from the tell-that-to-Intel,-Apple,-and-Adobe dept.
Natalie Kitroeff writes at Bloomberg that a new study says the secret to Silicon Valley’s triumph as the global capital of innovation may lie in a quirk of California’s employment law that prohibits the legal enforcement of non-compete clauses.
Unlike most states, California prohibits enforcement of non-compete clauses that force people who leave jobs to wait for a predetermined period before taking positions at rival companies. That puts California in the ideal position to rob other regions of their most prized inventors, “Policymakers who sanction the use of non-competes could be inadvertently creating regional disadvantage as far as retention of knowledge workers is concerned,” wrote the authors of the study "Regional disadvantage? Employee non-compete agreements and brain drain" (PDF). "Regions that choose to enforce employee non-compete agreements may therefore be subjecting themselves to a domestic brain drain not unlike that described in the literature on international emigration out of less developed countries."
The study, which looked at the behavior of people who had registered at least two patents from 1975 to 2005, focused on Michigan, which in 1985 reversed its long-standing prohibition of non-compete agreements. The authors found that after Michigan changed the rules, the rate of emigration among inventors was twice as a high as it was in states where non-competes remained illegal. Even worse for Michigan, its most talented inventors were also the most likely to flee. "Firms are going to be willing to relocate someone who is really good, as opposed to someone who is average," says Lee Fleming. For the inventors, it makes sense to take a risk on a place such as California, where they have more freedom. "If the job they relocate for doesn’t work out, then they can walk across the street because there are no non-competes
(Score: 2) by Runaway1956 on Friday March 20 2015, @02:57PM
Noncompete clauses are unconstitutional. While an employer is paying my wages, he has a lot of leeway regarding what he may require of me. The day he STOPS paying my wages, he has zero freaking authority over me. I can open my own company right down the street from him, and go into direct competition. Screw any noncompete clause. One cannot surrender his RIGHTS by simply signing a stupid contract. You have the RIGHT to work in your chosen field, and a former employer has zero rights to say otherwise.
(Score: 0) by Anonymous Coward on Friday March 20 2015, @03:13PM
Yeah this seems a stretch to connect non compete with wealth. http://en.wikipedia.org/wiki/File:Right_to_Work_states.svg [wikipedia.org]
California is successful because it is one of the worlds largest economies.
Michigan? The same state that had 2 years in earlier in 1985 had its major business bailed out by the gov had growth? The growth was in electronic things where cars were going hog wild with electronic accessories? You dont say?... Or as one of my vp's put it "if it has a wire in it we want it". California is/was a desirable place to live. Michigan not so much.
What is more interesting is they capped it at 2005. The paper is from 2011. Those previous 6 years of data are meaningless? Anyone dig thru it and see how they handled 2000 and 1992?
(Score: 0) by Anonymous Coward on Saturday March 21 2015, @08:16PM
Yeah this seems a stretch to connect non compete with wealth.
is it really? a non-compete among other things means that:
a) you can underpay workers or otherwise treat them like shit (since now they don't realistically have the option to go work for the competition)
b) if a worker has an idea to improve things and his boss disagrees, he can't set up a competing firm proving his idea
In short non-compete clauses decrease how near we can get to that perfectly competitive free market that capitalism holds up as the ideal
(Score: 2, Informative) by Anonymous Coward on Friday March 20 2015, @03:17PM
Exactly what part of the constitution do they violate?
Sorry, but the employer's authority over you is not because he pays you, but because you closed a contract that gives him the authority. Of course you wouldn't have closed the contract is he wouldn't have paid you, but the point is that the relevant part is the contract. And unless there's a law that specifically does say a certain clause is not valid, or a clause that would force you to do things which you are not allowed to do by the law, and the contract was closed in a legal way, then the contract is valid.
You mean, like the right to lie in bed all day instead of working? Well, nice to know, I always thought I waived that right by signing the work contract. ;-)
Indeed, that's exactly what a contract is about: You waive some of your rights (like the aforementioned right not to work for them), and in return they waive some of their rights (like the right not to give you money). There are of course certain rights you cannot waive (like the right to live). But that's specific to those rights, and not general. So when you argue that non-compete clauses are unconstitutional, you have to show that it violates one of those rights you cannot waive. Just noting that it is a right is not sufficient.
(Score: 0) by Anonymous Coward on Friday March 20 2015, @03:34PM
Perhaps this bit:
(Score: 3, Funny) by jcross on Friday March 20 2015, @03:46PM
Yes, they must leave me in peace to run my assembler. Non-competes involving the use of higher-level languages are still constitutional, though.
