Psst. Would you like to hear a secret? It could help you and me make lots of money. Maybe we'll be famous too. Either way, it's a really cool secret. Want to hear it? I have a condition though, before I tell you.
I need you to agree not to go off and exploit the secret without me. I've put quite a bit of work into figuring it out, so I want you to work with me, not against me. Of course if it turns out that you already knew the secret - maybe I'm only imagining that it's cool and new - then the condition doesn't hold. But if I'm really letting you in on a proper secret, I need you to agree to work with me, not against me. Sound fair?
Now, let me be clear. I will not be offended one bit if you don't want to hear the secret. I'll say that again. No Hard Feelings. Really. Some people don't like secrets. That's OK. And if you're one of those people, fine. We can even still work together. But not on the secret.
So, what do you think? I give you the secret. In return, you give me an assurance that you won't use it without me. Are you in?
If you said "yes", you and I have just made a form of "Non-Compete Agreement", something that the worthy Joel Spolsky says is, in the context of employment contracts, "completely outrageous". His remedy reflects the fact that, whether he likes it or not, Spolsky is as good a salesman as he is an engineer (which is, incidentally and as far as I can judge, very). His remedy is to point out to engineers-under-pressure-to-sign-a-non-compete that they may have a bargaining chip. He suggests:
"If the employer absolutely, positively insists that you promise not to go work for a competitor when you leave your job, you can tell them: "fine. You don't want me to work for a year after I leave, that's fine, but if I'm going to be 'on the beach', I want you to keep paying me my salary for one year after I leave, until I can legally get a job that you approve of."
And you know what; providing that is proposed in the same "no hard feelings if you don't accept" spirit that my original "you must not use my secret against me", it's a reasonable tactic (although not one I'd recommend). The potential employer can weigh the costs and benefits, just as the potential employee can. And both can decide according to their own sets of individual priorities.
But suppose they - both employer and employee - were forbidden from doing that weighing. Suppose Someone Else decided that under no circumstances is a non-compete permitted unless the employer continues to pay salary after the person has gone. What that Someone Else would be doing is effectively imposing a form of minimum wage. They'd be forcing the employer to pay above a certain mininimum OR NOT AT ALL. That Someone Else would have taken the ability of the potential employee to try to work a deal and turned it into an Unalianable Right. And I've already argued how careful we have to be with those.
So, does such a Someone Else exist. Well, yes it seems they do. And, unfortunately, it's the German government again. Here is the clause - something identical being legally required in Germany - covering non-competition in a new draft employee contract I just reviewed for a business partner in Munich:
"During the non-compete period the Employee shall receive a compensation which amounts for every year of the prohibition to half of the contractual benefits last received by the Employee."
Remember, there is no negotiating on this. The Employer has only two options if he feels he must protect the secret: he can either have the non-compete and pay money to the Employee after they leave; or he can simply not give the Employee access to the secret at all. There is NO MIDDLE GROUND. Even if they both agree, the Employee and Employer cannot make that agreement the basis of employment. (Well perhaps they could; but it would be unenforceable).
So, with a simple swipe of a pen, some bureaucrat has added another nail to the coffin of German engineering employment. Because with that pen, said bureaucrat has made Indian, Chinese, Roumanian, you name it employees more attractive (to the extent that those governments have a more laissez-faire approach) by making German employees less attractive.
They may as well have said that all meetings in Germany must be carried out in Esperanto.
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