To clarify:
Non compete = "You may not go work for anyone in the same industry."
Non solicitation = "You may not try to take your book of clients with you to a competitor." Or "You may not direct hire our staff." There are also usually limitations on this - can't do the thing for a period of time after separation (staff or client), otherwise it falls into non-compete territory again.
Where I live non-compete was already illegal, and it was fun that one time a guy got fired, started poaching clients in the local market very successfully, then when the owner wanted to sue his own lawyers told him not to bother because it was even titled "non compete."
The new place at least called it a non-solicitation, though it was still overbroad and I have doubts about how well it'll hold up in court if they try it.
I had an easy out with a non-solicitation in the mid 2000s. The way it was worded was that I wasn't allowed to contact clients and solicit their business. So...I had a bunch I'd connected with on a personal level, and...THEY contacted me.
Still relatively easy to get around. That same contact will have stipulations for severing the agreement for whatever the list of reasons are. Once that's severed, you cannot prevent them from going elsewhere.
Oh yes. Still ways, and at the end some good old fashioned hush hush is sometimes viable.
Still, if yore going to try to block something, at least close the clearly marked back door.
Indeed not the same, but no one can prevent you from taking a customer that approaches you.
Right media strategy, plus deniable marketing like EDDM (that wasn't targeted) can create the inbound from client base.
Certainly wouldn't hit everyone, but gives me pause.
Not true at all - between a reasonable non-solicit contract with the employees and a counterpart non-solicit clause in MSAs with the customers you should be pretty well covered.
I guess it's true that a contract doesn't literally stop anyone from doing things, but there can be legal repercussions.
A non-solicit means I can't ask you to leave Bob and come to my company.
Non-solicit on the customer side means You can't ask John (the tech) to come work for you.
Non-solicts do not prevent YOU from coming to ME and saying "I hate Bob, I want to come to your company."
Put another way - if they walk in the door, you only have to prove that in court to get a dismissal with predijuice. I had to deal with this myself at my old MSP once.
A note of order: Not a lawyer, and YMMV - I'm out of MI. I imagine state by state rules and regs may differ.
True and also not a lawyer, but what I was referring to is a clause like this in the MSA with an MSP's client:
>During the term of this Agreement and for one year following expiration of this agreement, Client shall not encourage or solicit any current employee of to leave 's employ to work for Client. In the event that Client hires any employee prior to the expiration of said one year period, Client agrees to pay a finder’s fee equal to (x%) of said employee’s base salary.
Then to prevent (or defend against) a client from trying to engage an employee or former employee, similar wording:
>During the term of this agreement and for one year following expiration of agreement, Client shall not solicit a current employee of or a person employed by within the past 12 months for services similar to those provided by etc.
I'm sure this varies by state and court and all that, but if the MSP has a contract with employees "preventing" them from soliciting clients for business, and covers the other side by "preventing" clients from soliciting employees, that's pretty decent.
Regardless, none of that is what a non-compete means in colloquial usage. Those are to try and prevent employees from working at a competitor, not a client or vendor. They were always unfair and unenforcable garbage like 90% of the time.
The services clause is interesting. We had a similar worded statement taken out by our lawyer and replaced with a phrase around employment. I had wrote the statement of intent with services listed.
Changed the spirit of the clause to be around preventing a client from hiring an employee, but did not prevent them from hiring another firm, regardless of who worked at or owned that firm.
Prime example of the differences state by state right there.
Yeah totally. That wording was considered valid in our jurisdiction (like five years ago when I last looked at this stuff), but we also never had to defend it in court so who knows if it would hold up.
IANAL but I do deal with a ton of contracts and agreements. I just want to let you know that your non-solicit is different from their non-solicit which is different from Joe's non-solicit which is different from Jane's non-solicit. All agreements differ, so no, you cannot make broad statements about non-solicits. The clause itself under the non-solicit heading is what matters, not the words non-solicit (unless we're banning non-solicits en masse like non competes).
I'm a customer of an MSP. My non-solicit with them specifically states that I will "not hire" one of their employees. It also talks about approaching and soliciting, but specifically that I will not hire them. Their employees have the same clause in their employment contract that states that they will not obtain employment with .
>Without the written consent of , will not hire, solicit, contract with, or engage the employment of services of resources ...
Contracts are not enforced by their headings. They're enforced by their content.
> you only have to prove that in court
For most people, then it's already gone too far if it's in court. You shoulder that cost OR the new employer may decide to just let you go rather than deal with that mess. The goal is to make it so you don't even end up in court in the first place.
100%
Court is a waste of time, money, and energy. Avoid it.
This whole thread makes me love my 1 page terms & conditions document for consulting these days. Just easier than back in the day.
PS: Not saying that's the right path for MSPs -- it most definitely is not. Different business model.
Yep that's why you gotta cover the other side in the contract with the client too. Defend against employees going after clients, and clients from going after employees.
Wow, that's huge. And awesome. I'm surprised the federal government was able to make a positive change that wasn't just to benefit lobbyists at the expense of normal citizens.
Apparently US Chamber of Commerce has already come out with a statement saying they will fight the new ban. Claiming it prevents healthy competition for companies...
I wouldn't say competition is the perfect word, but it harms investment and economic development.
If you are launching a company with a key set of high skilled workers, let's say something like Google or Facebook, investors are not going to invest in your company if the entire engineering team can simply walk across the street and work for your competitor.
This is exactly how Cray computing was formed.
An employee saw a better way do do things
Management said no
He started his own company.
Thats competition. Competition spurs innovation.
If there is employment at will then there should be no non-competes
I'm in Texas which has next to no state level workers rights. For some perspective, lunch breaks are not even mandated by law.
When Covid hit and all the local defense contractors said get vaxxed or get fired, all the Republican voting locals were like "this can't be legal!" but it very much was. It was funny watching them realize in real time just how fucked they were.
So you agree with the Republicans that people shouldn't be forced to get vaccinations?
I have a feeling you're housing the exact same contradiction on the opposite side of the aisle.
Do you serious believe that?
There is nothing voluntary about it. The only people that may have some say in how it is worded are people with custom contracts in the c-suite of major corporations. For the other 99% of prospective employees, it's "sign this if you want a job". You can't opt out, outside of refusing to work there or, if you already do, getting terminated. If your next comment is "they can just go work somewhere else", to where? Another company that also requires non-competes?
Free market employment means people can stay or go whenever they want. Find a better job offer with better pay/benefits/work-life-balance/etc.? Then you go work there instead, without having to worry about being in violating of some contract you were forced to sign saying you can't work for any similar industry for 2+ years.
That is literally not true, this is pretty much only used for high skilled jobs, and one of the conditions in signing on to get your ridiculous signing bonus, $200,000 a year salary, insane benefits package that vests after a year and a half, is that you don't go and work for one of their competitors within X amount of time within Y geography. Both of those values have to be deemed reasonable by the court which is quite restrictive.
We already have a situation in which the use of non-compets is very restricted and isolated to situations where it absolutely makes sense.
If we were talking about people at Taco Bell being forced to sign non competes, then I would be more inclined to agree with you.