(Score: 3, Informative) by bob_super on Friday March 20 2015, @04:46PM
In the states in which I lived, Non-Competes were legal only if they were a condition for an extra sum of cash. Usually a severance agreement.
I've never personally seen a case where your company could go after you if you rejected the extra and crossed the road.
People did have to be careful about the appearance of inappropriate behavior (telling company secrets, stealing IP), but if you don't have a clause that says "this chunk of money is because you can't go to work for our competitors right away", you are free to do as you wish.
Again, i haven't lived in every state.
(Score: 3, Interesting) by M. Baranczak on Friday March 20 2015, @07:10PM
In some countries, non-competes are legal, but if the company invokes the non-compete, then they have to pay you your old salary. This seems like a reasonable compromise. Then again, California proves that there's really no good reason for allowing non-competes at all.
(Score: 3, Insightful) by Runaway1956 on Saturday March 21 2015, @02:38PM
Yeah - that DOES sound like a pretty decent compromise. If my former employer doesn't want me to compete with him, he can continue to PAY ME to not compete. Cool. So, I'm getting the same wages that I was accustomed to while I actually worked for him, and I can take on any old part time minimum wage job for "extra" money. Not bad . . .
(Score: 0) by Anonymous Coward on Friday March 20 2015, @04:43PM
This clause binds Congress from creating laws abridging your freedom of assembly. It does not prevent you from entering into an agreement with a private party to not compete with them for some period of time.
(Score: 1) by Pessime on Friday March 20 2015, @04:47PM
I fail to see how that clause is relevant, since the clause is directed at what Congress shall not do. It says nothing about what is or isn't allowed in a contract between one party and another.
(Score: 0) by Anonymous Coward on Friday March 20 2015, @05:35PM
Exactly what part of the constitution do they violate?
Perhaps this bit:
Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.
Where's that '-1 poor reading comprehension' mod when you need it?
(Score: 2) by isostatic on Friday March 20 2015, @03:55PM
You mean, like the right to lie in bed all day instead of working? Well, nice to know, I always thought I waived that right by signing the work contract. ;-)
Nope, you still have that right. Of course the right has consequences, in that your employer will cease paying you, but they can't stop you from lying in bed all day.
(Score: 3, Interesting) by snick on Friday March 20 2015, @04:03PM
OK. IANAL, and I don't even play one on TV, and yeah ... the "it's unconstitutional" bit is hyperbolic, but from my understanding is that non-compete clauses tap dance on the edge of contract law.
Legally enforceable contracts must have some consideration from both sides. If I sign a piece of paper saying that I will give you my first born , and you have no obligation to do anything whatsoever for me, that is not a legally enforceable contract BECAUSE one of the parties is not taking on any obligation. (OK legal eagles ... 'splan how I've got that bit totally wrong)
It seems that non-compete clauses in contracts are questionable because the employer is not providing any compensation for the period of non-compete. If I signed a stand-alone paper saying I won't compete with you for a year, and in response you will give me nothing .... then this is not a legal contract. (that is why severance packages are often put together. The departing employee promises some things, and the employer coughs up one last wad of cash.)
Now, when you sign a non-compete as a requirement for being hired ... but receive no specific compensation for the non-compete clause other than the gestalt of your employment ... it seems legally questionable whether this is an enforceable contract. (California says: no)
(Score: 3, Interesting) by Thexalon on Friday March 20 2015, @04:51PM
In most states, courts have found that it is OK because you always have the choice to not take the job, so the "consideration" issue (that's the requirement that both parties get something out of it) is your paycheck for your period of employment. It's worth noting that the law generally ignores the issue of "what if all employers do this, so your only options are agree to a non-compete or not pay the rent?"
You are right that "It's unconstitutional" is completely wrong: There is no constitutional right to any kind of employment whatsoever. Indeed, it is perfectly legal to refuse to employ somebody for a wide variety of reasons, or for someone to be barred from a profession entirely by a private organization such as the bar association. I personally think enforceable non-competes are a bad idea, but that really is an issue for legislatures to decide.
Also relevant is that companies rarely go to the expense of enforcing these provisions. The only time I remember somebody actually getting tripped up by it in my career, a salesman had taken the entire client and prospect list from the company and gone to work for the direct competitor for something like 3 times his previous salary. When the now-former employer sued, it was for both violating the non-compete and violating the confidentiality agreement.
