Luckily noncompetes are illegal in California. The Bay Area/Silicon Valley wouldn’t be what it is today without the freedom to move between different companies and/or start your own company yourself.
Edit: illegal should be replaced with non-enforceable as mentioned below. Initially I didn't see any difference between the two words, but I can appreciate the nuance in meaning now based on hedora's provided example.
There are situations in which non-competes are enforceable in CA, just not for regular employees. For instance, if you sell a company you own in part or whole, a non-compete with the acquirer is enforceable.
Idk why anyone is down voting me. I consult on lawsuits for a living and recently worked on one where all the parties, lawyers, and the judge agreed that the non-compete was both valid and enforceable in exactly this situation.
Please don't break the site guidelines by going on about downvotes. Users will often come along and provide corrective upvotes (edit: your original comment has now been heavily upvoted), and then comments like this linger on, no longer accurate but just adding noise.
So even in circumstances where the consensus is just inaccurate, and even though that results in rate-limiting you removing your opportunity to engage in a discussion, merely talking about this circumstance simply exacerbates it
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So even in circumstances where the consensus is just inaccurate, and even though that results in rate-limiting you removing your opportunity to engage in a discussion, merely talking about this circumstance simply exacerbates it
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I think they downvoted you because that is totally different context than what discussion is about. We are not talking about CEO level agreements but simple workers.
I'm not arguing against the point. I'm simply clarifying-- for everyone's benefit-- that the assertion that "non-competes are unenforceable in CA" is not universally true.
You can be a simple worker and fall afoul of the above - if you have any options or stock you would be considered a part owner and then subject to a possible non compete, even as engineer #n
How does this work in practice? When you accept employment, you sign a non-compete which commences at the close of a future acquisition? I don't doubt that it's possible but I'm skeptical of the idea that a company can make a unilateral decision that's legally binding on you as an individual simply by virtue of the fact that you're a stock-holder. Has anyone here signed such an agreement? I'd be genuinely interested in reading the non-compete language.
No, when you're acquired as part of being acquired you sign a non-compete agreement. You're probably renegotiating salary/perks at that point so you'll likely be signing a new contract anyway.
I sold a two person company to a fifty person company, which triggered this situation. After the acquisition, I was a "normal worker" by most definitions.
You are absolutely correct. I went through exactly this when a large valley tech company bought the startup I founded and I joined the company as part of the deal. My lawyer explained it as "For regular employees these aren't enforceable but you're when you get millions of dollars personally, this is part of what they get in return." Seemed fair enough and we also negotiated the wording to be pretty specific. Basically, I couldn't go make another version of the products they purchased from me as part of the acquisition. However, if I wanted to quit and compete against any of their other pre-existing products I could (even though I wouldn't want to anyway).
Sure is unusual how a lawyer, versed in California employment law, drafting a contract and including terms he knows are unenforceable, in an attempt to mislead a worker and cheat them out of their rights, isn't considered fraud.
I'm not sure how it is in that specific case, but in general the penalties can be very severe. For example, when Apple was misleading Australians that they have only 1 year of warranty, instead of the 2 guaranteed by Australian law, they received a strongly worded letter from the courts telling them to stop. [1]
There was nothing under the law that limited it to 2 years. There is nothing under the law that defines specific timeframes for warranties in Australia.
Parts of the agreement aren’t enforceable but not everything?
I’ve seen things like venue and arbitration rules established and persist in otherwise junk agreements.
I see a lot of contracts from customers buying our dev services with weird language in it. The opposing counsel would have to know it not enforceable but it’s there anyway. Sometimes it’s silly stuff like “no open source software or code” yet it needs to be MEAN stack running on Ubuntu in AWS.
Ahh, interesting. So I suppose that means many companies add noncompete clauses into their contracts regardless, on the off chance that someday they can be retroactively enforced?
Yes. I used to point that out to visitors from other states who wanted to create "Silicon Austin" or something. Their state won't have the guts to ban noncompetes, so they're doomed to lose.