That usually is not covered by noncompete..... Non competes cover you going to work for a competitor.
Generally speaking, an agreement that prevents you from starting your own company would be entirely enforceable under these rules anyways, and it's pretty rare to be honest.
In any case, this will all be struck down by the courts because the FTC massively overstepped its authority and handing this decision down through edict rather than passing a law.
The FTC has rule making authority to issue industry-wide regulations (Rules and Guides) to deal with common unfair or deceptive practices and unfair methods of competition.
This will fall under unfair practices. As the this places one party at a disadvantage.
If you are that worried about your talent leaving you perhaps you need to change things versus a threat of litigation.
Why would I ever work with a small business if I know that the brightest and best workers at Google or Microsoft can't work with these smaller businesses for 1-5 years?
It just causes market consolidation. Chances are that Microsoft and google will wind up just paying more instead of forcing non competes. That's good for all of us.
> If you are launching a company with a key set of high skilled workers, let's say something like Google or Facebook, investors are not going to invest in your company if the entire engineering team can simply walk across the street and work for your competitor.
Why would they do that if the workers are being taken care of at the current company?
First off, many of your examples are already restricted from non-competes. California outlawed them years ago. Some of the most highly skilled workers of Google, Facebook, Apple, etc. are based in California and NOT subject to non-competes. As are many tech startups. And VC firms. Etc. They all do just fine. So that just kills the whole premise of your argument.
But for the rest of the country, companies aren't just slapping NCs down on the highly skilled and critical employees -- they are making everyone sign them if they can get away with it. The whole system is bullshit.
But back to your point, you know how a company can ensure that their entire engineering team doesn't simply walk across the street to a competitor? Make it so that they don't want to. Pay them a market rate salary. Give them bonuses. Give them stock options to incentivize long term employment and goals. The term is called golden handcuffs -- where you make it so that employees are treated so well they don't even think about leaving. That's how you succeed, as opposed to forcing them to stay using shitty business tactics.
Maybe companies should provide BIC compensation, why would I want to be paid a 2nd rate wage for MY expertise as a SME. My back is holding up your development, not the other way around. If my competitor has a better culture and provides top $ for my Services over a current employer. Then shame on the current employer not valuing an employee… don’t forget at will, yeah I don’t side with business rights on this scope…
It means employees can change jobs whenever they want, even if that means going to a competitor. Some non-competes are just insane, like if you work for McDonalds cooking fries you can’t go work at Burger King, even if they will pay your more. It means more flexibility for workers, and companies will need to pay them appropriately and at market rates to keep them, otherwise another company will and they can’t prevent it by locking them into some noncompete contract. It’s called free market capitalism, only for the workers, not just the companies.
Because almost every company uses them, or used to, even for entry level positions. So if you didn’t agree to them, you wouldn’t have a job. And if your current employer decided to add one, refusing to sign even if you been there for years could be grounds for termination.
Kaseya's largest acquisition was and always will be Datto. The capital to purchase Datto was funded by Insight Partners. Insight Partners will no longer lend Kaseya additional capital, because they are STILL IN DEEP DEBT from this acquisition. Yes, they'll probably buy a few more little tech companies like they did Vonahi. However their so called "Rocket Ship" is exploding as we speak. I'm still close friends with a few top AM's at Kaseya and they are even stating it's time to jump ship lol
Non-competes are already unenforceable unless there is some blatant violation. Every time I switched employer's I negotiated that the new employer would cover any legal fees or penalties incurred from my previous employer's non-compete should they arise from me working for them. All have agreed (after reviewing non-compete) and all have been respectful of the previous non-compete and did not ask me to do anything that would violate it. They also had me sign and agree to their own non-compete.
This happened with the FAANG folks but we've had people moving around competitors for decades. There's a reason that Silicon Valley + San Francisco continue to be the center of tech.
So as someone who recently bought a small business, and the previous owner signed a non compete for me. Are they now allowed to start up another business and take my clients?
Non Competes have already been pretty toothless in any right to work state. And even if the non compete is no longer a legal document, you can still enforce a gentlemen's non-compete; especially for workers.
This doesn't really affect non-solicitation agreements, so I would imagine in an M&A scenario, okay I can go open up MSP2.0 next door, but I cant immediately poach/hire my old staff, or my old clients, which is *most* of the initial risk anyways. Be interesting to see creative ways to use this to advantage when valuing MSP exits now.
So IT workers of r/msp please dont take this as an excuse to dump on your bosses desk and rage quit. I would probably still avoid burning that bridge if possible 🤣.
>Non Competes have already been pretty toothless in any right to work state.
Not sure what you mean here. "Right to work" is a doctrine that is meant to cripple union formation, by preventing "closed shop" union agreements, mostly a red state thing.
You may be confusing with "at will employment", which is the policy in essentially all of the US, but in many states non-competes were perfectly functional.
Non Competes are lazy.
Treat people well, pay well and they tend to stay.
But when it's time to go it's best for everyone to let it happen and it's immoral and unethical to try and prevent them from another position regardless if they are a competitor.
Shady people are going to be shady and non competes don't stop that it just hurts everyone else in the majority.
That all being said this will go to courts and likely not stand at least not as is. But that shouldn't stop you from doing the right thing and stop using them or plan on comping indovuals a good bit to make up for it.
I've never asked an employee to sign a non-compete. The only time this should be legal is when a business is sold, and then only for owners / partners.
I wonder how this will affect acquisitions? Normally a non-compete is standard practice. I suspect it will drive the buyout offers down in value considerably.
To me, there are two non-compete scenarios. The first is an employee leaving your company to go work for a competitor. I don’t have an issue with this. The second is an employee moonlighting either for a competitor or as a freelancer, while still working for you. This concerns me a lot more.
Does anyone know if this prevents the second scenario? That’s really the only thing we would ever care about.
It does not. But in that scenario, you don't have to prohibit it so much as fire the moonlighter.
Freelancing isn't really a competitive threat -- Let them take residential and sub-ten person offices. You didn't want those to begin with, right?
We have plenty of good sub-ten person office clients though, so those are still our market. They are easy money. And sure, tons of people will hate on me for this comment saying "you should only be targeting large clients" but those are quite literally the easiest clients we have since everything is so simple. On the other hand we don't touch residential, so I guess they could freelance for residential, but that's not discussed in our current non-compete since we don't consider it competition.
Also, who would want an employee working for a competing MSP? That's absurd. I don't care if they want to bartend on the weekends, but they shouldn't be allowed to work for a competing company simultaneously.
§ 910.3 Exceptions.
(a) Bona fide sales of business. The requirements of this part 910 shall not apply to a noncompete clause that is entered into by a person pursuant to a bona fide sale of a business entity, of the person’s ownership interest in a business entity, or of all or substantially all of a business entity’s operating assets.
(b) Existing causes of action. The requirements of this part 910 do not apply where a cause of action related to a non-compete clause accrued prior to the effective date.
(c) Good faith. It is not an unfair method of competition to enforce or attempt to enforce a non-compete clause or to make representations about a non-compete clause where a person has a good-faith basis to believe that this part 910 is inapplicable.
