Project Management

Do IT consultants need legal protection from competition?

Many IT consultants would like to make the playing field a little less even -- if it makes the money roll their way. Find out where Chip Camden stands on legal protection for IT consultants from competition.

 Americans are taught from an early age that our society is built on free-market capitalism. Perhaps no occupation better embodies the enterprising spirit required to attack an open market than IT consultant. Selling one's skills, looking for new work, and competing with other providers are part of our normal business cycle. But it appears that many IT consultants would like to make the playing field a little less even -- if it makes the money roll our way, that is.

Firms sometimes rely on legal barriers against competition to protect their business rather than working to stay competitive. This is not only self-defeating in the long run, it hurts commerce in general.

Noncompete agreements

My recent post about a TechRepublic member who was harassed for attempting to transition from employee to consultant generated quite a discussion about the merits of noncompete agreements. A noncompete is a contract clause that specifies that one party (or both parties) will not take business away from another party. It usually covers a period up to a defined interval following the end of the engagement.

Noncompetes are notorious for being vague and general -- often prohibiting a party from engaging in a similar business activity though it isn't in direct competition with the other party. Sometimes noncompetes even protect business endeavors that may occur in the future.

Companies often won't pursue a breach of a noncompete agreement unless that breach is blatantly competitive. Even when it is blatant, companies usually can't win because antitrust and other restraint of trade laws can be interpreted to make these agreements illegal. In fact, noncompetes are illegal in California (this decision was recently upheld).

I wonder why companies and consultancies feel the need for a noncompete. I think it's about laziness. If you're doing your job and competing in your market, you shouldn't worry that the other party will spoil their engagement with you in order to try to take that market away. And if the other party is so much better matched for the task, why should they be prevented from taking that business? Rather than setting up a trust to prevent competition, both parties should look for what makes them more valuable to the end customer and capitalize on those strengths. The big winner is the shared customer who is well served by both parties and who will not feel neglected by a smug vendor who considers them "locked in."

How noncompetes differ from nondisclosures A noncompete is completely different from a nondisclosure agreement (NDA), also known as a confidential disclosure agreement (CDA). When two parties contract to work together, it's often necessary to share information that one of the parties wants to keep out of the public knowledge. An NDA/CDA says that you won't reveal the specified details to anyone else. It also often states that you may not use that information for any other purpose; this includes starting a venture in competition with the other party. An NDA/CDA doesn't necessarily prevent you from competing with the other party in ways that don't take advantage of that information.

No-hire clauses

A special case of noncompete is the agreement not to compete for people. Whereas in not competing for business, the customer loses; in the case of no-hires, the contractor or employee gets the short end of the stick.

For example, a consultancy and its client agree not to hire their respective subcontractors or employees. This may provide some peace of mind for the two parties involved in that agreement, but it artificially limits the market for the employees' skills. An employee who feels trapped will be even more resentful than a customer who feels locked in. If you need to worry about no-hire clauses, you can bet that your employees are actively looking for a way out of serfdom -- and they'll find it. So instead of giving the underhanded company that stole your best person the evil eye, you should ask yourself why that employee wanted to leave in the first place.

Rules limiting global competition

A lot of IT folks are up in arms against outsourcing and bringing in foreign guest workers. Here are three groups that are in this camp (tip of the hat to TechRepublic member Marty R. Milette for the links -- and the warning about writing this blog):

Many IT pros think that H-1B visa requirements are too loose. And here's where I may lose a few friends: I think that H-1B visa requirements are too stringent. I also disagree with any governmentally imposed restraints on offshoring or outsourcing.

IT is already a global market, especially in software development. Even if you can artificially prevent workers from coming to the United States, you can't prevent them from working via the Internet. And, if by some heavy-handed protectionist legislation, you are able to prevent workers from even contracting remotely, you'll only end up isolating one nation within a rapidly evolving global IT industry. IT workers in that isolated nation will play a less and less significant role unless they learn to compete and cooperate. Rather than putting off the inevitable, IT consultants need to figure out how to provide value in a worldwide open market. If we can't do that, we shouldn't be in the game at all.

Legal protection from competition is unnecessary

To my mind, these legal barriers only serve to prop up the status quo by artificially limiting competition. None of them can achieve their long-term goals. All they can possibly do is to buy some time while the parties that benefit from them figure out how they'll cope with the new state of affairs -- once resistance becomes futile.

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About

Chip Camden has been programming since 1978, and he's still not done. An independent consultant since 1991, Chip specializes in software development tools, languages, and migration to new technology. Besides writing for TechRepublic's IT Consultant b...

82 comments
BobR
BobR

First I'd like to say that I agree with Chip, that contracts should be unnecessary. Reality, however, is that we are sometimes asked to sign contracts, and we don't want to walk away from the opportunity. At one time I was asked to sign a non compete to subcontract for a consulting firm. I was to be prevented from doing any work directly for any of their clients, even those they had only marketed to. I asked that the penalties be spelled out in the contract. The terms were spelled out that I would owe an amount double the previous 12 months billings. This effectively prevented me from working directly for any active, large client, but just as effectively opened the door for 'potential' and 'past' clients. I've never taken that step; for reasons where I'm back to agreeing with Chip (the market will remedy): If I did this, it would be a black mark on my name in an area and economy where I don't need any black marks. Additionally, this consulting firm also follows the market driven model: they take good enough care of me that I've never been tempted to try to work directly for their clients.