Absolutely agreed - contracts you're asked to sign without the opportunity for a lawyer to review should be considered invalid/under duress. They're basically like EULAs you only see after you've opened the package and forfeited the right to return the software.
I don't think having to retain a lawyer just to sign an internship offer is ideal either. There should be some guardrails that some things are simply unenforceable and you don't need to get a lawyer involved.
If there are millions of college kids who all need contract review within the span of a few days in the spring, I would expect the market to adapt in some way. The most likely, I think, is that employers (at least employers within an industry) would settle on some boilerplate contract, and law firms would let you upload a contract to their website, have a script run a diff, and come back "Yes, this is in fact the boilerplate contract, here is our plain-English summary" or "No, here's how it differs, you can retain us at normal rates to explain the diff or you can push back on your employer." (They could charge you a few bucks, or they could just have the cost of reviewing this year's boilerplate contract be paid by the employers, who are incentivized to successfully and legally hire interns.)
The more interesting question is whether if everyone knows there's a non-compete and it's the industry standard, there will be any more effective pushback... now that I think of it, I worry there may be less if contracts get mechanically standardized.
I’ve often thought there should be a ratio between transaction value, and the maximum complexity of the contracts involved.
Say 1% is the ceiling. The minimum take home salary of the internship would then be at least 1/0.01=100x the price it would take a lawyer to review and negotiate the employment contract.
Say it takes a lawyer a conservative 5 hours, at a Bay Area lowball of $250/hour. The internship must therefore pay at minimum $125,000 after tax, or terms benefiting the employer (and only those)
are unenforceable.
This would be applicable retroactively even when people choose to sign without reading.
Alternatively, the author of said contract could, by law, be forced to pay for the other party’s lawyer.
That seems simpler, but I think it is more easily abused by consumers. (Get a overpriced slimey lawyer, apply for 100 credit cards, and split the fee with the lawyer after the fact).
Is there an existing solution in the court system when you're forced to pay the other side's attorneys' fees, to make sure those fees are reasonable?
My uninformed suggestion is to set a statutory rate for contract review, allowing the legislature to revise it every few years, and perhaps tying it to some other government budget or salary in some way (e.g., some multiple of the effective hourly rate of government attorneys or clerks, or some fraction of the government's maximum allowed rate on their own contract review).
Do you work in HR? not sure max of 2 years is a Good Balance.
Especially if you can stop some one after leaving there first low payed job to not work for 2 years on 50% of their starting salary - do you not see the potential to abuse young workers here
The 2 years is a good balance for highly skilled employees who carry competitive information such as customer contacts or technology. After that time the information is likely mostly worthless anyway.
I agree that for interns the situation is not good but believe the "reasonable" provision is most likely to make a non-compete with an intern worthless in court.
Non-competes get abused so much in the states because the cost to companies is next to nothing when workers don't push back. I don't think companies would go around giving everyone two-year non-competes if it meant they had to pay an extra year's salary to everyone who quits.
It’s a bit more messy than that in California even. Non competes are not forbidden, just generally unenforceable due to some other labor laws. So a lot of companies will still to this day have employees sign non-competes, and threaten them with legal action if they violate them.
They’d almost certainly lose, depending on circumstances, but the threat is enough to have a pretty strong chilling effect.
IANL but AFAIK, they have to pay 50% if they chose to enforce the non compete, i.e. you want to work for a direct competitor in the exact same field but now you can't. Otherwise they don't have to pay anything and you are free to work on whatever else you like.
Getting paid 50% of my peak salary for just sitting on my ass and doing nothing sounds great to me. I'd go for it. Move to Spain for a couple of years, pursue my hobbies, stuff like that.
I'm sure one can find a job outside their field for 50% less money which doesn't trigger the non-compete, if that's the case.
Though, TBH, I'd like the comp to be 100% of the offer I'd be forced to forego. I.e. I go interview somewhere, negotiate an offer with them, and if my previous employer feels very strongly about me not working there, they can pay me 100% of the total package to not work there. That's the only set-up that'd be truly "fair" to the former employee, IMO.
