In this blog I look beyond the obvious and try to find out why people and companies do what they do - and what it means for the rest of us. 
……which i'm having with myself, goes something like this;
Pro: As an employer and business person, I want to absolutely protect myself and my people from dirt bags who are brought into our business, taught everything about how to succeed, and then flee to either another outfit or to start their own wanna-be outfit. Why should my company be put under any risk from someone who learned their craft and built their relationships because of us? For a company to work successfully, it normally intimates that those who work for you have to be "in the know" to be effective. They have to learn all the little secrets that make you successful – why should they be allowed to use those same secrets against you?
Con: As an entrepreneur, and a Darwinist, I want the creativity that occurs inside a company to be allowed to move out and set up new businesses, with new opportunities, and new models to contribute to the real economy. How much innovation is stifled because a business never gets started or gets started too late because of fighting non-compete issues? Does not the success of Silicon Valley and the effective demise of the Rt. 128 club prove that the non-compete is bad for overall growth of the entrepreneurial economy? If no one could ever leave their job and go elsewhere or start their own gig, would DEC still be the biggest company in MA? I think not.
The problem is the answer is both. If you simply leave because you are a dirt bag – you want to take all that someone has taught you and use it directly against them – you should absolutely be tortured in a public square while good looking girls laugh at your inadequacies. If you leave with what you learned to do things differently, because you see a better/different opportunity or a new business model that makes more sense in the new world order – then are you really directly competing? These are complex issues, but if you put a gun to my head, as much as want to protect myself and my folks, I would pick against the enforcing of non-competes as they are currently written.
What we need to do is change/re-write the laws in such a way that we protect the investment and intellectual property we put into to our people without killing their ability to do new accretive things which add value to the world – but get everyone (and yes, that means you California) to agree that direct dirt bag no-value add slime-ball non-compete violations will be prosecuted and those who commit them completely emasculated. I'm sure they will go for that……
By the way – this rant came about because EMC instantly sued Dave Donatelli – which I expected – and he instantly counter-sued (from California) – which I expected. It will cost a bunch of time and money, and I can't see how EMC can win, but they will get some bullshit concessions from HP (Dave won't really do storage, or something silly), both spend too much, and in the end it won't matter in the least. EMC needs to do this so others know they will enforce their rights, so I don't blame them – but there has to be a better way, no?
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Steve
I have to say if I was a customer of EMC I’d be thinking whether EMC were going to sue me just because I stopped buying their hardware. It’s not exactly showing them in a positive light.
The lawsuits won’t result in either party ‘winning’, but you can’t blame EMC. Leaving the company to run the same business at a major competitor isn’t the best way to treat the company you worked at for the last 22 years.
Non-compete clauses are tantamount to giving an employer the right to say “work for me or find another way to earn a living”. Would you suggest that employees be given the right to tell their employer “let me work for you or enter another business”? “My way or the highway” clauses are clearly absurd… and unenforceable in California.
Non-compete clauses are not the same as confidentiality agreements and that’s the core of the question at hand. This should be somewhat self-policing as people that violate confidentiality agreements theoretically will have a hard time finding employment.
Unless there are “confidentiality violators” (“dirtbags” in your terminology) in this particular situation, just focus on meeting your customer needs and you’ll do just fine.
So he SHOULDN’T take the job for which he is most suited simply out of loyalty to a company who would dump him in a heartbeat if they needed to? I’m not referring to EMC specifically here, just to the way that American companies have taught their employees how loyalty works.
If your heart is telling you it’s time for you to go, then it’s time for you to go. And if it’s time for you to go, then you should be able to go to the job for which you are most suited. If your former employer is somehow damaged because (even if you don’t take trade secrets with you) you know exactly how to compete with them and win, then it’s their fault for not offering you enough incentive to stay — whatever that incentive may be.
As a former and current owner of my own company, I see employment as a two way street. They need to give me a reason to hire them and keep them, but I need to give them a reason to stay. If an employee leaves, I see it as my failure not theirs. I failed to give them what they were looking for in a job — whatever that was. If they went to a competitor, then that’s my bad.
In any discussion about non-compete one must differentiate between “non-competes” for employees-at-will, and the non-competes clause contained in the employment agreements of key personnel.
Generally speaking, it is difficult to enforce draconian non-competes against an employee-at-will unless an employer can show the court that the employee received something of value in exchange for his promise to adhere to the non-compete. Non-competes are NOT automatic for an employee-at-will. No surprise that non-competes are often tied to severance agreements during layoffs in an attempt to make an end-run around the system. Still, courts frown upon any non-competes that are too broad or deep in the context of employees-at-will who signed them specifically in exchange for severance or other additional compensation (e.g. stock options).
Today’s executives and star players generally aren’t employees-at-will. The compensation packages they receive are often more than enough to justify the non-competes in their tailored employment contracts. It should come as no surprise that the Donatelli’s of the world end up in court in lengthy legal disputes.
