In 2021 President Biden signed an executive order for the elimination of noncompete documents that are used be corporations, industries, and government offices to make it impossible for valuable employees to use their talents and skills if they take a similar job with another business.
It’s a move that is long overdue.
An employee’s knowledge, talent, and skills are his/her self acquired intellectual property. No employer should ever be allowed to own that.
It is financially punitive to the employees who are the most valuable. Those who come up with new ideas and products. Those who develop industry-changing strategies. Those who improve the competitive positions and operations of the businesses they work for.
Noncompetes destroy careers. They keep employees trapped into jobs by making it impossible to accept a better job offer from another source.
They also make it impossible for employees to become entrepreneurs by branching out to start their own businesses in their areas of expertise.
This is something I have very personal experience with.
In 1989 I was working for a manufacturing company as their Director of Sales and Marketing. When the company hired me in 1988 they were using an advertising agency to manage all the ads, media, and creatives that generated the sales for their products.
The agency kept 15% of the marketing budget as their commission to manage the advertising media. They charged more beyond that for any new creatives they developed plus the production of those creatives. They also took a 15% markup for any printing and production work they managed.
This had always been a normal fee structure for ad agencies. But it’s one that leaves a big dent in the profits of the companies who are their clients.
The company hired me because in previous businesses I worked for I set up and managed in-house ad agencies that greatly enhanced those companies’ profits by allowing them to keep those 15% commission payments, buy printing and production without markup, and avoid high creative fees because they were now done in-house.
So in 1989 I set up an in-house agency for that employer. I ran it. I hired the staff for it. Neither of the two partners who owned the manufacturing business had any of the skills or knowledge to do that. I wrote new ad creatives that out-performed those of the ad agency they were using. Sales were up significantly, and profits were up even more. I was rewarded with very handsome bonuses.
In 1991 they approached me with the idea of taking my in-house agency to a new level, by selling our services to other businesses. I wasn’t interested. Basically they wanted to use my skill, talent, experience, and knowledge as a product they could sell as more income for them.
We spent 1-1/2 years negotiating this. They had their attorney produce a noncompete agreement that basically said if I left their employ I would agree to not work in the fields of advertising and marketing, either for myself or for any other business.
I knew immediately there was no way I would sign that. But I submitted it to my attorney for review. He said it was one of the most mean-spirited noncompetes he ever read. Needless to say, I never signed it and would not agree to their proposal. Instead, in 1992 I entered into an agreement with just one of the partners to take my in-house agency and turn it into a for-profit business as an independent company that was not associated with the manufacturing company.
We started together as partners in 1993. His part in the partnership was sales; to get us new clients. Mine was to run the agency. But his lack of knowledge of the ad industry made it impossible for him to close a deal. I became the closer who brought in clients. By 1995 he was so discouraged that I bought him out. From 1996 until I closed the business for personal reasons in 2009, it was all mine.
After 2009 I set up a new business as a marketing consultant, with my office in my home. I closed that in 2016 when I decided to retire.
Had I signed that noncompete in 1991 it would have prevented me from continuing my career.
This happens to employees all the time. I was fortunate that I had the legal backing and determination to take on the owners of the company that last employed me.
It gets ridiculous. An example of how ridiculous is a sub shop that made employees sign noncompetes that if they quit they couldn’t make subs for any other sub shop or sandwich vendor within three miles of any of their locations.
The skills an employee brings to a job, and even the skills he/she learns on the job, are what make them employable and able to work up to increased levels of employment and earnings. Right now about 1 in every 5 American employees are restricted from finding better employment because of noncompetes. That’s 30 million people! 20% of the workforce.
I’m glad this deplorable process of noncompetes is getting attention. It’s long overdue. The FTC has voted 3-1 in favor. Now it goes to Congress for final votes to make it law. I hope they pass it.
Already the U.S. Chamber of Commerce is threatening to take legal action to prevent it, siding with big corporations. And you can bet they’re lobbying Congress to either kill this potential new law or let it die a natural death from typical Congressional inaction. Let’s not allow that to happen.
“Always be smarter than the people who hire you.”
Lena Horne
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Bravo Carol…you hit the nail on the head on an issue that has long been a personal pet peeve! I’ve had a pretty fair amount of DoD government contracting experience over the years from both sides – first as USAF officer on source selection boards that evaluate competing proposals and ultimately select the best one and awards that company the government contract; and then later on after retiring from USAF as a contractor proposal development team member charged with writing, reviewing and editing what we hope will be winning proposals for my company.
The incumbent on a contract up for recompete usually does their best to lock in key employees on that contract by having them commit in writing to grant their current employer exclusive rights to bid their names and resumes in the staffing sections of their proposal – and NOT allow competitors to list their resumes within their competing proposals. This is getting employees to sign an exclusive agreement that in reality is a non-compete agreement like those you describe. Usually, it includes an effective multi-year timeframe from the signature date until a couple of years after the new contract is executed.
At the same time, competitors usually pull out all the stops attempting to identify the incumbent’s key personnel… ideally with impressions of who the government wants to keep, who they would like to get rid of, and those they don’t really care about. If the incumbent is successful in keeping key players exclusive to them, then they have the best chance of winning the recompete if the government is happy with their current team. If competitors manage to get key incumbent employees to allow use their resumes to be used in competitor proposals, then the government most likely knows they can keep the current contractor workforce they want as long as the proposal they select includes the right resumes within the proposed staffing sectionThe employees are the losers in this game unless the winning proposal contains their resumes within that proposal’s staffing descriptions.
My experience is that in almost every case, when the incumbent loses a recompute, they do not retain the workforce on that contract – they let them go. If the incumbent had successfully locked in that workforce with exclusive non-competes, then they can deny any competitor from using these people should the incumbent choose to not release them from their agreements. Employees can an do sometimes get royally screwed.The government loses if the current contractor workforce goes away with the new contract.
Such shenanigans are unethical (if not illegal), and do not serve the interests of the workforce or individual workers…the ones that count.
Wow! Both stories are wild to me. We had no idea of the depth and scope of these shenanigans in your worlds. Share your tales with your legislators.
I am trying to imagine this in our field of education. I worked for 3 different school districts and carried all the skills, techniques and materials I developed in each setting to the next school.
What you two describe is madness. inquiring minds need to know when this legislation comes up.