I don't know. I think I'd be hard pressed to find a job outside of software engineering as a whole that paid half what I'm making now. Maybe I could get a SWE job with a company in an unrelated field, but probably not outside of software entirely.
Even that’s not entirely fair. You’re not just missing out on salary, but opportunities for growth and advancement. And, depending on your field, you might also be unable to keep your skills honed.
They don’t actually prevent you from working. They’ll usually have to declare before you leave if they enforce the non compete or not, and if so
they will pay 50% whatever you do, for the length of the clause.
What the GP was expliciting is that since paying 50% for an employee with low risk is absurd, a lot of companies won’t enforce the non compete.
a summer internship I did had a 1 year noncompete and we own your IP contract; when I asked about it, they basically said it would be too inconvenient for them to change it at all, and it was fine, all the other interns were fine with it, just sign...
I did, of course, since it was too late for me to have any leverage and I really needed it for my resume.
I wish that someone would put up a website where interns can share what company they slave for, how much/if they get paid, and whether stuff like this goes on. I can’t speak for anyone else, but I would prefer not giving money to companies that do things like this.
It is really to the detriment of the states that allow it. I constantly feel as though due to noncompetes I will be forced to make a move to California in order to further my career on any reasonable timeline. I can't actually know that I will want to stay at a company many years until after I sign the noncompete, but then it is much too late and the noncompete is in effect. If I don't want to be chained to a specific company possibly killing my career progression, I have to be extremely careful.
It is things like this that are severely slowing tech growth outside of the bay. Since there are no noncompetes, the chains have to be crafted with positive incentives instead of negative incentives, causing developer salaries and benefits to go up rapidly.
It really is a tragedy of selfishness. The economy would be better overall but the vested interests want non-competes. The best thing federally that would draw heavy backlash would be to abolish non-competes federally.
From a practical standpoint, does anyone actually enforce the noncompetes against regular employees? It never struck me as worth the money and bad press to enforce something like this against an intern or regular line engineer or manager.
My former employer threatened me in Oregon (started as an intern, software engineer). I had to pay a lawyer $4000 to help avoid going to court.
Basically they were trying to scare other employees from leaving.
So you’re both of some money, but in the end, nothing was actually enforced, and their reputation is trashed? This is exactly what I thought would happen at worse.
Meh. Next time, have the new employer cover the legal costs. 5k is not much to spend when onboarding a new employee. That’s basically IT costs.
For small tech companies it is a nuclear option. Unless everyone hates the employee it will only go badly.
For instance: a tech company I used to work for, a well liked employee left to go work for a company he used to consult for. The owner threatened hard to sue. It made the papers, the lawsuit alone would have ended us, but now local companies didn’t want to sign either because our reputation tanked, and many of the employees threatened to quit.
That’s kind of my point. It seems like it will on backfire, thus leaving it at a lot of bluster, but no one actually enforcing it, which then just encourages everyone else to leave as well, and then the threat is revealed to be a paper tiger.
Edit: When my employer tried to retrospectively claim ownership of side projects through a change of policy I got the wording changed to concern work projects or projects during work time. I doubt the original wording would have been enforceable in my jurisdiction, though.
A non-CA startup once tried to get me to sign a non compete for an internship. It would have forced me to resign a position at the university that was the reason they wanted to hire me in the first place. I pointed that out, and they immediately escalated to the founder, and replaced the internship contract. The old one was boilerplate that they cut and pasted from some other document.
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[ 0.24 ms ] story [ 158 ms ] threadEdit: illegal should be replaced with non-enforceable as mentioned below. Initially I didn't see any difference between the two words, but I can appreciate the nuance in meaning now based on hedora's provided example.
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Talking about the consensus is against the rules here So even in circumstances where the consensus is just inaccurate, and even though that results in rate-limiting you removing your opportunity to engage in a discussion, merely talking about this circumstance simply exacerbates it
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[1] https://www.zdnet.com/article/apple-forced-to-comply-with-au...
I’ve seen things like venue and arbitration rules established and persist in otherwise junk agreements.
I see a lot of contracts from customers buying our dev services with weird language in it. The opposing counsel would have to know it not enforceable but it’s there anyway. Sometimes it’s silly stuff like “no open source software or code” yet it needs to be MEAN stack running on Ubuntu in AWS.
