Non-competes

From /., I saw an article on non-competes. It made the claim that they are the DRM of human capital. DRM is, for all intents and purposes, digital rights management, which is post sales control over assets. Human capital is a euphemism of course, for people … knowledge workers specifically (which is itself a euphemism … )

What struck me (as a Michigander of about 2 decades now) was this snippet:

Finally, to make the case even more compelling, some researchers from Harvard Business School put out some research earlier this year that not only compared the situation in Silicon Valley to Boston, but added a third natural experiment in Michigan. You see, Michigan used to not enforce noncompetes, but in 1985, Michigan inadvertently began allowing noncompetes to be enforced again. The research showed that immediately following the change, mobility of inventors in Michigan decreased noticeably, slowing the spread of certain ideas. Their research found that “The networks of small companies so crucial to Silicon Valley’s growth would be less likely to develop in regions that enforce noncompetes.”

Well … there is a great deal more negatively impacting Michigan these days. Freedom to roam isn’t high on the list. The major issues are lack of capital, somewhat hostile-to-small-business climate, disinterest in anything but automotive related companies from the MEDC … oh they do feign an interest in bio companies.

Michigan has many positive attributes relative to the Silicon Valley area. Low cost of living, lower cash burn rates, great rent rates, less traffic ….

What it lacks are serious VCs. Spinouts of universities here (3 big ones: U-Mich, MSU, and Wayne State) often have to get capital from outside the state, and often wind up moving.

But back to non-competes. Generally speaking, I am not convinced they are enforceable. I think NDAs are enforceable. In the past, when employers asked me to sign one, I typically countered with “sure, but you have to pay me full salary/benefits during the time of the non-compete so that I can make a living in my profession.” The issue is not one of DRM, its of IP. I don’t want my companies IP spread all over to my competitors. I will enforce this, and will aggressively pursue violators of that … those folks are thieves. If someone works for me, then moves to a competitor, as long as they don’t use our disclosed information/contacts/customers, sure, knock yourself out.

I don’t think of non-competes as DRM, but I think they are hard to enforce. They tend to be onerous, highly one sided. I think industry would benefit in general, if everyone simply refused to sign it, or better had their attorneys mark it up before hand.

We have many organizations try to push highly onerous and one-sided agreements, either as part of a consulting effort, partnership, sales, and so one. Some of the more egregious and laughable ones are that we have to submit to whatever their lawyers say, we have to give them all our IP, or “worldwide exclusive royalty-free rights” to what we sell/provide … We reject such things out of hand. Non-competes are in this group.

Don’t take bad deals folks … if someone wants you to sign away your rights and freedoms in advance of a deal (employment, purchase, consulting, …) then they are probably not worth working for. Non-competes prevent you as an employee from earning a living. Bad deals increase your risk, without allowing you to price in the value of that risk.

Viewed 6327 times by 1115 viewers

Facebooktwittergoogle_plusredditpinterestlinkedinmail