What I have to really wonder about is why this is described as a "technicality". Precise rules about the proper doorknobs to use for compliance with the ADA is a technicality. Provisions like this can and do have a profound effect. Heck, a similar such "technicality" with a major effect is the provision buried in the minimum wage increase of 1996 that says that computer programmers and system administrators are always exempt from overtime rules regardless of whether they have management responsibilities.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 2) by snick on Friday March 20 2015, @05:26PM
Yeah, and legal definitions have nothing to do with reasonableness ... but that really seems like double dipping on the consideration. "If you do these two things I will pay you for the value of one of them and we will pretend that the payment covers both..."
In a world where legal decisions were based on reasonableness that would never fly. But in such a world Frogstar fighters would probably be green too.
(Score: 2) by Thexalon on Friday March 20 2015, @06:39PM
Those kind of contracts happen all the time. For example, your contract with your ISP might say that you will pay them $X every month, and they'll hook up your Internet service and send someone to fix it if they screw up and will provide phone support.
The assumption with contract law is that you made the decision freely, knew exactly what you were getting into, and chose to enter into that agreement. That assumption might not be warranted, but that's the assumption.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 3, Interesting) by snick on Friday March 20 2015, @06:57PM
The funny thing about non-compete clauses is that the ultimate remedy for problems over any other clause in your contract is often for the principals to part ways. If I decide that I'm not going to abide by some not-explicitly-compensated term of employment ... I can walk away, or my employer can tell me to get lost, and there is no further obligation on either side after our relationship is terminated. Non-compete clauses follow you _after_ you have severed the relationship with your employer.
I'm not saying that they are illegal (many courts have said that they are not) or even unique ... just that they are really not like most other clauses in contracts. And in my (non-legal) opinion, allowing obligations for which no explicit compensation was offered to survive beyond the duration of employment feels like cheating.
(Score: 3, Informative) by NotSanguine on Friday March 20 2015, @05:19PM
Noncompete clauses are unconstitutional. While an employer is paying my wages, he has a lot of leeway regarding what he may require of me. The day he STOPS paying my wages, he has zero freaking authority over me. I can open my own company right down the street from him, and go into direct competition. Screw any noncompete clause. One cannot surrender his RIGHTS by simply signing a stupid contract. You have the RIGHT to work in your chosen field, and a former employer has zero rights to say otherwise.
Unconstitutional? Really? Where exactly is it in the U.S. Constitution that defines what can be in contract and what cannot?
Is that in the Commerce Clause? Please. You're either woefully uninformed, trolling or just plain dumb.
it is true that non-compete clauses are difficult to enforce, unless there's some kind of delayed compensation involved. Even then, it's a civil matter, rather than a criminal one. IIRC, there have been some cases (usually combined with IP/trade secret claims and/or customer lists) where non-compete clauses have been successfully enforced through litigation. However, it's usually not worth pursuing.
No, no, you're not thinking; you're just being logical. --Niels Bohr
(Score: 0) by Anonymous Coward on Friday March 20 2015, @05:32PM
People can't sign away rights. That is why indentured servitude is illegal. I cannot have you sign a EULA that specifies that the second amendment no longer applies to you for instance.
Really just look at non-competes. It forces someone into servitude, even if the person being served does not request anything. It is a form of ownership over someone else. Simple as that. To defend it is to defend slavery.
(Score: 5, Insightful) by NotSanguine on Friday March 20 2015, @05:49PM
People can't sign away rights. That is why indentured servitude is illegal. I cannot have you sign a EULA that specifies that the second amendment no longer applies to you for instance.
Really just look at non-competes. It forces someone into servitude, even if the person being served does not request anything. It is a form of ownership over someone else. Simple as that. To defend it is to defend slavery.
I'm not going to address your lack of logical reasoning, poor rhetorical skills or apparently nonexistent knowledge of contract and constitutional law, nor am I going to address the logical fallacies in your statement other than to posit that you prove the oft quoted and, almost as often, mis-attributed maxim: 'Tis better to remain silent and be thought a fool, than to speak and remove all doubt.
No, no, you're not thinking; you're just being logical. --Niels Bohr
(Score: 0) by Anonymous Coward on Friday March 20 2015, @06:17PM
> Unconstitutional? Really? Where exactly is it in the U.S. Constitution that defines what can be in contract and what cannot?
It is really funny watching runaway try to reconcile his far-right pseudo-libertarianism with the possibility of getting fucked over by the inevitable consequences of his ideology. For guys like him, "the constitution" is a sort of divine authority. So when the cognitive dissonance gets too strong, people like him give up any pretense of logic and just punt up to to their god, hoping that because his religion is the one true religion there is no way his god would let him down.
