In places where employee non-compete agreements are widely used, how do people working at large companies change jobs (or find new ones if they get laid off)? Seems like if such a large company offers products and services in many areas and wants the employee to sign a non-compete agreement, that is almost like agreeing to being unemployed for the length of the non-compete agreement after ending employment, since it may be difficult to find a new employer in an area that is not in competition with the large company. The same goes for an employee working in a specialty job where all employers of that kind of job are competitors.
Usually non-competes require that an employee not poach the first employer’s clients. It doesn’t necessarily mean that you can’t work in the industry ever again, although some might.
Many companies with non-compete clauses, continue to pay the employee for the time specified in the clause. So if you have a 6 month non-compete and you resign, in order for the company to hold you to the non-compete clause, they must pay you for that 6 month period. You do need to check with your new employer that they are willing to hold the job for you for that 6 month period.
Here, “non-compete” specifically refers to restricting the employee’s ability to work at a competitor after leaving the current employer. Non-poaching and non-use/disclosure of employer trade secrets (which can include the client list) agreements are common and can exist without non-compete agreements.
^^^The industry I work in uses non-competes to guard against sharing of ‘trade secrets’, product formulations and new product plans. But the companies who enforce them, pay the employee for the time off between jobs.
Personally I wish the rest of the country would adopt California’s rules on non compete clauses, to me they are really about trying to keep an employee working for you rather than a competitor,which among other things could mean not having to pay them well. Intellectual property is already covered automatically, when you move to another company you are not allowed to divulge trade secrets to the new company and cannot transfer technology, so if you wrote the code at the old company, you cannot simply use that code when you get to company B, and so forth, so the non compete clause is really about restricting employees chances to move, and in a sense it is also monopolistic. I remember seeing a panel talking about this issue, and this one typical executive type was saying “well, why should we train employees, have them learn the business, develop their skills, then have them go to a competitor to make more money” and the response from a management expert (it was someone like a Peter Drucker or the like) was something like “maybe you should make it so that worker you have invested time and training in feels appreciated, like rewarding him/her for what they do”. It is especially kind of idiotic to have when companies routinely have as their mantra “no one is irreplaceable, we don’t want the irreplaceable man syndrome”, yet they basically block people from moving to a competitor for that very reason, arguing losing them would hurt too much.
My husband has had non-compete clauses like thenone @VeryHappy wrote of. When switching jobs…within the same field… in the same geographic area, he could not take CURRENT clients with him…and could not secure new contracts with them for a period of time.
It has never been an issue for him…and he has switched jobs a number of times.
In addition to non-compete clause, he has also needed to complete some work for the old employer…which necessitated time off from the new one. The old employer paid him a per diem. The new employers totally understood because they would expect the same consideration.
“Usually non-competes require that an employee not poach the first employer’s clients. It doesn’t necessarily mean that you can’t work in the industry ever again, although some might.”
It can - for a reasonable period of time. State law defines what can be an enforceable NC agreement, and time restrictions are ok in my state. This is from 2014, but the legislature punted on a bill that was supposed to make it more tech-friendly…
In general (the specifics depend on individual state legislation and case law), non-compete clauses have to be reasonable in scope (time, geography, etc.) in order to be enforceable. Of course it’s in determining what is or isn’t reasonable where litigation can ensue. But clearly a drug researcher can’t be prohibited from working in a fast-moving industry like the pharmaceutical industry for five years, a marketing executive for a ski manufacturer can’t be prohibited from taking a job as vice president for marketing at a surfboard company, the director of a water park in Florida can’t be prohibited from running a water park in Ohio.
True, but it’s far easier for an ex-employer to show that the former employee took a prohibited position in violation of an express non-compete clause than to prove a trade secret (technology, customer contact, etc.) was divulged or even find out that it happened in the first place .
Non-competes give employers sticks that they can potentially use, but in my experience they aren’t used often. For example, I haven’t seen a case of a non-compete threatened to be used when an employee got laid off.
The case I am most familiar with is is at one of the startups where we tried to make a key hire from an established company, and when the company found out where the employee was going, and pulled out the non-compete agreement because of bad blood between parties at the new and old company. I have also heard of it being used several times, but only second hand.
This is the chilling effect a non-compete has–it effectively prevents the employee from moving to a new place but at the same time kills his or her career at the old place. And for a startup, being barred from hiring someone for several months or longer can be a non-starter.
At a startup, I was asked to sign an extremely broad non-compete, which potentially could have left me unemployable. Would it have been enforceable in court? I have no idea, but I pushed back and the company agreed to modify the language. Would the language of the non-compete been negotiable at a Fortune 500 company? Of course not.
There may be a non-compete agreement between an employee and employer…and in that state, it may not be enforceable. There’s a lot written about what’s considered fair.
I worked under some pretty restrictive NCs, for a few companies, and employees regularly moved to the competition. You try to play your cards right, when you move.
Not sure what you mean, music, but every Labor Atty our Company has hired has said that non-competes are not really enforceable in California except for key, strategic positions.
My H is just finishing up his noncompete. As a CEO his non compete was for 18 months within a certain distance from his Health Care organization’s headquarters. If he got a job outside of that area he was fine but at 60 years of age he didn’t want to move. He was very fortunate to be offered an equal position in a different industry that had health care components withn 8 weeks of his leaving.They would not have allowed him to run another HC organization. It worked out that he is being paid for his noncompete while working at his new position. Win win.
CA has a very stringent law that is worker friendly. In general, NCs are not enforceable for most workers.
It is only fair to pay the employee for the NC time period if you demand they stay out of work, you can’t force ppl to work only for you. Unless you have a period contract. But then you must pay them even if you want them out.
Laws should protect employer property from employee poaching, but an employee’s skills are not their property.