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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