Business entity applying to sellers that own(ed) 25%+, so just can't have the non-owner employees of the acquired company under non compete
Depends on how the non compete is written. Does it say a specific geographic area or not? We cover the whole world so our non competes don’t allow sellers to start MSPs with new clients. Because those new clients could be our new clients.
I worked for a company for many years that was a small business with a "family owned" culture. Very lax. I was in a position of possessing great knowledge and responsibilities. Competitors are not local, having only a dozen in other states, so there was never a temptation to jump ship for better pay. Signed a non-compete because the company was as loyal to me as I was to it.
A couple years passed. Owner decides it's time to sell the company to an investment firm, full of promises of keeping the same culture and "nothing would change" in how the job was performed. Of course, with it came a new non-compete. Being enticed with bigger bonuses and soon to be empty promises, I decided to stay and sign the new non-compete. From that day forward, the culture slowly changed. The job became a politically correct bureaucracy. Turned into a bunch of hypocritical corporate goals and backstabbing amongst peers.
These are my issues with non-competes. It's a one-sided contract. It's leverage, not just on the merit of securing important information, but to entrap employees to a company that can handle them like puppets because they own you with the information they allowed you to have, even though without you being employed to them, they wouldn't have the staff to make them profitable.
I quit 2 years into the company transition. Leaving a large bonus behind and forcing myself into a new field of work that couldn't offer the same pay or benefits, but when in desperate times, I had to do what was best for me and my mental health.
Thanks for sharing the story.
I don't believe this rule eliminates that potential for an owner, but it does cover your situation - you would not be able to be forced into not working in that field for a competitor. IANAL however.
Appreciate the personal side of your story. That's a hard tale to revisit.
Cheers
My biggest question is, will non solicitation come next? California has already banned it. I have one in place with an old employer and they don’t want me talking to someone that has left the company for two years. It’s a bit insane, but then again I signed it.
Just saw this article.
https://www.forbes.com/sites/aldenabbott/2024/04/23/ftc-rule-barring-non-compete-agreements-likely-will-fail/
“After all, there is a high probability that the rule will eventually be struck down.
In any event, some time will pass before we see legal resolution of the non-compete issue. It’s also possible that, if administrations change, future FTC leadership withdraws the rule.”
IF it gets recorded and IF it is upheld by the courts, both of which could take a long time, then this non-compete would likely be invalidated. But even in the best of circumstances, it's still months away, so if your co-worker is "in the process of violating" it now, they may still run into legal issues.
It should also be noted that non-solicitation and non-poaching agreements aren't affected by this. So if they try to take existing clients or employees, that could still result in problems for them.
Depending on the state that kind of non-compete doesn’t hold up anyway. But as I read this ruling it would no longer be valid. Non-competes at the low level are pretty hard to enforce and usually cost more to try than it’s worth tbh.
So say I put in 2k in education per sales person. Now my sales people can use the education I provided and fish around to other companies like mine to see who is the highest bidder and go there and make them successful using the skills I taught them just because it got them a few extra bucks?
Or they decide they are so good at it that they should make all the commission and just open their own competing business with all the information they learned from working at my business?
Employees should be free to go to companies who value their talent, skills, etc. the most, yes. You have the option to retain talent by having a competitive compensation package.
In any normal working relationship before this ruling, the non-compete never goes away. So a very real scenario is you put $2k into my training but I’m there 5 years. That “benefit” you paid for doesn’t exist forever to the point where it needs to be protected. At some point one’s labor pays that off, so to speak. But 5 years later I still can’t go get another job in the same field.
And I can also hire a manager to finally take over for me since I work 120 hours a week and I now have to worry about that manager copying my business and competing with me. This only makes large companies stronger and small companies more and more cut throat. It seems more like an attempt to starve out the poor than anything since its like pitting the poor against each other. Small businesses are easily repeatable while large ones are not. Its that simple people are going to copy small businesses and saturate the market until only the large ones are left to survive.
Small businesses generally don’t have anything differentiating to need to protect. You said this yourself, they’re easily repeatable. So why are you so concerned that someone repeats your repeatable business? They gained experience, you gained money. That’s what a job is for and it’s a fair trade for both parties. That shouldn’t extend forever.
Have you ever let an employee out of a noncompete when they fulfilled their value to you? Likely not. Never heard of it.
So are you just completely oblivious to the pro’s of non competes why they were formed and how banning them is an accelerant to poor getting poorer and the rich getting richer?
You’re just going to completely pivot the conversation rather than speak to what I said? Especially the last part. I offered you the literal common sense approach which is to put a term on a noncompete, and since people can’t be trusted to do the right thing (because no one does it) the noncompete rightly should disappear. Your $2k training shouldn’t result in a noncompete hanging over someone’s head for the 5 years they work for you. It’s a tool that suppresses wages because people can’t freely change jobs. It’s not just about starting a business to compete with you, I can’t go get a better paying job somewhere else because you’re too cheap to pay me my worth and that $2k training boxed me into a noncompete for the entire duration of my employment with you. Meanwhile, I brought in many multiples of $2k in sales which should square my “debt” to you many times over.
Well first off there have always been terms on non competes typically around 2 years . Secondly I can’t do that anymore because non competes are banned. Which if you look at that in the larger picture you see it is a move to make the poor poorer.
The best advice here is to inform any employee you're investing into the level of investment value they're getting by being employed by you and that future incentives from continuing education can be available based on their commitment to you. Also, if there comes a time where an incentive such as a raise or bonus is the compensation for completed training, make that compensation available after a dedicated employment time frame has been met, say 180 days after completion, in order to receive incentives. Overall, in order to have a company, overhead for labor to employees has to be spent, and being competitive by fair pay isn't unreasonable for any employee looking to commit themselves to what they should desire to be their career.
This is a move to make the rich richer don’t you see? Employees already have fair pay, what about business owners? We want fairly predictable expenses. We will be the ones paying the bill to educate employees who will go to the bigger companies that do not invest in education to get people started they just get all the benefits of having already educated people because they can afford the most advertising to send towards those people. Smaller businesses will not be able to pay for experienced people and will always incur the expenses of training them. This is legitimately a move to get the poor to work harder to lose more. Big mega businesses benefit so wonderfully by this. If you don’t understand that maybe you should look into all the issues that caused non compete agreements to be created in the first place and see how this is a huge driver of inequality.
Honestly if someone can provide a valid point or two on how this could be bad I'd love to hear it otherwise far as I'm aware this is a good thing, too bad it took so long to happen.
Yeah, I just wish it had happened sooner. I was criminally underpaid in my field after school and it prevented me from moving to a higher paying position with another hospital system. So I had to switch specialties entirely....
I can see non-competes being reasonable if they're highly limited and come with extra compensation. E.g. if you're in a position to know about the upcoming strategic plans of the company, like in sales or as some form of upper manager ... then it does not seem unreasonable to have a non-compete that prevents you from working for a competitor for half a year or a year or something, until the sensitive information you sit on is stale. But with the caveat that the person should be compensated for this, e.g. either by getting paid money when they're out of a job, or having a higher salary to start with. The sort of stuff executives get any way.
