Surely some CEO here, or someone who has worked in HR can illuminate us on how they believe this is true.
I once caught a company I worked for in the lie about this. I was advocating for a new employee who didn't want to sign the no-compete clause. They say they needed it. I asked what problems they had in California, and how it was impacting their business - they replied there were no problems. So I was like, "Ok, so if it isn't impacting you in CA, why do you think it will impact elsewhere?"
In the end, they did hire that person, and did not make them sign the non-compete.
Companies don't "believe" things. They will amorally advocate for whatever is remotely favorable to the company.
There is no financial incentive for them to say "We don't need noncompetes" or even "You know, it really doesn't affect our bottom line either way." So instead they will always say "Of course we need it." There's no downside.
Right, exactly. When Walgreens says "Walgreens feels very strongly that labor unions do not serve the best interests of our individual employees or the company as a whole," they are lying. Walgreens is not a person. It does not feel anything. You might apply this to their leadership instead, but it's also understood that Walgreen's leadership is also lying. They are quite aware that a labor union would better serve their individual employees. It's just culturally accepted that corporations can nakedly lie about this sort of stuff and it doesn't matter.
What a company says "We prefer thing X," everything they say after that is just the autocomplete of ChatGPT with a prompt "make up reasons why X is good." They're not their actual justifications. Their actual justifications are usually readily apparent, but it's comes across better to just make inane statements than to speak the truth.
Political interviews have the same problem. You ask the politician a significant question with a yes/no answer. The politician says "this is important" and then makes noises for 20 seconds. The noises don't matter. They don't say anything. What they're actually doing is declining to answer, but culturally it's acceptable to do it this way, and it's unclear why.
This is technically correct. (The best kind of correct, right?)
> They will amorally advocate for whatever is remotely favorable to the company.
This is not (at least, not as universally as you state it).
Companies are legal fictions; they do not act on their own.
People act. People talk. People believe things. People often amorally advocate for whatever they believe will be most favorable for their employer, or for themselves.
People are often wrong.
As companies are made up of many people, those people's beliefs and actions don't always match up, so it's still dangerous to talk too carelessly about a given company "believing" any particular thing without qualifiers.
Any time someone talks about a company "doing something", they obviously mean that the people within the company did those things, and those people's actions are guided by their individual and collective beliefs. They do not suddenly become perfect automata operating solely for the best interests of the company, without bias of their own, and they certainly don't suddenly become perfectly able to determine what will best serve the interests of the company.
> Companies don't "believe" things. They will amorally advocate for whatever is remotely favorable to the company.
I think this makes companies seem much more rational than they actually are. Plenty of companies do things because other players (especially larger players) in the space do it, regardless of cost/benefit to themselves. Where do you think the phrase "no one got fired for buying IBM" comes from?
If you've been around high-level exec's or their lawyers much - there's a whole lotta "what is the maximum amount of sh*t that we could get away with, or at least might benefit from attempting?" going on.
> some CEO here, or someone who has worked in HR can illuminate us on how they believe this is true
I'm trying to think of a case where I want to hire someone, HR says I need a non-compete, the candidate won't sign one, and I don't push back against HR. I'm coming up empty. That said, if a colleague wanted to hire someone, I was iffy on them and saw a string of short employment stints, I might press for a gardening leave or tighter NDA regarding client lists and IP.
OK, I can try and steel man it for you. Warning, long.
California hasn't had noncompetes for a long time (B&P 16600). But if you look in the code right around there, there are a few carveouts that cover most of the situations that are used most of the time for legitimate cases, like the split up of a closely held company.
There are other extreme examples that use a slightly different legal theory, like professional athlete contracts, which also rely on the forbearance of the other teams from employing the person in that specific role, though if Lebron wanted to pour beers for the Knicks, I'm doubtful that's covered. (Back when they were the worst team in existence, I did some work for the Warriors.)
The real reason they're haven't been so many issues in California is because they make you sign all kinds of things about IP, trade secrets, and so on which they will always start with if they really want to block a move. The courts know the score, they know this is just non-compete by other means, but if you cover your bases, it usually works (i.e. move is ok). Your new employer knows the score too and will usually just work a deal or fight the case. But if the cost gets too high, or maybe you kept an email print out you shouldn't have, it can get gnarly/expensive. And even just that drag/delay is enough of a deterrent.