Found the problem.
The more interesting question is whether if everyone knows there's a non-compete and it's the industry standard, there will be any more effective pushback... now that I think of it, I worry there may be less if contracts get mechanically standardized.
Say 1% is the ceiling. The minimum take home salary of the internship would then be at least 1/0.01=100x the price it would take a lawyer to review and negotiate the employment contract.
Say it takes a lawyer a conservative 5 hours, at a Bay Area lowball of $250/hour. The internship must therefore pay at minimum $125,000 after tax, or terms benefiting the employer (and only those) are unenforceable.
This would be applicable retroactively even when people choose to sign without reading.
That seems simpler, but I think it is more easily abused by consumers. (Get a overpriced slimey lawyer, apply for 100 credit cards, and split the fee with the lawyer after the fact).
My uninformed suggestion is to set a statutory rate for contract review, allowing the legislature to revise it every few years, and perhaps tying it to some other government budget or salary in some way (e.g., some multiple of the effective hourly rate of government attorneys or clerks, or some fraction of the government's maximum allowed rate on their own contract review).
- max 2 years
- employer has to continue to pay at least 50% of the salary the employee last earned for the duration of the non-compete.
- cannot non-compete minors
- must provide reasonable argument for the non-compete (hard for interns)
I think this is a good balance.
Especially if you can stop some one after leaving there first low payed job to not work for 2 years on 50% of their starting salary - do you not see the potential to abuse young workers here
I agree that for interns the situation is not good but believe the "reasonable" provision is most likely to make a non-compete with an intern worthless in court.
You wouldn't get a 2 year non compete for a FSTE 100 CEO in the UK to stand up in court.
A
They’d almost certainly lose, depending on circumstances, but the threat is enough to have a pretty strong chilling effect.
50% is an embarrassing amount. I'd accept 100% maybe.
It's a fair system we should adopt everywhere.
Though, TBH, I'd like the comp to be 100% of the offer I'd be forced to forego. I.e. I go interview somewhere, negotiate an offer with them, and if my previous employer feels very strongly about me not working there, they can pay me 100% of the total package to not work there. That's the only set-up that'd be truly "fair" to the former employee, IMO.
What the GP was expliciting is that since paying 50% for an employee with low risk is absurd, a lot of companies won’t enforce the non compete.
In that case the only recourse would be to try sue/re-negociate under the angle that the non-compete is unfair (too low pay or too broad scope).
Otherwise, if you find another job in another field, you’d get the full job salary + the 50% from the non-compete. That’s usually fair enough.
I did, of course, since it was too late for me to have any leverage and I really needed it for my resume.
It is things like this that are severely slowing tech growth outside of the bay. Since there are no noncompetes, the chains have to be crafted with positive incentives instead of negative incentives, causing developer salaries and benefits to go up rapidly.
In the USA no significant tech company has any contractual notice period, and the social norm is to provide two weeks notice.
In fact, at Google the policy is that the maximum period an employee may continue is three weeks once they have handed notice of resignation.
I believe bizarrely long notice periods, commonly three months now, are a large contributing factor to the depressed wages in technology in the U.K.
When friction is applied to the labor market, it’s to the detriment of the employees.
Meh. Next time, have the new employer cover the legal costs. 5k is not much to spend when onboarding a new employee. That’s basically IT costs.
For instance: a tech company I used to work for, a well liked employee left to go work for a company he used to consult for. The owner threatened hard to sue. It made the papers, the lawsuit alone would have ended us, but now local companies didn’t want to sign either because our reputation tanked, and many of the employees threatened to quit.
Edit: When my employer tried to retrospectively claim ownership of side projects through a change of policy I got the wording changed to concern work projects or projects during work time. I doubt the original wording would have been enforceable in my jurisdiction, though.
They were pretty apologetic, actually.
That is exceptionally unreasonable and unconscionable.
If some interns are stupid or careless, that's another problem but you can't say that non-competes are the problem. You don't have to sign it.