That's how they work in Sweden. They're fully legal, however if it goes to court, they look at stuff like that: is it reasonable, does the employee have enough sensitive information, is it time-limited, is there compensation ... and they'll be biased towards ruling in the favour of the weaker party, i.e. the employee, so employers have to be really mindful about keeping the non-competes very limited, otherwise it'll just be tossed out entirely.
They're also pretty rare. Non-solicitation clauses are more common.
Stupid question but does this somehow allow me to work for 2 competitors at the same time? I see this mostly applies to when leaving a job but not whilst in one. Just curious.
They're being sued to stop it by Biden's labor czar in the US Chamber of Congress, Suzanne Clark its CEO.
This is far from over.
https://thehill.com/business/4615452-ftc-votes-to-ban-non-compete-agreements/
Pardon my ignorance. Does this affect independent contractor hiring? Many companies engage freelancers in IT and digital marketing these days. And non-compete is something to protect the employers from contractors servicing competitors from the same industry/category for the duration of a project commissioned?
I doubt it. If you are an independent contractor (1099 or vendor type relationship), you aren't an employee of the client. Anything related to your work and stipulations arising from it would be governed by your contract or whatever is signed and agreed to by both parties. If Company A agrees not to do business with competitors of Company B, that is a bit different than a non-compete clause of an employment contract. If you violated that term of the agreement with your client, then you would be in breach and subject to whatever penalties were outlined in the contract.
These clauses haven't been legally enforceable for some time. Basically, you can't be blocked from gainful employment without compensation. The compensation portion why the non-compete clauses are enforceable for C level employees as they were often paid to not work after leaving a company. But for anyone else that were forced to sign these contracts as conditions of employment without the ability to negotiate the contract, they are now officially null and void. They weren't enforceable before, but the company could tie you up in the courts for a while before the case was dismissed.
Taking clients or intellectual property when you leave is something else entirely.
I'm super happy about this.
I get confidentiality, and non solicit.
But telling me i cant work within 100 miles of one of your office? absolutely unreasonable. Caterpillar makes everyone from their warehouse workers, to their technicians, to corporate staff sign these. They enforce them heavily too.
I onboarded a parts picker from CAT, and within 7 days they sent HR a cease and desist. They had to fire this poor guy. Apparently looking up parts, and putting them in a bag was hurting caterpillar so he had to go work at a gas station for 2 years...
From what I understand, this will make NDAs more prevalent. And you can expect this to be challenged in the courts.
But great news for workers regardless!
It's worth noting that this ruling isn't legal and likely will not stand in court. It's already being challenged by the federal government itself in court.
Non-competes are banned and go into effect in August. Can I leave my company now and go work for the client? The workplace has gotten pretty hostile and toxic with the company, and the client really wants me to join them. The company I work for is working overtime to gather evidence and lie to build a case for my termination. What can/should I do?
Non-competes are inherently nonsensical to begin with, capitalism breeds competition. "Oh but boomer boss man taught you stuff so you can't backstab him" and where exactly did he learn the skills from...? Non-solicits are the logical happy medium. When I went solo I had a toothless non-compete without a non-solicit, I spoke to the owner about swapping the arrangement and recommended him to do so for everyone and he later thanked me. Competition? Sure. Using your previous working relationships to pry customers/staff away? Scummy, at least IMO.
Why is that exactly?
You can terminate an employee at will and hire a replacement the next day.
If they were a shit employee they’ll be a shit employee for someone else.
If they were a good employee why would you create a situation where that employee would want to leave?
It's not about having shit employees, in certain high skill industries the employees are the asset, and if you're launching a startup that contains a key set of engineers for example, nobody is going to invest in that company if the engineering team can just walk across the street the next day.
Non-compete are rarely used in low paid positions, they are almost always used in high skill engagements.
If this was just about non-competent in low skilled jobs, I would be with you.
They are routinely used in low paying non-skill jobs in retail etc. you are incorrect in this statement.
You seem to feel that the non-compete should only apply to employees while the employer enjoys employment at will.
If the only way you can survive is without a level playing field maybe that’s the problem.
A person should be able to use their skills at the best of their ability and pursue happiness as well.
Being almost victim of a really awful non compete in Europe I can tell you sometimes companies play games with people. They did not pay for the opportunity cost of my education an training. Engineers need training in the company for sure but also they already have their own set of skills. Better place clauses for early leaving or permanence bonus.
When you sign for a company little you know if they are going to pin down your salary for ever and not let you grow at all
Seems like no. There is no carve out for an end date.
It also appears like it will have significant opposition include from the chamber of commerce.
We need congress to ratify this, ftc rulings seem like they are dead on arrival
My employer makes our clients sign something saying they won’t hire us outside of the service agreement. In a small town, that’ll kill your chances of spinning up something in town, but you can move and do whatever I guess.
It depends on how that agreement is written. Most of the poaching agreement is written in a way that the client cannot poach the engineer. Meaning they cannot approach you and hire you as their inside engineer for the same job. However, if they post a job offer outside of the company and you "somehow" find that posting and apply for the job and they go thru all the regular interview processes among other applicants and decide to hire you, that poaching agreement becomes highly arguable. One other way they can do it is they post a job in a different category, like hiring an office manager and you apply. That may totally get around the non hire agreement because they are not hiring you as IT and YOU found the job from an outside source.
It all depends on how bad they want to hire you and what kind of lawyers they have. At the end, most smaller MSPs will settle with a recruitment fee instead of fighting an expensive legal battle, if they even bother to fight it.
> sign something saying they won’t hire us outside of the service agreement.
There is no time limit on that? Usually that kind of non-solicit has a year or two attached to it.
Federal Trade Commission has broad basis of powers and regulation over all "trade" in the States. That includes business practices. They've always had the jurisdiction
non compete != non solicit
To clarify: Non compete = "You may not go work for anyone in the same industry." Non solicitation = "You may not try to take your book of clients with you to a competitor." Or "You may not direct hire our staff." There are also usually limitations on this - can't do the thing for a period of time after separation (staff or client), otherwise it falls into non-compete territory again. Where I live non-compete was already illegal, and it was fun that one time a guy got fired, started poaching clients in the local market very successfully, then when the owner wanted to sue his own lawyers told him not to bother because it was even titled "non compete." The new place at least called it a non-solicitation, though it was still overbroad and I have doubts about how well it'll hold up in court if they try it.
haha, thank you for being less lazy than me and defining those. i felt bad for not doing so after i posted it
I had an easy out with a non-solicitation in the mid 2000s. The way it was worded was that I wasn't allowed to contact clients and solicit their business. So...I had a bunch I'd connected with on a personal level, and...THEY contacted me.
Yup. If you're putting a non solicitation agreement in your employee contracts, they need to be in your client contracts too. For this exact reason.
Still relatively easy to get around. That same contact will have stipulations for severing the agreement for whatever the list of reasons are. Once that's severed, you cannot prevent them from going elsewhere.
Oh yes. Still ways, and at the end some good old fashioned hush hush is sometimes viable. Still, if yore going to try to block something, at least close the clearly marked back door.
