In Defense of Non-Competes – Make them Industry Specific
Jay Shepherd’s recent post on "Rethinking non-competes" in his Gruntled Employee Blog got me thinking. His take was this:
But if [the employee] decide[s] eventually that it’s time to leave the nest, then they should be free to do so. Even if it means that they’re going to compete.
With one exception. They can’t take our stuff. And by stuff I mean two things: our secrets and our client relationships. If their old jobs required them to work with our secrets — our legitimate, protectable secrets, not stupid things like prospect lists — then they should not be allowed to take them to their new jobs. And if in their old jobs we paid them to develop and maintain customer relationships to the extent that they became the face of our company, then they should have to stay away from those relationships for a reasonable period of time. A year, say.
Seems like a pragmatic approach and employers get to protect their trade secrets and customer relationships. Courts don’t like enforcing non-competes that are simply punitive in nature, there has to be something real to protect and the law in Texas has evolved that way.
The optimal solution however is not one size fits all. Instead, it should be industry specific. Non-compete agreements are not appropriate for every industry. The industry need to take the initiative to work out employee transition agreements. I know, wishful thinking. But it can be done. Broker Dealers have done so with The Protocol. The industry knows what their "special sauce" is and what truly needs protection. The Protocol allows employees to move within the industry and take their clients. This may not be appropriate in every industry. But the point is the industry and the market, not lawyers or legislators, are in a better position to make the determination.