If executives (and other employees under contract) are not comfortable with the terms of their employment agreements, the issue should be addressed before they sign on the dotted line. Instead, they sign it and enjoy the accompanying salaries, options, severance, and other benefits and perks, until the day they want out. Suddenly, one day they are no longer fine with the terms and want the freedom to move about without repercussions. It simply doesn’t work that way, nor should it. As the saying goes, “that is why they are paid the big bucks.”
Curtis, if an employee leaves it’s not always our failure as business owners. Similarly, it is not always their failure as employees if we must let them go. Clearly you understand that. Over the past 40 years we have built an entitlement generation filled with job-hopping opportunists at all levels. The inflection point was around 88-90 when the last of the corporate cultures of loyalty fell. Since then companies and individuals have operated largely out of self-interest, no matter how well they are treated, nor how much time we have invested in them.
Steve, unless the members of your crew sign contracts in exchange for special compensation packages, any non-compete protection you believe you have would not likely hold up in court.
Donatelli….well we’re not going to be privy to the details of his case, but rest assured someone (HP) is going to pay the piper (EMC) if he is to work at HP in the capacity for which he was obviously hired.
“(Dave won’t really do storage, or something silly), both spend too much, and in the end it won’t matter in the least. EMC needs to do this so others know they will enforce their rights, so I don’t blame them – but there has to be a better way, no?”
Sure. Pay them what they are worth with binding contracts in tow. It works well with professional athletes and it’s not uncommon to keep them on one team. Free enterprise, right? Am I guilty of simplifying the obvious? But then again, the corner cases (for even the very well paid) will be the creative geniuses that will leave anyhow for the challenge. Should they be shackled? Seems unfair, doesn’t it? It’s all about fairness, too!
HA.
Good points on both sides. To be fair – Dave sued EMC first – in California – to get out of his employee agreement. He is NOT an employee at will, as Mr. Martins brought up, and clearly had a very specific employment agreement for which he was compensated outrageously well for. EMC countersued within 8 nano seconds, in MA, to enforce the agreement.
It seems to me that pontificating the right versus wrong of the “could you?” side of the argument misses the larger point – “Should you?” seems to hold more societal impact.
Are we not better off as an economic society by enabling – even encouraging – the entrepreneur? And if so, do not the same shackles of non-compete agreements that need to be removed from the entrepreneur leaving to start their own business also need to be removed from those leaving to start their careers over inside a competitor?
Having said that, make no mistake that I, and I suspect most, would violently attempt to enforce all agreements in terms of privacy, trade-secrets, non-solicitation, etc. When it comes down to it, are we really concerned with the competition or what the person really represents – the ability to screw with our livelihood by taking our customer with them? If you use what I have taught you against me in my own customer base, I should have the right to chop you off at the knees.
Keep it coming. Good stuff. Steve
I still think that to sign an agreement – any agreement – without intending to abide by it is less than honorable and probably not legal unless someone is holding a gun to your head. I suppose the days when your word was your bond is long gone.
—I totally agree. Look at professional athletes who sign outrageous contracts only to hold out three years later when they feel disrespected because some rookie is making more money. They sure where ok with it at the time. Alas, it is what it is. – Steve
CA court bitch slapped Dave’s request to ignore agreement and is waiting for MA court to rule. Postponed hearing until May 15. In the interim, he is NOT going to work at HP today.
An HP spokesperson said Donatelli, who had been with EMC for 22 years,
would not start his new position on Tuesday as planned. “We are
disappointed that the Massachusetts court saw fit to delay Mr.
Donatelli’s employment with HP,” she said. “However, the court’s order
is preliminary and we are confident that Mr. Donatelli will be permitted
to join HP in a leadership role once a full hearing of the issues is
held.”
—–Steve
Having read all of the above posts, they seem, to me at least, to be concerned with loyalty by the employee. Certainly all valid comments with important perspectives particular to the debate of non-compete clauses and their legal validity.
However, I believe Steve also touches on another interesting aspect of leaving one company for another. The idea of creative energy and the accretion of knowledge. One other important consideration is that HP is not EMC and that Mr. Donatelli, despite all he knows about how EMC approaches storage is now working for another company with different perspectives, creative insights and an entirely different workforce.
I think we forget that it is not Mr. Donatelli who is competing with EMC, but HP and he has a great deal of work to do to integrate himself and his insights and approaches within HP. This may make HP a more formidable competitor against EMC, or it may not. Being a market Darwinist myself, I believe that EMC and HP should decide this not with the rule of law, but with real customer value and superior products. Mr. Donatelli is only one man and by himself can only do so much to impact the success of his former employer. It is the company’s approach to customer service and engineering and other aspects of a company that continue to make it successful and not the hire of a single individual from a competitor.
As an aside, my personal opinion regarding non-compete clauses is that they serve a limited usefulness in very specific cases, but should not be use to prevent someone from pursuing their own career goals – as Steve points out. Those cases might be “taking” clients with you when leaving a consulting company [dirt-bag], but not personal “IP” [creative], “taking” engineering information on products and processes that were developed by an entire company [dirt-bag], but not personal creativity and business acumen [creative]. So, in general, I agree with Steve’s views on non-compete clauses. JMHO