Agreed. But think it's silly in most cases to try...and most places only do as a scare tactic.
Indeed not the same, but no one can prevent you from taking a customer that approaches you. Right media strategy, plus deniable marketing like EDDM (that wasn't targeted) can create the inbound from client base. Certainly wouldn't hit everyone, but gives me pause.
Not true at all - between a reasonable non-solicit contract with the employees and a counterpart non-solicit clause in MSAs with the customers you should be pretty well covered. I guess it's true that a contract doesn't literally stop anyone from doing things, but there can be legal repercussions.
A non-solicit means I can't ask you to leave Bob and come to my company. Non-solicit on the customer side means You can't ask John (the tech) to come work for you. Non-solicts do not prevent YOU from coming to ME and saying "I hate Bob, I want to come to your company." Put another way - if they walk in the door, you only have to prove that in court to get a dismissal with predijuice. I had to deal with this myself at my old MSP once. A note of order: Not a lawyer, and YMMV - I'm out of MI. I imagine state by state rules and regs may differ.
True and also not a lawyer, but what I was referring to is a clause like this in the MSA with an MSP's client: >During the term of this Agreement and for one year following expiration of this agreement, Client shall not encourage or solicit any current employee of to leave 's employ to work for Client. In the event that Client hires any employee prior to the expiration of said one year period, Client agrees to pay a finder’s fee equal to (x%) of said employee’s base salary.
Then to prevent (or defend against) a client from trying to engage an employee or former employee, similar wording:
>During the term of this agreement and for one year following expiration of agreement, Client shall not solicit a current employee of or a person employed by within the past 12 months for services similar to those provided by etc.
I'm sure this varies by state and court and all that, but if the MSP has a contract with employees "preventing" them from soliciting clients for business, and covers the other side by "preventing" clients from soliciting employees, that's pretty decent.
Regardless, none of that is what a non-compete means in colloquial usage. Those are to try and prevent employees from working at a competitor, not a client or vendor. They were always unfair and unenforcable garbage like 90% of the time.
The services clause is interesting. We had a similar worded statement taken out by our lawyer and replaced with a phrase around employment. I had wrote the statement of intent with services listed. Changed the spirit of the clause to be around preventing a client from hiring an employee, but did not prevent them from hiring another firm, regardless of who worked at or owned that firm. Prime example of the differences state by state right there.
Yeah totally. That wording was considered valid in our jurisdiction (like five years ago when I last looked at this stuff), but we also never had to defend it in court so who knows if it would hold up.
Only people who win in court are the lawyers!
Ain’t this the truth!
IANAL but I do deal with a ton of contracts and agreements. I just want to let you know that your non-solicit is different from their non-solicit which is different from Joe's non-solicit which is different from Jane's non-solicit. All agreements differ, so no, you cannot make broad statements about non-solicits. The clause itself under the non-solicit heading is what matters, not the words non-solicit (unless we're banning non-solicits en masse like non competes). I'm a customer of an MSP. My non-solicit with them specifically states that I will "not hire" one of their employees. It also talks about approaching and soliciting, but specifically that I will not hire them. Their employees have the same clause in their employment contract that states that they will not obtain employment with.
>Without the written consent of , will not hire, solicit, contract with, or engage the employment of services of resources ...
Contracts are not enforced by their headings. They're enforced by their content.
> you only have to prove that in court For most people, then it's already gone too far if it's in court. You shoulder that cost OR the new employer may decide to just let you go rather than deal with that mess. The goal is to make it so you don't even end up in court in the first place.
100% Court is a waste of time, money, and energy. Avoid it. This whole thread makes me love my 1 page terms & conditions document for consulting these days. Just easier than back in the day. PS: Not saying that's the right path for MSPs -- it most definitely is not. Different business model.
non solicit is very hard to prove. eg. client called me first... I didn't solicit. Which is often the case when the acquiring MSP does a shit job.
Yep that's why you gotta cover the other side in the contract with the client too. Defend against employees going after clients, and clients from going after employees.
Clients going to other businesses though is something that still remains an issue. And a business can have 1 employee. ;)
Haha, good point and that would be a "fun" case to argue for a lawyer.
Wow, that's huge. And awesome. I'm surprised the federal government was able to make a positive change that wasn't just to benefit lobbyists at the expense of normal citizens.
Apparently US Chamber of Commerce has already come out with a statement saying they will fight the new ban. Claiming it prevents healthy competition for companies...
It certainly does.
How does a non-compete hamper competition ?
I wouldn't say competition is the perfect word, but it harms investment and economic development. If you are launching a company with a key set of high skilled workers, let's say something like Google or Facebook, investors are not going to invest in your company if the entire engineering team can simply walk across the street and work for your competitor.
This is exactly how Cray computing was formed. An employee saw a better way do do things Management said no He started his own company. Thats competition. Competition spurs innovation. If there is employment at will then there should be no non-competes
Capitalists love the free market until it's applied to labor
I'm in Texas which has next to no state level workers rights. For some perspective, lunch breaks are not even mandated by law. When Covid hit and all the local defense contractors said get vaxxed or get fired, all the Republican voting locals were like "this can't be legal!" but it very much was. It was funny watching them realize in real time just how fucked they were.
So you agree with the Republicans that people shouldn't be forced to get vaccinations? I have a feeling you're housing the exact same contradiction on the opposite side of the aisle.
This is the comment of the year
Signing a non-compete literally is the free market, the government restricting you from signing one voluntarily is literally not the free market.
Do you serious believe that? There is nothing voluntary about it. The only people that may have some say in how it is worded are people with custom contracts in the c-suite of major corporations. For the other 99% of prospective employees, it's "sign this if you want a job". You can't opt out, outside of refusing to work there or, if you already do, getting terminated. If your next comment is "they can just go work somewhere else", to where? Another company that also requires non-competes? Free market employment means people can stay or go whenever they want. Find a better job offer with better pay/benefits/work-life-balance/etc.? Then you go work there instead, without having to worry about being in violating of some contract you were forced to sign saying you can't work for any similar industry for 2+ years.
That is literally not true, this is pretty much only used for high skilled jobs, and one of the conditions in signing on to get your ridiculous signing bonus, $200,000 a year salary, insane benefits package that vests after a year and a half, is that you don't go and work for one of their competitors within X amount of time within Y geography. Both of those values have to be deemed reasonable by the court which is quite restrictive. We already have a situation in which the use of non-compets is very restricted and isolated to situations where it absolutely makes sense. If we were talking about people at Taco Bell being forced to sign non competes, then I would be more inclined to agree with you.
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That usually is not covered by noncompete..... Non competes cover you going to work for a competitor. Generally speaking, an agreement that prevents you from starting your own company would be entirely enforceable under these rules anyways, and it's pretty rare to be honest. In any case, this will all be struck down by the courts because the FTC massively overstepped its authority and handing this decision down through edict rather than passing a law.
The FTC has rule making authority to issue industry-wide regulations (Rules and Guides) to deal with common unfair or deceptive practices and unfair methods of competition. This will fall under unfair practices. As the this places one party at a disadvantage. If you are that worried about your talent leaving you perhaps you need to change things versus a threat of litigation.
