argument does not hold when X = selling yourself into slavery.
Thus toby was demonstrating the OP's argument was not valid as it stands for all forms of contract X, and so it needs to be clarified to indicate why it is valid for X = non-compete agreement (for example by reframing the argument from one based on competence to: "I don't believe the state should refuse to enforce contracts merely on economic grounds")
No, but indentured servants did enter into contracts to make themselves slaves (for a limited period of time) and that's no longer allowed by law, either.
I agree with you that "slavery" was a sloppy argument, but indentured servitude is a better one.
I agree with you that "slavery" was a sloppy argument, but indentured servitude is a better one.
Non-competes could be seen (from a company's point of view) as a form of the prisoner's dilemma: everyone is better off if no one requires non-competes, but if everyone else requires them than I need to. Therefore, a law of this sort could potentially improve conditions for all companies in a way that individual companies could not accomplish themselves. That is, the government is not trying to tell you what to do, it's trying to create a better business and employment environment.
Really? Finish your thought. Why is everyone better off if nobody requires noncompetes?
Non-competes are basically a source of friction in the employment market. They create inefficiencies because employees can no longer go to work for the company to which they will provide most value (which will presumably reward them commensurately).
In theory, the ability to sign a non-compete increases an employee's options. In practice, if they're enforced, many employees no longer have much option for employment without signing them.
But don't worry, even if this bill passes, you'll still have the option of signing enforceable non-competes in almost every other state in the U.S.
But don't worry, even if this bill passes, you'll still have the option of signing enforceable non-competes in almost every other state in the U.S.
Driving a car, voting, and signing a lease are all much much simpler to do than understanding a non-compete agreement. And actually I think the line of "most" people falls somewhere in the middle.
I read this as [Massachusetts Bill to Ban] [Non-Competes backed by Spark Capital], rather than [Massachusetts Bill to Ban Non-Competes] [backed by Spark Capital], so it's good to see that Spark is backing the ban.
In general I think the state should take a utilitarian perspective in matters like this. If non-competes hurt the economy more than they help it would be self-defeating for the state to enforce them.
I'll leave the rest for politicians and pundits.
In general I think the state should take a utilitarian perspective in matters like this. If non-competes hurt the economy more than they help it would be self-defeating for the state to enforce them.
I'll leave the rest for politicians and pundits.
How do we measure the utility?
I'd guess that people often agree to non-competes because they don't know how bad a deal they are. This could be solved if (1) people checked their contracts with lawyers more often, or (2) contract terms were standardized in such a rigid way that people could quickly learn about all the potential clauses.
Why don't people check their contracts with lawyers? If it's because of a high estimated cost, is that estimation right?
Part of the problem (and therefore part of the solution) is that the choosing of contract terms asymmetrically benefits the employer, since they only have to do the lawyer work once.
Why don't people check their contracts with lawyers? If it's because of a high estimated cost, is that estimation right?
Part of the problem (and therefore part of the solution) is that the choosing of contract terms asymmetrically benefits the employer, since they only have to do the lawyer work once.
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I've had lawyers in Georgia tell me a non-compete has no teeth under GA law. You still might get sued, but apparently, the law leans heavily towards the employee.
Intellectual property and trade secrets are however well protected for the employer.
Intellectual property and trade secrets are however well protected for the employer.
That's the case in most jurisdictions; judges will tend not to interpret contracts in ways that preclude individuals from earning a living. In a lot of states, judges also have the authority to modify noncompetes on the fly, so that they aren't confronted with the choice of screwing a former employee and throwing out an entire contract term wholesale.
Excellent movement on Spark's part. I've personally been handed a non-compete by a venture capital fund that would make a producer blush. It's preposterous what some firms try to con entrepreneurs into.
I'm really not sure why I'm expected to muster sympathy for entrepreneurs facing noncompetes from VC's. Isn't this an eminently reasonable use for noncompetes? You're epsilon from corporate-to-corporate contracts in this scenario.
That said, I'm fully in support. :)