<p>[Schumpeter:</a> Ties that bind | The Economist](<a href=“The Economist | World News, Economics, Politics, Business & Finance”>Ties that bind)</p>
<p>Basically, they are writing, based on [Talent</a> Wants to Be Free - Lobel, Orly - Yale University Press](<a href=“http://yalepress.yale.edu/book.asp?isbn=9780300166279]Talent”>http://yalepress.yale.edu/book.asp?isbn=9780300166279) , that employee non-compete agreements tend to limit innovation.</p>
<p>I hate non-compete agreements but there is a legitimate business reason for them. </p>
<p>For example, if you are an employer and you hire employee John, train him in every aspect of your business, show him you secret ingredients, and expose him to all of your customers etc, he can destroy you in a short time by opening a business next to yours and contacting all of your customers.</p>
<p>If you are going allow non-compete agreements at least make them fair. Prevent the employer from terminating an employee at will. Limit it to positions where employees can actually do damage rather than including all employees or lower level employees. </p>
<p>Employees have done damage to employers for years because of being thiefs. Although not necessarily based on a non-compete agreement, Zuckerberg stole the business concept and intellectual property to develop Facebook. He is a billionaire thief. Most employers are afraid of running into the next Zuckerberg.</p>
<p>labor attorneys that I have spoken with in California have said that such clauses are essentially unenforceable in this state below the Exec levee.</p>
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<p>Non-disclosure agreements are used to prevent leaking of company secrets.</p>
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<p>California basically prohibits employee non-compete agreements in the general case (BPC 16600), with a limited exception for a business owner or partner who sells a business (BPC 16601, 16602, 16602.5).</p>
<p>[CA</a> Codes (bpc:16600-16607)](<a href=“http://www.leginfo.ca.gov/cgi-bin/displaycode?section=bpc&group=16001-17000&file=16600-16607]CA”>http://www.leginfo.ca.gov/cgi-bin/displaycode?section=bpc&group=16001-17000&file=16600-16607)
[California</a> Non-Compete Agreement | Non Compete Law Site](<a href=“TextMine: AI powered knowledge base for your business critical documents”>http://californianoncompete.com/)</p>
<p>However, there are other states which do not prohibit non-compete agreements.</p>
<p>Many labor lawyer friends also state that non-compete agreements are also anti-labor as it could cause a highly specialized non-executive level employee to be unable to be employed in his/her specialized industry/craft during the period the non-compete agreement is in effect after being laid-off.</p>
<p>I don’t have a problem with non-disclosure agreements. Companies may have a legitimate interest in proprietary information or “trade secrets,” including confidential information on their customers.</p>
<p>Non-compete agreements are more problematic. Essentially they bar ex-employees from using their own professional skills, knowledge, experience, talents, and contacts for the period specified in the contract. This is a problem not just for the individual, but for society more broadly because all that human capital is wasted. I think California is on the right track not to recognize such agreements. I recognize that it can be messy sorting out which bits of information are proprietary to the former employer, and which are part of the professional knowledge and skill of the former employee, but I think that’s the right place to draw the line.</p>
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<p>Not exactly. One way you prevent disclosure of your business operations is preventing an employee from competing with you by starting his or her own business or joining another business in the same geographic area. I have not seen a non-compete that was not based on the premise or has as its stated justification that the employee has access to the employer’s customer list and knowledge of business operations. Non-disclosure agreements are often focused (but not solely) on employees who remain employees but are restricted on what they can disclose while remaining employed by the employer. Usually when you see non-compete agreements you will also see non-disclosure language included. The reverse is not usually true.</p>
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<p>In California, non-disclosure agreements are used extensively, and the agreements endure beyond the term of employment, without any non-compete restriction. I.e. the former employee can work for a competitor, but not disclose any proprietary information from the former employer to the new employer.</p>
<p>The real reason some employers like non-compete agreements is that it makes it more difficult and costly for employees to change jobs, since the employee often must endure a period of unemployment between jobs due to the non-compete agreement, particularly when the employer is a large one with many locations and lines of business that make a large percentage of other employers competition.</p>