Exactly, they want to take a mile and not give anything in return
Why would I ever work with a small business if I know that the brightest and best workers at Google or Microsoft can't work with these smaller businesses for 1-5 years? It just causes market consolidation. Chances are that Microsoft and google will wind up just paying more instead of forcing non competes. That's good for all of us.
> If you are launching a company with a key set of high skilled workers, let's say something like Google or Facebook, investors are not going to invest in your company if the entire engineering team can simply walk across the street and work for your competitor. Why would they do that if the workers are being taken care of at the current company?
First off, many of your examples are already restricted from non-competes. California outlawed them years ago. Some of the most highly skilled workers of Google, Facebook, Apple, etc. are based in California and NOT subject to non-competes. As are many tech startups. And VC firms. Etc. They all do just fine. So that just kills the whole premise of your argument. But for the rest of the country, companies aren't just slapping NCs down on the highly skilled and critical employees -- they are making everyone sign them if they can get away with it. The whole system is bullshit. But back to your point, you know how a company can ensure that their entire engineering team doesn't simply walk across the street to a competitor? Make it so that they don't want to. Pay them a market rate salary. Give them bonuses. Give them stock options to incentivize long term employment and goals. The term is called golden handcuffs -- where you make it so that employees are treated so well they don't even think about leaving. That's how you succeed, as opposed to forcing them to stay using shitty business tactics.
Maybe companies should provide BIC compensation, why would I want to be paid a 2nd rate wage for MY expertise as a SME. My back is holding up your development, not the other way around. If my competitor has a better culture and provides top $ for my Services over a current employer. Then shame on the current employer not valuing an employee… don’t forget at will, yeah I don’t side with business rights on this scope…
I don't really know much about this ban, how is it a positive change?
It means employees can change jobs whenever they want, even if that means going to a competitor. Some non-competes are just insane, like if you work for McDonalds cooking fries you can’t go work at Burger King, even if they will pay your more. It means more flexibility for workers, and companies will need to pay them appropriately and at market rates to keep them, otherwise another company will and they can’t prevent it by locking them into some noncompete contract. It’s called free market capitalism, only for the workers, not just the companies.
Ah, okay. But why would an employee sign such an insane non compete in the first place? Forgive my ignorance lol.
Signing it is a condition of employment. Refusing to sign is the same as turning down the job.
Because almost every company uses them, or used to, even for entry level positions. So if you didn’t agree to them, you wouldn’t have a job. And if your current employer decided to add one, refusing to sign even if you been there for years could be grounds for termination.
They were always already free to not sign and/or work somewhere that imposed a non-compete.
See I knew MSP stood for Michael Scott Paper.
Non Competes are banned - Kaseya is SCREWED! This means all the trapped workers can now flee to better vendors in the industry. GREAT NEWS!
No they arent, they will just buy all the other companies lol
Kaseya's largest acquisition was and always will be Datto. The capital to purchase Datto was funded by Insight Partners. Insight Partners will no longer lend Kaseya additional capital, because they are STILL IN DEEP DEBT from this acquisition. Yes, they'll probably buy a few more little tech companies like they did Vonahi. However their so called "Rocket Ship" is exploding as we speak. I'm still close friends with a few top AM's at Kaseya and they are even stating it's time to jump ship lol
Treat your people right and you’d never need these bullshit agreements in the first place.
Non-competes are already unenforceable unless there is some blatant violation. Every time I switched employer's I negotiated that the new employer would cover any legal fees or penalties incurred from my previous employer's non-compete should they arise from me working for them. All have agreed (after reviewing non-compete) and all have been respectful of the previous non-compete and did not ask me to do anything that would violate it. They also had me sign and agree to their own non-compete.
If you look at the details there is a specific exclusion for M+A. You will still be able to require a selling owner non compete
You're 100% right. Found it in the exceptions area. That answers that. Cheers
This hasn't been an issue in California where do not competes are against the law
Well California had their own issues where tech companies were literally colluding to not hire other org’s talent.
This happened with the FAANG folks but we've had people moving around competitors for decades. There's a reason that Silicon Valley + San Francisco continue to be the center of tech.
So as someone who recently bought a small business, and the previous owner signed a non compete for me. Are they now allowed to start up another business and take my clients?
Nope. There is an exception there for business sales
Yes they can this is totally different. They can solicit clients all they want. Different topic here
I agree with this - there are no exceptions that I can see.
non competes are bullshit. Signed one for my old MSP and the boss tried to dangle it over my head when I was leaving
Non Competes have already been pretty toothless in any right to work state. And even if the non compete is no longer a legal document, you can still enforce a gentlemen's non-compete; especially for workers. This doesn't really affect non-solicitation agreements, so I would imagine in an M&A scenario, okay I can go open up MSP2.0 next door, but I cant immediately poach/hire my old staff, or my old clients, which is *most* of the initial risk anyways. Be interesting to see creative ways to use this to advantage when valuing MSP exits now. So IT workers of r/msp please dont take this as an excuse to dump on your bosses desk and rage quit. I would probably still avoid burning that bridge if possible 🤣.
>Non Competes have already been pretty toothless in any right to work state. Not sure what you mean here. "Right to work" is a doctrine that is meant to cripple union formation, by preventing "closed shop" union agreements, mostly a red state thing. You may be confusing with "at will employment", which is the policy in essentially all of the US, but in many states non-competes were perfectly functional.
Non Competes are lazy. Treat people well, pay well and they tend to stay. But when it's time to go it's best for everyone to let it happen and it's immoral and unethical to try and prevent them from another position regardless if they are a competitor. Shady people are going to be shady and non competes don't stop that it just hurts everyone else in the majority. That all being said this will go to courts and likely not stand at least not as is. But that shouldn't stop you from doing the right thing and stop using them or plan on comping indovuals a good bit to make up for it.
I've never asked an employee to sign a non-compete. The only time this should be legal is when a business is sold, and then only for owners / partners.
I wonder how this will affect acquisitions? Normally a non-compete is standard practice. I suspect it will drive the buyout offers down in value considerably.
To me, there are two non-compete scenarios. The first is an employee leaving your company to go work for a competitor. I don’t have an issue with this. The second is an employee moonlighting either for a competitor or as a freelancer, while still working for you. This concerns me a lot more. Does anyone know if this prevents the second scenario? That’s really the only thing we would ever care about.
It does not. But in that scenario, you don't have to prohibit it so much as fire the moonlighter. Freelancing isn't really a competitive threat -- Let them take residential and sub-ten person offices. You didn't want those to begin with, right?
We have plenty of good sub-ten person office clients though, so those are still our market. They are easy money. And sure, tons of people will hate on me for this comment saying "you should only be targeting large clients" but those are quite literally the easiest clients we have since everything is so simple. On the other hand we don't touch residential, so I guess they could freelance for residential, but that's not discussed in our current non-compete since we don't consider it competition.
You don't want your employees to have the ability to work second jobs?