So what's left? An employee who leaves with no critical information who just wants to open a competitor near by? There are a few circumstances like this where it might matter. Small company, key employee leaves, he has no IP, but it will probably impact your business. So what do you do?
Realistically, you probably engage in guerrilla tactics. And this brings me to my steel man.
How much of the oblique, bank-shot BS litigation (the guerrilla tactics I mentioned) about "trade secrets" is really just back door non-compete? That's your cost. Your benefit is free movement of employees, which means employees have more leverage in a freer market for labor and employers have to run their business well and can't just collect rents on their non-protectable intangibles, like being the only iPhone repair shop in town.
If you had a fair, reasonable standard for non-competes that had statutory limits and were void otherwise and that had to be supported by separate consideration, sort of like how we're trying to do employment arbitrations here, then I might be interested whether this cancels out the BS trade-secret litigation is enough of a benefit to outweigh the cost.
Of course, I doubt it. I've been involved with this stuff for decades and it's never perfect, and I understand that other states might want to be careful about adopting California stuff, but this statute is so old that it's from when Earl Warren was governor.
No one will miss these much. But I think the next question is how to tone down these BS trade secret cases too.
Employers do have legitimate concerns in their IP, but those are protected other ways. Maybe they don't believe that can be done easily. Or maybe it's in your brain and you can't unforget. Well, then the solution is in the IP universe, not in keeping competition out.
tl;dr best argument is that it's the only practical way to protect IP, but this can be addressed other ways both legal (contracts, lawsuits) and nonlegal (cybersecurity), which is exactly what people in CA have done sometimes too much.
As you say, California companies have a ton of things they can pull on departing employees--especially if those employees did take IP or client lists out the door with them.
In addition, while signing non-competes and having them stringently enforced isn't quite a man bites dog situation in other states, it's very far from universal. Only time I had one was while I was briefly working for EMC (big non-compete advocate) who acquired the company I was working for. And, in that case, the non-compete only applied to becoming an executive of a storage vendor.
I wasn't aware of non-competes being a widespread thing in the MA computer industry at the time. The company I worked for was actually founded by an ex-DEC engineer. That said, I'm happy to see the current pushback. They definitely have a chilling effect on especially small firms hiring people because they're seen as a risk. The very small company I worked for over a number of years saw any non-compete as a hard pass.
What I have told people, both as a business owner and as an advisor to others is, there's this magical thing you can do to keep employees from moving to other companies. It almost always works. If it doesn't work, you can try the second thing.
Wages and working conditions.
No one wants to hear that because they want a magic piece of paper that makes all problems solved for cheap.
Wages can be hard if you end up having to compete with FinTech, BigTech, and some other fields--or even just some company that really wants a person.
And working conditions covers a lot of ground. People just get itchy feet even when conditions aren't objectively bad. Or they liked the company when it was smaller but it has outgrown them.
But I'll agree that companies change and people change, and both should just be prepared to move on when the mutual bargain no longer works.
The pro sports restrictions are because they have a union and a collective bargaining agreement. If it weren't for that all the draft, trade, free agency, and so on rules would be unenforceable.
Sort of. There's a nexus between antitrust and the unions, but in terms of why someone can't just quit and go work for another team, that relies mostly on what's called a "negative covenant" that's in all of the standard player contracts and related clauses and it involves jumping between leagues or even sports as well, so the anti-trust surface is a bit different or possibly not in the mix, and can also involve individual sports like tennis or boxing.
A lot of the other anti-competitive things sports leagues get away with are because of what you're talking about, but the reason every California-based professional athlete can't just rip up their contract and walk away is they have a different kind of reasoning going into it based on their rarity.
I once caught a company I worked for in the lie about this. I was advocating for a new employee who didn't want to sign the no-compete clause. They say they needed it. I asked what problems they had in California, and how it was impacting their business - they replied there were no problems. So I was like, "Ok, so if it isn't impacting you in CA, why do you think it will impact elsewhere?"
In the end, they did hire that person, and did not make them sign the non-compete.