<p>If non-competes for non-executive/owner/partner employees are allowed, they should be limited in duration (perhaps no more than 3 or 6 months to avoid former employee’s skills decaying), and former employer should be required to continue employee compensation during the term of the non-compete (or may waive part or all of the non-compete time period for a lesser term of continued compensation); if the former employee gets a job offer with higher compensation, the former employer must raise the compensation to match or waive the non-compete. In terms of law, there should be a “bright line” so that it is easy to see whether a non-compete is legal or not – murky definitions that require litigation in court to determine reasonableness of are disadvantageous to a former employee who may not have money for lawyers.</p>
<p>Noncompete clauses are heinous for physicians and dentists, and also for their patients.</p>
<p>I have lived both sides of this, with my dentist suddenly not with the practice when I called to make an appointment, and of course nobody in the practice coukd or would tell us where, outside the no compete distance, she was practicing.</p>
<p>My husband and his brother, as physicians, faced the other side of the no compete clause when they decided to leave their practices. My BIL is commuting an hour each way for a couple of years because he wants his young choldren to stay in their town and schools.</p>
<p>My husband faced the same issue many years ago when he left a practice.</p>
<p>Tech industry basically KILLED noncompete agreements for most people in California! It just wouldn’t work! Turnover is so crazy over there, and other factors!!</p>
<p>personally noncompete agreements are cool but they should be as narrowly construed as possible. i have heard of some cases wehre they tried to be like, “You can’t work in a related industry for 10 years within 100 miles of us!” and it’s like, “dude, you guys are a dental office! Who travels 100 miles to see another dentist??? dentists don’t have a wide competitive radius!”</p>
<p>It’s dumb and those desrve to be struck down. more narrow ones can stand.</p>
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<p>Actually, the prohibition against most employee non-compete agreements in California predated the growth of the tech industry. Indeed, that prohibition against most employee non-compete agreements is sometimes cited as a reason the tech industry grew well in California.</p>
<p>[North</a> Dakota non-compete law shares history with California - Lexology](<a href=“North Dakota non-compete law shares history with California - Lexology”>North Dakota non-compete law shares history with California - Lexology) indicates that the prohibition against most employee non-compete agreements in California and North Dakota dates from the 1800s.</p>
<p>Here is an article on employee non-compete agreements, including a discussion on differences between various states and their effects, and the effect of the 1985 repeal of the prohibition of most employee non-compete agreements in Michigan: [The</a> Power of the Noncompete Clause — HBS Working Knowledge](<a href=“http://hbswk.hbs.edu/item/5628.html]The”>The Power of the Noncompete Clause - HBS Working Knowledge)</p>
<p>What I’ve heard is that they’re legally unenforceable, but reading into the company I’m going to, they have their own enforcement methods apparently that strongly deincentive breaking the non-compete.</p>
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<p>State laws and court precedents vary.</p>
<p>Non-competes are the single biggest thing holding back Massachusetts tech. People can’t leave to start new companies or to join other, smaller companies. So they leave the state for CA. The problem comes up time and again in the legislature but the big money is behind keeping them - and the big money in this case includes both large employers and lawyers. </p>
<p>This is a very big issue in MA tech.</p>
<p>I have seen a lot of non-compete agreements in the securities industry. The stock brokerage hires a broker and says you can work for us but you can’t leave and join another brokerage. The agreements are often disregarded and the broker leaves to join a competing firm. Only if the broker really ticked off the old brokerage will the old brokerage take action. Sometimes the old brokerage will even sue the new brokerage claiming the new brokerage should not have hired the broker. I watched a smart lawyer whose client was being sued for breach of a non-compete force the case into federal court and get the agreement quashed almost immediately. I can’t remember how he did it, but it was pretty impressive.</p>
<p>However, unless the law sets a “clear bright line”, fighting one’s former employer to court to invalidate a non-compete on the basis that it is “unreasonable” is probably unaffordable for most former employees who have less money to spend on lawyers than their former employers.</p>
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<p>It certainly looks like the non-competes for physicians are imposing a significant deadweight loss with respect to physician employment in your area. Forcing a departing employee to move, take an hour long commute, or remain unemployed for a few years seems quite unreasonable to me, although it apparently has passed the “reasonable” test in your state’s courts.</p>