The case for banning non-competes
Making the labor market work
I find it extraordinary how tech companies that succeeded by moving fast and breaking things are such bullies as to threaten to sue their employees if they dare do the same.
I had to sign a non-compete when I founded my company and the legal advice I was given is that in the UK non-compete's don't stand up in court because you can't stop someone from making a living. I am not a lawyer but this seems reasonable.
Yep, I think that's right in the UK, though the devil's in the detail.
I don't think it works that way in the US, where if you sign an employment contract, you're bound by it.
That's why legislation is needed. I hope it succeeds!
US is a little more grey area. There’s some non-competes that are totally valid, and some that stretch so far that courts throw them out.
For instance, if the time frame is too long or if the opportunity restriction is too wide it’ll be thrown out.
This article taught me the useful term "monopsony" — a market condition in which there is only one major buyer. As opposed to a monopoly, where there's only one major seller. There is a similar term, oligopsony, in which a few buyers control the entire market. (As opposed to an oligopoly.)
I like to look at employers and employees as customers and businesses, respectively. Employers are buying the services sold by employees. If you're an employee with a rare skillset or talent, it's unlikely there will be lots of employers who both need and can afford the service you're selling, and you might have to deal with an oligopsony situation. For example, if you are a talented software engineer, there are only a handful of top-tier tech companies who can pay the salary you deserve.
Banning non-competes will foster competition, allowing companies to poach each other's employees, which is what gives you more options and negotiating power as the employee and that situation. Whereas from the companies' perspective, it's more advantageous for them to agree not to compete with each other, which is why you had situations like Steve Jobs and the Google leadership team collude (illegally) not to hire each other's employees, so they could keep prices (wages) down and act as an effective oligopsony.
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