(Score: 0) by Anonymous Coward on Friday March 20 2015, @03:00PM
Wouldn't a contract with non-compete clause between an employee and an employer outside of California be under whatever law happens to be in force where the contract is closed (which would not by California, in that case)? And wouldn't therefore any lawsuit over that non-compete clause happen at that place, and under the law of that place, even if the employee then goes to California for his next employment?
After all, it's not the new employer who is suing over the non-compete clause, is it?
(Score: 2) by cmn32480 on Friday March 20 2015, @05:00PM
Most every contract that I have ever seen has a clause in it that states in what jurisdiction any dispute will be litigated. Generally, this is the home court for one of the entities.
"It's a dog eat dog world, and I'm wearing Milkbone underwear" - Norm Peterson
(Score: 1, Funny) by Anonymous Coward on Friday March 20 2015, @03:07PM
"The more you tighten your grip, CEO, the more innovation will slip through your fingers."
(Score: 4, Interesting) by MrGuy on Friday March 20 2015, @03:10PM
Apple. Google. Adobe. All regional powerhouses who decided, regardless of the actual law, that they would institute EFFECTIVE non-competes between each other with their flagrantly illegal "non-poaching" agreements that explicitly limited their employees mobility. Oh, and which, by the way, this study appears to completely ignore in delcaring California the land of free employment.
If non-competes stifle innovation, why did companies seen as highly innovative like them SO MUCH that they violated the law to make sure that their employees were NOT free to move around?
(Score: 0) by Anonymous Coward on Friday March 20 2015, @03:21PM
If non-competes stifle innovation, why did companies seen as highly innovative like them SO MUCH that they violated the law to make sure that their employees were NOT free to move around?
Because talent is a tragedy of the commons situation. It is rational for individual companies to try lock up talent, but that is destructive for the system as a whole.
(Score: 3, Insightful) by M. Baranczak on Friday March 20 2015, @03:33PM
The non-poaching cartel came into being long after Silicon Valley became Silicon Valley.
(Score: 2) by bob_super on Friday March 20 2015, @04:50PM
The non-poaching was as much about limiting salary hyper-inflation as it was about non-compete.
(Score: 2) by darkfeline on Friday March 20 2015, @06:29PM
>limiting salary hyper-inflation
What happened to capitalism is good and leave it up to the free market?
Join the SDF Public Access UNIX System today!
(Score: 0) by Anonymous Coward on Friday March 20 2015, @09:08PM
Collusion is part of a truly free market.
(Score: 1) by rondon on Friday March 20 2015, @07:57PM
Did you use hyper-inflation to imply that the wage growth was a bad thing? Possibly unwarranted? Maybe these engineers and scientists didn't deserve to gain a larger share of the fruits of their labor. I feel like the words you used (much like the words I used, e.g. fruits of their labor), without a definite meaning, get thrown around a lot to make things sound positive or negative.
I guess my request is that you add clarity to your statements so that I can understand whether you are espousing (or possibly shilling) an ideology or simply adding a fact to the discussion. Most of the other posters at least make it obvious when they shill, so I can take their responses with the appropriate amount of sodium.
(Score: 2) by bob_super on Friday March 20 2015, @08:36PM
That was a statement from the companies' standpoint, trying to justify their reprehensible -and mildly slap-wristed- actions.
It's been well over a decade since I got a raise above 3% without switching jobs, and I know a few people in the Valley making a killing by playing job-Frogger (some may go Splat soon if they keep pushing their luck). I understand why the big guys would try to illegally reduce mobility artificially, rather than give the required raises.
Most of the Froggers I know wouldn't endanger their next jump by revealing the competitive stuff they know, and apparently their companies are not asking. So the non-compete in my limited sample is more about avoid the salary competition rather than keeping secrets.
(Score: 2) by unitron on Saturday March 21 2015, @08:06PM
What's "deserve" got to do with it?
It's supply and demand. If Company X wants/needs Engineer Y and Scientist Z badly enough, they'll pay their asking price if they think having them as employees will increase the gross enough to pay them and have an attractive amount left over.
If not, they won't, and if no one else will either, Y and Z will have to lower their asking price if they want a job.
something something Slashcott something something Beta something something
(Score: 3, Interesting) by Whoever on Friday March 20 2015, @03:55PM
Because it's not about the established companies -- it's about the startups. The Apple/Google/Adobe no-poaching agreement started long after those companies were long established in Silicon Valley, but the question is: why were they established in Silicon Valley? Also, any employee of one of those companies still had options. Facebook, for example, refused to join the no-poaching agreement, and there are hundreds of other companies a former employee could join.