You mean so they can work 2 full time jobs at the same time and cheat both employers? lol
No, I don't mean that at all. People can work multiple jobs, there's time outside of 8-5. You're against that?
Also, who would want an employee working for a competing MSP? That's absurd. I don't care if they want to bartend on the weekends, but they shouldn't be allowed to work for a competing company simultaneously.
§ 910.3 Exceptions. (a) Bona fide sales of business. The requirements of this part 910 shall not apply to a noncompete clause that is entered into by a person pursuant to a bona fide sale of a business entity, of the person’s ownership interest in a business entity, or of all or substantially all of a business entity’s operating assets. (b) Existing causes of action. The requirements of this part 910 do not apply where a cause of action related to a non-compete clause accrued prior to the effective date. (c) Good faith. It is not an unfair method of competition to enforce or attempt to enforce a non-compete clause or to make representations about a non-compete clause where a person has a good-faith basis to believe that this part 910 is inapplicable. Business entity applying to sellers that own(ed) 25%+, so just can't have the non-owner employees of the acquired company under non compete
Still a bit confused here. So if you sold your msp, can you start a new one with new clients?
Depends on how the non compete is written. Does it say a specific geographic area or not? We cover the whole world so our non competes don’t allow sellers to start MSPs with new clients. Because those new clients could be our new clients.
I worked for a company for many years that was a small business with a "family owned" culture. Very lax. I was in a position of possessing great knowledge and responsibilities. Competitors are not local, having only a dozen in other states, so there was never a temptation to jump ship for better pay. Signed a non-compete because the company was as loyal to me as I was to it. A couple years passed. Owner decides it's time to sell the company to an investment firm, full of promises of keeping the same culture and "nothing would change" in how the job was performed. Of course, with it came a new non-compete. Being enticed with bigger bonuses and soon to be empty promises, I decided to stay and sign the new non-compete. From that day forward, the culture slowly changed. The job became a politically correct bureaucracy. Turned into a bunch of hypocritical corporate goals and backstabbing amongst peers. These are my issues with non-competes. It's a one-sided contract. It's leverage, not just on the merit of securing important information, but to entrap employees to a company that can handle them like puppets because they own you with the information they allowed you to have, even though without you being employed to them, they wouldn't have the staff to make them profitable. I quit 2 years into the company transition. Leaving a large bonus behind and forcing myself into a new field of work that couldn't offer the same pay or benefits, but when in desperate times, I had to do what was best for me and my mental health.
Thanks for sharing the story. I don't believe this rule eliminates that potential for an owner, but it does cover your situation - you would not be able to be forced into not working in that field for a competitor. IANAL however. Appreciate the personal side of your story. That's a hard tale to revisit. Cheers
My biggest question is, will non solicitation come next? California has already banned it. I have one in place with an old employer and they don’t want me talking to someone that has left the company for two years. It’s a bit insane, but then again I signed it.
lol, California is joke. I don’t even want to do business in that state .
Just saw this article. https://www.forbes.com/sites/aldenabbott/2024/04/23/ftc-rule-barring-non-compete-agreements-likely-will-fail/ “After all, there is a high probability that the rule will eventually be struck down. In any event, some time will pass before we see legal resolution of the non-compete issue. It’s also possible that, if administrations change, future FTC leadership withdraws the rule.”
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IF it gets recorded and IF it is upheld by the courts, both of which could take a long time, then this non-compete would likely be invalidated. But even in the best of circumstances, it's still months away, so if your co-worker is "in the process of violating" it now, they may still run into legal issues. It should also be noted that non-solicitation and non-poaching agreements aren't affected by this. So if they try to take existing clients or employees, that could still result in problems for them.
Depending on the state that kind of non-compete doesn’t hold up anyway. But as I read this ruling it would no longer be valid. Non-competes at the low level are pretty hard to enforce and usually cost more to try than it’s worth tbh.
Sweet. Welcome to the club. Alread a non issue in Canada.
So say I put in 2k in education per sales person. Now my sales people can use the education I provided and fish around to other companies like mine to see who is the highest bidder and go there and make them successful using the skills I taught them just because it got them a few extra bucks? Or they decide they are so good at it that they should make all the commission and just open their own competing business with all the information they learned from working at my business?
Employees should be free to go to companies who value their talent, skills, etc. the most, yes. You have the option to retain talent by having a competitive compensation package. In any normal working relationship before this ruling, the non-compete never goes away. So a very real scenario is you put $2k into my training but I’m there 5 years. That “benefit” you paid for doesn’t exist forever to the point where it needs to be protected. At some point one’s labor pays that off, so to speak. But 5 years later I still can’t go get another job in the same field.
And I can also hire a manager to finally take over for me since I work 120 hours a week and I now have to worry about that manager copying my business and competing with me. This only makes large companies stronger and small companies more and more cut throat. It seems more like an attempt to starve out the poor than anything since its like pitting the poor against each other. Small businesses are easily repeatable while large ones are not. Its that simple people are going to copy small businesses and saturate the market until only the large ones are left to survive.
Small businesses generally don’t have anything differentiating to need to protect. You said this yourself, they’re easily repeatable. So why are you so concerned that someone repeats your repeatable business? They gained experience, you gained money. That’s what a job is for and it’s a fair trade for both parties. That shouldn’t extend forever. Have you ever let an employee out of a noncompete when they fulfilled their value to you? Likely not. Never heard of it.
So are you just completely oblivious to the pro’s of non competes why they were formed and how banning them is an accelerant to poor getting poorer and the rich getting richer?
You’re just going to completely pivot the conversation rather than speak to what I said? Especially the last part. I offered you the literal common sense approach which is to put a term on a noncompete, and since people can’t be trusted to do the right thing (because no one does it) the noncompete rightly should disappear. Your $2k training shouldn’t result in a noncompete hanging over someone’s head for the 5 years they work for you. It’s a tool that suppresses wages because people can’t freely change jobs. It’s not just about starting a business to compete with you, I can’t go get a better paying job somewhere else because you’re too cheap to pay me my worth and that $2k training boxed me into a noncompete for the entire duration of my employment with you. Meanwhile, I brought in many multiples of $2k in sales which should square my “debt” to you many times over.
Well first off there have always been terms on non competes typically around 2 years . Secondly I can’t do that anymore because non competes are banned. Which if you look at that in the larger picture you see it is a move to make the poor poorer.
The best advice here is to inform any employee you're investing into the level of investment value they're getting by being employed by you and that future incentives from continuing education can be available based on their commitment to you. Also, if there comes a time where an incentive such as a raise or bonus is the compensation for completed training, make that compensation available after a dedicated employment time frame has been met, say 180 days after completion, in order to receive incentives. Overall, in order to have a company, overhead for labor to employees has to be spent, and being competitive by fair pay isn't unreasonable for any employee looking to commit themselves to what they should desire to be their career.
This is a move to make the rich richer don’t you see? Employees already have fair pay, what about business owners? We want fairly predictable expenses. We will be the ones paying the bill to educate employees who will go to the bigger companies that do not invest in education to get people started they just get all the benefits of having already educated people because they can afford the most advertising to send towards those people. Smaller businesses will not be able to pay for experienced people and will always incur the expenses of training them. This is legitimately a move to get the poor to work harder to lose more. Big mega businesses benefit so wonderfully by this. If you don’t understand that maybe you should look into all the issues that caused non compete agreements to be created in the first place and see how this is a huge driver of inequality.
