What’s non-compete clauses and why is it a big deal that it’s banned?

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I see that the FTC banned it and (from what I see) it seems like a good thing. Why?

In: Economics

15 Answers

Anonymous 0 Comments

The short version is that a hiring contract for a company you work for might have a clause like “after you quit/are fired/whatever, you can’t work for a company that is a competitor of ours for X months/years”. That’s a non-compete clause. It’s not just “don’t share our secrets with our competitors”, it’s “don’t even look for a replacement job at our competitors.”

Naturally employees don’t like it. If you’re good in the tech field and loose your job, you’re going to want a new job in the same field, right? In fact, your competitors might *want* your skills… But no, contract limits the places you can go after losing your job or you get sued by your former boss.

So, yeah, there’s been a push recently to have that declared illegal. If that does happen (I’m not sure of the FTC has the power to just make like that with a declaration) it would retroactively make it unenforceable on any existing contract.

Anonymous 0 Comments

Lets say you get a job at a car repair shop, and they have you sign a non-compete. If it was enforceable, you wouldn’t be able to go work for any other car repair shops, and as your work skills mostly have to do with repairing cars, you likely have to take a job you don’t have established skills for, and make less money.

Basically, it’s a way for shady employers to lock their employees in, when they’d be able to earn more at another employer in the same industry.

Anonymous 0 Comments

For instance, consider a physician in private practice who works at five local hospitals. If they lose their job or are terminated, they may be restricted from working within a certain radius (e.g., a specific number of miles) from each of these hospitals for a specified period, as per their contract. This is an example of a non-compete clause. Similarly, a tech worker employed by a consulting firm may be prohibited from joining any of their clients’ companies if they lose their job with the consulting firm, to prevent them from leveraging their professional connections and expertise to compete with their former employer.

Anonymous 0 Comments

Its modern day feudelism. You are a peasent tied to your feudel lord.

“Now we see the violence inherent in the system” M. Python 1975

Anonymous 0 Comments

TLDR: This is actually a big win for employees and a long time coming. Non-competes prevent you from competing with a former employer for a set period after you quit. These agreements are very one-sided in favor of a business, and arguably predatory behavior because companies don’t really give employees a choice but to sign it.

Non-compete clauses are one-sided agreements that put short term limits on what kind of work you can do after you leave a company (quit or are fired).

For example imagine you work in the IT field as a consultant that has a couple dozen clients. You may have a non-compete clause that prevents you from working for one of said clients for 6 months to a year.

This is to protect your employer from a client hiring you directly, or a skilled person leaving and taking all of their customers with them.

One the surface this seems fare enough, but these agreements are horribly one-sided and there are scenarios where a non-compete effectively makes you unemployable in your industry for a set period.

If for example you career is based on being an expert on a specific software product, and by design you have regular contact with all customers that run that particular product. If you quit you can’t work for any of them making you effectively unemployable. So what are you supposed to do for 6 months? work at a McDonalds?

Depending on where you live non-competes are often unenforceable because you can’t prevent a person from working and earning a living. You can however make their lives difficult, and even sue them or their employer depending on the contract. It is however a bit of a grey area. There’s numerous ways to get around a non-compete.

Alternatives include NDAs forbidding people from taking trade secrets with them to new employers, or gardening leave.

In Formula 1 for example many senior people have gardening leave clauses in their contracts. If you quit and have say 6 months left on your contract, the team you work for may put you on gardening leave. This is effectively a suspension, you still work for the team and collect a paycheck but you just stay home until your contract runs out. This is to prevent you from working for a competitor and taking the latest secrets with you for that period.

This is more fair to the employee than a non-compete because at least in this case you are still getting paid! Your employer has to pay **you** for the privilege of keeping you off the market.

For these reasons many countries are starting to make non-competes straight up illegal, which is good news for a lot of employees with said clauses because they often act like a pair of handcuffs, forcing you to stay for an employer that underpays you or treats you badly, and preventing you from joining a competitor for a better paying job.

Anonymous 0 Comments

It is an anticompetitive practice. Essentially it prevents a worker from leaving a job and working for the company’s competition; even if the competition is an objectively better employer by wage and benefits. It’s a big deal because in many fields, non-compete clauses were the unfortunate standard for high skill jobs.

For instance if I worked as a researcher for Google’s AI department. A non compete clause would let Google sue me if I go work for a different AI company.

Anonymous 0 Comments

Non compete means that you won’t take a job with a rival in the same industry. Which fucks workers who leave because it makes them unable to find work in the industry they have experience in.

The idea is that it protects companies from corporate espionage. But in reality it just fucks people over.

Very rarely are they ever actually enforced. Because a company would have to sue the ex worker.

But now they’re all unenforceable. Allowing people to seek employment within their fields without fear of repercussions.

Anonymous 0 Comments

Employees want to be able to quit their jobs and find other jobs without restrictions.  Employers are worried about employees running off with the business’ customers or confidential information, or spending a lot of money to train an employee only to have them take that training and use it to help a competitor.  

Where non-competes are legal (it varies by state), they usually have some limits.  The big one is that the non-compete has to protect a “legitimate interest” of the employer and “I want to be able to lock my employees in” isn’t a legitimate interest.  That means that in a court case about the non-compete, the employer would lose.  The thing is, though, that employees don’t want the time and expense and uncertainty of a lawsuit.  So, they’ll comply with non-competes that would get tossed out in court.  And the employer gets that “lock-in” that they want. 

Anonymous 0 Comments

Non compete comes in many variations, but the general agreements are that if an employer-employee relationship is terminated, then the employee cannot work in an identical role at another employer for a certain time frame and/or within a certain distance.

So an agreement can say “if an employee or employer severs relationship, then the employee agrees to not start employment as a mechanic for within 2 years and within 25 miles of any Firestone locations”.

The idea is that the employee could cause harm to an employer by poaching clients or other employees.

In reality, it only serves to limit pay and benefits to an employee. Because the employer can treat the employee like crap and pay crap, and the employee can’t quit and work in the same job for several years or have to commute very far away. Likewise, a national company may have a location every 25 miles, so an employee cannot move anywhere without being in that radius. So they can’t work.

It’s a big deal that it’s banned because now employees can quit and find another job easier for more pay and benefits.

Anonymous 0 Comments

A non-compete clause limits an employees ability to find work with certain limitations such as duration of time and location. This only benefits the employer as it removes a person’s ability to find comparative work for better pay.

Not only that but it harms the economic interests of competing companies that are not even in direct contract as their potential hiring pool is smaller because of these non-compete clauses.

Basically it harms workers and competing companies only to the benefit of the one company which is worse overall economically.