How is a non-compete legal anyway? You're basically saying that a person can't get a job with a competitor in the same industry, how is anyone with any decent skillset supposed to get a new job without somewhat violating a noncompete?
Most non-competes aren't enforcable and employers know this. They exist to bully people into submission – in the case of the article, Law360 bullied the journalist, but also Reuters Thompson. They know they'd probably win if they challenged Law360 in court, but it's just not worth the cost to take the fight, when it's easier and cheaper to just fire what is essentially a low-level employee.
I know a similar story. A person I know took a job with a tier one financial institution, knowing full well that the company they were previously employed with would cause a stir. Sure enough, upon starting the new job, the person in question received letters threatening legal action. This person is not easily scared, so simply ignored the letters. The new employer however received similar letters, and just as with the story in the article, they fired the employee simply because it wasn't worth taking the fight – there's always someone else they can employ.
It's unethical, and I'm glad the AG looks into it.
It's a cost/benefit situation. The cost of keeping the employee is very high in this case, even if they win the legal battle, and the benefit is probably unclear. The employee might be really great for the company, but it's difficult to quantify, and the moral cost to just let them go is low. It'll mean you and I will have a conversation like this about how crappy they are, but unless that conversation happens on the front page of WaPo or NYT it's just not worth caring about it. Haters gonna hate, and all that.
Most employers would see it this way, I'm absolutely sure of it. Even if fighting for the employee means they'll sleep better at night, it still would've cost an arm and a leg with little to show for it other than a feel-good sensation.
That's why it's so important for the AG to look into, and hopefully strike down on this shitty practice.
Disregarding their use in tech or journalism, there are uses for them.
My wife and I own a gym (in addition to our full-time jobs) that has several salaried trainers on staff. They sign a non-compete that for 1 year from the date of termination, they cannot take a trainer job at any gym within a 5 mile radius from our location, and they cannot own more than 20% of any gym located within a 10 mile radius.
This prevents them from opening up shop across the street and taking half the clients with them. It prevents them from doing the same with a nearby competitor.
It is limited by time, has a specific geographic area, and is only for a specific job. They can do whatever they want beyond a 10 mile radius on day 1, or they can open up a gym on day 366 anywhere in the world.
We've never had to litigate it because it's never come up, and if someone wasn't happy and really wanted to get a job at a Gold's two miles down the road, we would probably let them provided they didn't spend their last week giving our clients their new business cards or something.
I think there is a big difference here between non-compete and no-poaching agreements. At least yours is tailored to a radius, but I don't know that your narrow definition of non-compete is really the same.
In principle, I agree with you. However, in practice, a lot of what drives non-competes is concerns about poaching. I don't know if non-competes are particularly prevalent in service industries but I'm probably most aware of examples from consulting. I'm not going to defend non-competes but I suspect one of the reasons that they exist is that poaching clients and use of inside knowledge from a former employer are difficult to prove if they're not blatant whereas working for a competitor is pretty straightforward.
"Silly contract games" are still important to protecting the business. And it's not only about our bottom line. We have three full-time trainers and few part-timers. If one took a big chunk of our clientele, we're suddenly laying people off with no notice just to keep the lights on.
As a consultant/freelancer/employee you have the luxury of just worrying about what's best for you and that's it. As an employer, it's in my best interest to protect the business, otherwise people could be out on the street. If we mess something up with a contract or fail or do some "silly" thing correct it can literally ruin someone else's life through no fault of their own.
That one seems far more fair to me though, just because you're limiting it to a certain distance around your particular shop (and I know gyms are super competitive so the protection measures make sense).
It's not like you're saying you can't get a job or own a gym anywhere on the planet for one year after your resignation or something to that effect.
It completely removes your negotiating powers in regards to raises and promotions, as well. What incentive does an employer have to pay their employees fairly when they know that said employee is legally prohibited from working anywhere else?
It seems the surest way to hamstring your own career is to sign a non-compete.
That sort of depends. My last non-compete contained the provision that if the employer needs to continue paying the full wage during the time of the non-compete. That doesn't fully remove the lock-in but it makes it a costly option, leveling the playing field somewhat.
To be an enforceable contract, there has to be an exchange of value.
If the value to be exchanged is "this allows you to be employed by us" then you should easily be able to rescind your consent and return the value offered by the counterparty. If I am no longer employed by a company, the right to work for them is worthless to me, so I can return it to get back my right to work for other companies.
In order to be enforceable, the non-compete has to pay you just compensation for every week that you honor it. And in order to discourage people from simply rescinding when they quit, it needs to provide tangible value at signing, value that would have to be returned in order to rescind.
For instance: If you sign this, we will give you $2000 now, and your full salary for each of the first 52 weeks after you leave us, provided you do not go to work for one of our competitors (list of specific competitor companies incorporated by reference) during that time. We can rescind at any time, and any ongoing payments will stop after two weeks. You can rescind by returning the $2000, and any ongoing payments will stop immediately.
That's a non-compete with teeth, because it recognizes that the ability to work for other companies has value, and gives other value in exchange for that value.
If BS non-competes are to become more common, notices of rescission might become more common with the resignation letter. Had the subject of the article offered such a rescission notice, she would have been able to sue her former employer for defaming her to her new employer. Now, she would first have to sue for declaratory judgment that the non-compete did not constitute an enforceable contract from the beginning, and then also prove that the old employer should have known that it was unenforceable when they contacted her new employer. That's a lot more difficult than "they told a lie and it got me fired."
In a lot of professions, you can relatively easy move to another industry. Software engineer who had developed very valuable medical algorithms may sign a non-compete and then get a next job in game development, for example.
Also, a lot of non-compete agreements are more specific than an "industry" as a whole and target specific product type, niche or something like that.
I've had to negotiate scope of NCs at all but one job. I've had to change enforcement period length and industry scopes. So many times the scope has been interpretable as all software ever, and I've seen terms of 2 years. Generally I'll accept NCs for the same industry and for up to 6 months after termination.
Most non-competes aren't enforced because they can't be (due to the reason you mentioned). BUT it still adds a level of risk to people looking to jump ship.
And many firms just don't want to deal with the potential hassle/exposure of hiring someone who has a non-compete that could potentially come into play.
In a former role, one or two of the larger firms in the space were known for having non-competes they were known for trying to enforce that basically said that if someone left--even if they were laid off--they couldn't do the same type of job for a year. Someone I know who left one of those firms just took a year off before going out on their own. The firm I was at wouldn't even think of touching someone to whom those non-competes applied.