Gabby22
Gabby22

I guess one way round the problem is to refuse to sign anything except (reasonable) non-disclosure agreements. To get away with this you need to (a) be really wanted by the company, or (b) work for smaller clients, or both. I've turned down work for larger companies simply because the agreements were draconian, and never regretted it. Generally working for clients with (say) 100 staff is much more satisfying than those with 1000 anyway. I've also stalled on signing the NDA or other agreements, simply by putting it off. Generally, they forget about it very quickly. I've seen some really nasty agreements, particularly for work involving bid preparations, which would mean that after signing 2 or 3 of these, you wouldn't be able to work for any other clients.

SirLanse
SirLanse

So, you bring in a kid, teach them your business, introduce them to the local players. Should he be able to leave and undercut your prices with the knowledge that you gave him? Take your customer list and offer the same product at a lower price, because he did not incur your learning curve costs. H1Bs - lets start by outsourcing IT blogs.

Tony Hopkinson
Tony Hopkinson

Never even noticed the unreasoning bias in that lot. Anti outsourcing = anti competitiveness. So is that. Chip making money American corporates making money America making money Substitute Tony an Uk if you want a transaltlantic persspective. Or Sanjay and India for an international one. I'd say we need more legislation to enable and protect competition. Unfortunately the business's who are currently in the drivers seat, do notb want it, and they are the ones who fund the legislators. I keep misssing this one, because it's too simple or too complex, I don't know. Why is good for business, good for your country? Outsourcing certainly appeals to business, can even be good for it at least in the short term. For your country, not even little bit. So the globalisation argument is actually an increase in the feudal domain of our lords and masters. So tug your forelock as much as you like, me I'm having none of it. Anti-competition laws of any kind, never level the playing field they tilt it. There is no one more anti-competition than a businessman, it isn't good for it, you see. All in all, hilarious.

Sterling chip Camden
Sterling chip Camden

I think contracts are generally a good thing, because they define expectations. I'm not against contracts -- I'm only against pointless anti-competitive provisions in contracts.

Sterling chip Camden
Sterling chip Camden

One of the most important skills to develop early is the ability to see when you shouldn't take a job.

Sterling chip Camden
Sterling chip Camden

I'm sure that if TR could find a writer that could generate more ad revenue per dollar paid, they wouldn't care what continent he/she/it lived on. And I couldn't blame them.

MichP
MichP

A new guy was brought in to manage a struggling company with the idea he'd eventually buy it. He never qualified for a business loan because couldn't show any success. Was fired, after several warnings, for driving the company into even worse shape. Seems he took home several BOXES of company documents, including customer lists and vendor contacts. He brought them back only when someone noticed they were missing and confronted him. But he started directly competing with his old company, selling the same products to same customers, conveniently not mentioning to them that he was on his own now. And all this with a non-compete agreement in place. The article has some good points. But we wind up with more restrictive laws and contracts because some low-life took advantage. It's that difference between following the letter and the spirit of the law. When you hire someone, you don't know if they'll be a decent person or pull something slimy when they leave.

reisen55
reisen55

So, here we have a fine backer of outsourcing, after all it is JUST BUSINESS CUTTING EXPENSES after all. My response: Tony - Poor English language. Shows throughout your post so how you can be a professional is beyond me. Quality of Job - important. Outsourcing is an American mania at the moment, management loves to cite lower costs (salary and benefits) to do the same job and usually increase shareholder value. Suggest you research W. Edwards Deming. The "quality" of the work performed overseas and not domestically is dramatically worse. Oh there are exceptions, but almost every case I know of the quality of job goes down fast and stays poor. So, American workers now have to spend time fixing overseas mistakes. Phone conferences with Bangalore as difficult due to time values. Helpdesk personnel half a world away reading from a script of problems is such a poor support model that it is hilarious too. Except that it is far from funny.

Sterling chip Camden
Sterling chip Camden

I didn't really get where you stand on these issues. I agree that anti-competition laws "tilt the playing field" -- which is why I'm against them. I think more competition produces better commerce overall -- better products, better prices, more efficiency all around. "Good for business" - what's good for business in general, rather than what's good for only certain businesses.

