Life without non-competes isn’t necessarily sunny (even in California)

As an attorney who represents executives who have had to sign non-compete agreements as a condition of employment, I confess to a general dislike of non-competes. They impede worker mobility and career growth, and are often an unnecessarily restrictive way to prevent trade secret theft.  Not always, but often.

As a way to encourage labor mobility and attract venture capitalism, Massachusetts even toyed with the idea of doing away with non-competes. They ultimately passed on that notion, at least for now.

Critics of non-competes sometimes point to California as a land free of such restrictive covenants, where talented workers can sell their talents to the highest bidder. Thanks to In re: High-Tech Employee Antitrust Litigation, however, we now know that, in the case of non-competes, the devil you know can be far better than the devil you didn’t even really know existed until he was revealed by a U.S. Justice Department investigation.

In that case, a group of software engineers (prompted by the aforementioned Justice Department investigation) sued Apple, Google and other Silicon Valley companies in 2011, over the companies’ back-room agreements not to recruit each other’s personnel and to prevent bidding wars over prospective hires by capping pay packages. The plaintiffs claimed that the agreements – reportedly masterminded by none other than the late Steve Jobs, Apple’s former CEO – depressed their wages and impeded their mobility.

Earlier this month, the parties announced a $415 million settlement that should be finalized in early July.

The truth is, unscrupulous employers can always find a way to entrap employees, with or without non-competes. They let it be known that leaving the company is frowned upon by, among other tactics, suing former employees on trumped-up claims of theft of confidential information and other accusations. Current employees get the message clearly: I’m safer staying here, even if I’m miserable.

The moral for Texas executives chafing under the constraints of a non-compete is that, cumbersome as it may be, your non-compete was negotiated and signed by consenting adults, in the light of day. And, if the non-compete is drafted the way it is supposed to be, you should know exactly what you can do, and what you cannot.  But in states where they are unenforceable, employers sometimes resort to other tactics.

For that, we in Texas can be thankful.

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