tags: #publish links: [[Staffing and Employment]], [[Business Strategy and Competition]], [[Law]] created: 2021-07-25 Sun --- # Non-Compete Clauses There's a few variants of this concept in different countries and jurisdictions. In each case they put some restrictions on you *after* ending your employment with this employer. - [[Anti-Poaching Clauses]] - stopping you stealing/hiring your old colleages or clients for some period after you leave. - **Non-competes** - employment contract terms which restrict who you can work *for* after you leave. May ban you from working for: - Companies that do business with this employer (sort of the reverse of anti-poaching) - or *any* company in a related industry! **Why's this bad for competition**? - Because it restricts free movement of skilled people to the company that pays better or offers the best employment terms or most rewarding work. **Why's this good for competition?** Because, *in theory* smaller companies can level the playing field slightly by making it harder for richer companies to steal their good staff, hindering the trend towards giant monopolies. However, this relies on the *flawed assumption* that the smaller company can afford the high costs of defending a breach in court against a richer competitor, or that the richer competitor isn't just going to pay them out. [[The legal system isn't a level playing field]], so this clause can't fix the problem because it relies on the courts. **Why's this bad for employees?** Because the balance of power is way off (they generally have no ability to negotiate these clauses), and because any restriction on movement between employers will tend to suppress salaries and working conditions, because employers no longer need to try so hard to retain their best workers. **What's the overall effect?** In practise these employment restrictions *most likely favour the richest companies* by allowing them to reduce staff departures *and* reduce upward pressure on salaries and conditions, but also still allowing some amount of stealing staff from smaller companies who can't afford to defend. The effect is likely to be remarkably similar to some historical cartel-style anti-poach secret agreements between large companies. **These clauses are often described as necessary for innovation. Is that true?** Probably not! It depends on your assumptions: [this article](https://www.slowboring.com/p/the-case-for-banning-non-competes) has a look at this; in summary, if we want to encourage innovation, then: - if innovation is **expensive**, we should allow companies to restrict movement - if innovation is just **difficult**, we should try to stop rich companies from hogging all the best people, because there's no particular reason to think that the richest companies are going to be the best at using them to innovate. In fact - that article also points out **there's a trend for lower-paid less knowledge-focussed workers to be subject to these clauses too**. *There's no way that's possibly about innovation*, nor does the business risk argument hold up for large markets of lower-skilled jobs: it's pure suppression of wages and employment conditions by restricting staff movement, or protectionism against client-stealing by companies that are offering a better service. Charming. ![[Embed - disclaimer - my opinions, not legal advice]]