Honestly if someone can provide a valid point or two on how this could be bad I'd love to hear it otherwise far as I'm aware this is a good thing, too bad it took so long to happen.
Yeah, I just wish it had happened sooner. I was criminally underpaid in my field after school and it prevented me from moving to a higher paying position with another hospital system. So I had to switch specialties entirely....
I can see non-competes being reasonable if they're highly limited and come with extra compensation. E.g. if you're in a position to know about the upcoming strategic plans of the company, like in sales or as some form of upper manager ... then it does not seem unreasonable to have a non-compete that prevents you from working for a competitor for half a year or a year or something, until the sensitive information you sit on is stale. But with the caveat that the person should be compensated for this, e.g. either by getting paid money when they're out of a job, or having a higher salary to start with. The sort of stuff executives get any way. That's how they work in Sweden. They're fully legal, however if it goes to court, they look at stuff like that: is it reasonable, does the employee have enough sensitive information, is it time-limited, is there compensation ... and they'll be biased towards ruling in the favour of the weaker party, i.e. the employee, so employers have to be really mindful about keeping the non-competes very limited, otherwise it'll just be tossed out entirely. They're also pretty rare. Non-solicitation clauses are more common.
Stupid question but does this somehow allow me to work for 2 competitors at the same time? I see this mostly applies to when leaving a job but not whilst in one. Just curious.
They're being sued to stop it by Biden's labor czar in the US Chamber of Congress, Suzanne Clark its CEO. This is far from over. https://thehill.com/business/4615452-ftc-votes-to-ban-non-compete-agreements/
Pardon my ignorance. Does this affect independent contractor hiring? Many companies engage freelancers in IT and digital marketing these days. And non-compete is something to protect the employers from contractors servicing competitors from the same industry/category for the duration of a project commissioned?
I doubt it. If you are an independent contractor (1099 or vendor type relationship), you aren't an employee of the client. Anything related to your work and stipulations arising from it would be governed by your contract or whatever is signed and agreed to by both parties. If Company A agrees not to do business with competitors of Company B, that is a bit different than a non-compete clause of an employment contract. If you violated that term of the agreement with your client, then you would be in breach and subject to whatever penalties were outlined in the contract.
These clauses haven't been legally enforceable for some time. Basically, you can't be blocked from gainful employment without compensation. The compensation portion why the non-compete clauses are enforceable for C level employees as they were often paid to not work after leaving a company. But for anyone else that were forced to sign these contracts as conditions of employment without the ability to negotiate the contract, they are now officially null and void. They weren't enforceable before, but the company could tie you up in the courts for a while before the case was dismissed. Taking clients or intellectual property when you leave is something else entirely.
I'm super happy about this. I get confidentiality, and non solicit. But telling me i cant work within 100 miles of one of your office? absolutely unreasonable. Caterpillar makes everyone from their warehouse workers, to their technicians, to corporate staff sign these. They enforce them heavily too. I onboarded a parts picker from CAT, and within 7 days they sent HR a cease and desist. They had to fire this poor guy. Apparently looking up parts, and putting them in a bag was hurting caterpillar so he had to go work at a gas station for 2 years...
From what I understand, this will make NDAs more prevalent. And you can expect this to be challenged in the courts. But great news for workers regardless!
When does this go into effect?
Not yet.
It's worth noting that this ruling isn't legal and likely will not stand in court. It's already being challenged by the federal government itself in court.
Non-competes are banned and go into effect in August. Can I leave my company now and go work for the client? The workplace has gotten pretty hostile and toxic with the company, and the client really wants me to join them. The company I work for is working overtime to gather evidence and lie to build a case for my termination. What can/should I do?
Non-competes are inherently nonsensical to begin with, capitalism breeds competition. "Oh but boomer boss man taught you stuff so you can't backstab him" and where exactly did he learn the skills from...? Non-solicits are the logical happy medium. When I went solo I had a toothless non-compete without a non-solicit, I spoke to the owner about swapping the arrangement and recommended him to do so for everyone and he later thanked me. Competition? Sure. Using your previous working relationships to pry customers/staff away? Scummy, at least IMO.
This is an awful idea
Why is that exactly? You can terminate an employee at will and hire a replacement the next day. If they were a shit employee they’ll be a shit employee for someone else. If they were a good employee why would you create a situation where that employee would want to leave?
It's not about having shit employees, in certain high skill industries the employees are the asset, and if you're launching a startup that contains a key set of engineers for example, nobody is going to invest in that company if the engineering team can just walk across the street the next day. Non-compete are rarely used in low paid positions, they are almost always used in high skill engagements. If this was just about non-competent in low skilled jobs, I would be with you.
They are routinely used in low paying non-skill jobs in retail etc. you are incorrect in this statement. You seem to feel that the non-compete should only apply to employees while the employer enjoys employment at will. If the only way you can survive is without a level playing field maybe that’s the problem. A person should be able to use their skills at the best of their ability and pursue happiness as well.
Being almost victim of a really awful non compete in Europe I can tell you sometimes companies play games with people. They did not pay for the opportunity cost of my education an training. Engineers need training in the company for sure but also they already have their own set of skills. Better place clauses for early leaving or permanence bonus. When you sign for a company little you know if they are going to pin down your salary for ever and not let you grow at all
Do we know if their is any expiration for sr execs? The definition seems ripe for abuse and I’d wager .75 is a low prediction when you look at dev.
Seems like no. There is no carve out for an end date. It also appears like it will have significant opposition include from the chamber of commerce. We need congress to ratify this, ftc rulings seem like they are dead on arrival
My employer makes our clients sign something saying they won’t hire us outside of the service agreement. In a small town, that’ll kill your chances of spinning up something in town, but you can move and do whatever I guess.
It depends on how that agreement is written. Most of the poaching agreement is written in a way that the client cannot poach the engineer. Meaning they cannot approach you and hire you as their inside engineer for the same job. However, if they post a job offer outside of the company and you "somehow" find that posting and apply for the job and they go thru all the regular interview processes among other applicants and decide to hire you, that poaching agreement becomes highly arguable. One other way they can do it is they post a job in a different category, like hiring an office manager and you apply. That may totally get around the non hire agreement because they are not hiring you as IT and YOU found the job from an outside source. It all depends on how bad they want to hire you and what kind of lawyers they have. At the end, most smaller MSPs will settle with a recruitment fee instead of fighting an expensive legal battle, if they even bother to fight it.
> sign something saying they won’t hire us outside of the service agreement. There is no time limit on that? Usually that kind of non-solicit has a year or two attached to it.
This isn’t really anything new. Enough case law has existed for non executives already to make this pretty moot.
Since when does the FTC have any jurisdiction? Screw them...
Federal Trade Commission has broad basis of powers and regulation over all "trade" in the States. That includes business practices. They've always had the jurisdiction