(Score: 2) by ikanreed on Friday March 20 2015, @04:07PM
Those start-ups are in a bubble again. Just putting that out there.
(Score: 2, Interesting) by Anonymous Coward on Friday March 20 2015, @03:52PM
The studies on why Silicon Valley has been more successful than similarly-endowed competitors (notably Boston's Route 128) goes back at least to the mid-90s, with the book Regional Advantage [harvard.edu] which discussed the free migration of engineers from company to company. This present study seems to take Saxenian's work as a starting point and tries to pinpoint the cause as something in the state legal code.
I'm dubious of the latter. California has always attracted restless non-conformists, visionaries and hippies in much greater quantities than most of the rest of the country (and world). The east coast has plenty of highly educated folks but is somewhat hidebound, especially in corporate life (perhaps not as bad as the US Midwest, though). I'm sure California has plenty of companies run as bureaucratic fiefdoms, but in relative terms, they're pretty friendly towards constant change.
(Score: 1) by demonlapin on Friday March 20 2015, @05:11PM
(Score: 3, Funny) by Leebert on Saturday March 21 2015, @02:39AM
Palo Alto sounds boring. :)
(Score: 3, Insightful) by goody on Friday March 20 2015, @04:22PM
For the most part on the east coast in every company I've worked in, non-competes were never enforced, never litigated. It's not worth the time and effort and it's questionable half the time whether it's legally enforceable.
I'm surprised Bloomberg would publish an article that is so easily debunked with empirical evidence.
(Score: 4, Insightful) by Anonymous Coward on Friday March 20 2015, @04:26PM
Headline should be:
1)Silicon Valley I the World's Innovation Capital.
2) #1 is because of N
Hint, #1 isn't true.
(Score: 0) by Anonymous Coward on Friday March 20 2015, @05:17PM
Expect bullshit.
(Score: 3, Insightful) by Anonymous Coward on Friday March 20 2015, @07:55PM
His giant no-paragraph-break bullshit fests simply baffle the editors here and on the green site. Stop adding in carriage returns for him. Stop accepting submissions that are just a bunch of linkspam.
(Score: 3, Insightful) by dyingtolive on Friday March 20 2015, @08:27PM
"Scab"? That's lame. You could have made it rhyme or something. How about "Spew Pickens" or something like that?
Also, and more importantly, if you think it's low quality, submit something else for me to read instead. Or get a life.
Don't blame me, I voted for moose wang!
(Score: 0) by Anonymous Coward on Friday March 20 2015, @05:42PM
1)Silicon Valley I the World's Innovation Capital.
Hint, #1 isn't true.
Apparently at least one mod found your proof by assertion to be persuasive.
I'm not sure why. I guess that's what happens when everybody gets mod points.
Seems like we have a problem with promoting stupid comments, where's the outcry to change the moderation system to fix that?
(Score: 1, Insightful) by Anonymous Coward on Friday March 20 2015, @05:47PM
1) place xyz has innovators and is successful
2) some secret sauce I just figured out if you just read my blog
If the secret sauce is not lots of people and money. Then it is usually 'that one weird trick' and just clickbait...
(Score: 1, Touché) by Anonymous Coward on Friday March 20 2015, @06:56PM
silicon valley has no innovators. it is not successful.
(Score: 4, Informative) by MichaelDavidCrawford on Friday March 20 2015, @10:57PM
It's not that California doesn't have non-competes, it's that they are unenforceable. Back when I was just a wee boy, I signed non-competes regularly. I expect most companies still have them in their contracts.
If someone who signed a non-compete is not knowledgeable about state law, quite likely they won't even apply to a competitor.
Yes I Have No Bananas. [gofundme.com]
(Score: 0) by Anonymous Coward on Saturday March 21 2015, @02:23AM
Such an act would demonstrate the utter cluelessness of that company.
They are operating on inertia and clearly aren't aware of anything that has happened in years.
Don't stroll to the door.
Walk as briskly as you can manage.
This is not a place you want to work.
-- gewg_
(Score: 3, Insightful) by MichaelDavidCrawford on Saturday March 21 2015, @02:52AM
Consulting and employment contracts are commonly written by attorneys, who would have every reason to know they are unenforceable. I'm quite certain they depend on those who sign such contracts, not to know their legal rights.
Yes I Have No Bananas. [gofundme.com]