NemesisTWarlock
NemesisTWarlock

I really hope you are just out to stir up discussion because otherwsie you are either a complete idiot or simply an idealistic fool. You claim to be a consultant but why would anybody in their right mind employ you when you obviously don't seem to believe they have any rights whatsoever? Sure you say that 'morally' you wouldn't do these things, but when the next financial problem hits and your morality vs. putting food on the table is up for review why should they trust your dubious honour system? Business grows by building an organisation that is self-sustaining and self-replicating. To do this it must invest time and resource. To say it has no rights and that anybody that comes into contact with that business can simply take what they want and attack it without fear is simply destroying the basis of business. If anyone is allowed to be paid to do work, can receive training, and then immediately use that to harm the business that gave it to them, then what is the incentive for business to grow and create jobs? You are advocating a society that relies on the uncertainty of person principles. Why not take that and apply it to every aspect of life and say that murder is not punishable by law or that parents have no legal responsibility for looking after their kids? Sure, morally 'you' may not be inclined to kill your neighbour or use your kids for target practice but if you are the neighbour or they are your kids that someone wants to do this to, should that be acceptable? As long as there is balance, then customers, employees, and employers all have the right not to be screwed over. You know full well that black and white doesn't exist in this situation because it is all a case of classifying the infinite shades of grey. Please do yourself a favour and step up to say you aren't what you are claiming to be and that you have a grasp on reality.

Sterling chip Camden
Sterling chip Camden

Yes, the employer was taken advantage of -- so what. Lesson learned, screen your proteges better. I still don't think there should be laws to prevent this. Convince me.

Tony Hopkinson
Tony Hopkinson

Where in that argument poor english or not did I once suggest that outsourcing was a good idea? Of course the quality of work performed overeas is worse. It's got nothing to do with it being overseas though, very little to do with culture or native language. It's worse because the reason for doing it is to be CHEAP. I was neither supporting nor advocating outsourcing, I was arguing with the implicit link in Chip's post. That because anti-competitive legislation is bad, therefore anti-outsourcing is bad. Pratt. Oh sorry that was unprofessional of me wasn't it! Post edited so this raisin fellow might have more chance of comprehension.

Four-Eyes
Four-Eyes

"I think more competition produces better commerce overall -- better products, better prices, more efficiency all around. "Good for business" - what's good for business in general, rather than what's good for only certain businesses." I "generally" agree with your statement but more often than not, too much competition forces the prices of services down to unbelieveably ludicrous levels. Just try looking at the bidding wars at sites like Craigslist... Unbelieveable! I wonder how one can actually live on that kind of low compensation...

lost in Texas
lost in Texas

Chip- From the Yahoo Chats Rooms: It seems that IBM cannot get enough Indians into their delivery teams. The latest ploy is that their ideal delivery model is to have 80 % of a deal staffed in India and 15 of the remaining 20 % in the US be "landed resources" or Indians and such on H1B visas. This is causing the deal team management some heartburn as they no longer have enough White guys to front the customer/client. Don't yell at me: this is straight from internal executive presentations among themselves. In the IBM ideal deal there would be one White guy(salesman)at the contract signing and only White executives in Armonk reaping the profits. All the rest of the workers, except those, would be non-US citizens.

Tony Hopkinson
Tony Hopkinson

got to do with it? Are you trying to claim that products and services are cheaper becsause of outsourcing? Really ? Are you trying to claim that outsourcing has increased competition. With whom? If anything, outsourcing has crippled competition on a global basis..... Then there's the patent hypocracy that businesses like competition. They like their suppliers to be in a competitive market, they'd rather their customers have exactly one choice though, as long as it's them. The only time you hear reasons for legislation for or against competition, is when some loser tilts the playing field by purchasing votes in the legislature. Pro-competitive legislation is so 'you' can compete, anti is because 'you' can't. There is no difference, because the final objective is always to eradicate 'your' competition. Corporate dynamics 101.

Tony Hopkinson
Tony Hopkinson

"as the first thing a business does when growth stops through one factor or another, is to reduce jobs in order to keep growing profit." I didn't say it didn't make sense to do this. It was an argument against the poster's contention that business creates jobs. They can and do, but that is not the purpose, it's a consequence. The guy came across as one of these I'm doing you a favour by employing you types, get's right up my nose that attitude.

Marty R. Milette
Marty R. Milette

>as the first thing a business does when >growth stops through one factor or another, >is to reduce jobs in order to keep growing >profit. This makes absolutely no sense whatsoever. If it was possible to reduce jobs and grow profit -- then the only way that is possible is if there were too many people employed to begin with. OF COURSE any organization with any kind of quality/performance improvement system in place WILL become more efficient and either be able to handle more business -- or handle the same amount of business with less labour. There is no magic in that. >So human rights could not automatically >supercede a powerful elite's little earner. So who are these 'powerful elite'? Surely not the tens of millions of average people who happen to hold shares in large businesses -- hoping maybe to have invested in a profitable one so that they'll have something come retirement time? Or maybe these powerful elite are the moms and pops who own small businesses -- or the independent computer consultants working 16 hours a day trying to stay ahead of the tax man and have enough left over to keep a roof over their head? >Now take a wild guess at who payed for >that piece of legislation. Want to see who is paying for legislation and who they are paying it to? For the US at least, just look here: http://opensecrets.org/industries/mems.php I don't see any moms and pops on any of the lists though. In any case, it doesn't take anything more than to follow the money to see what's under the rocks. It ain't pretty.

Tony Hopkinson
Tony Hopkinson

Did you say gave ? Businesses do not grow and create jobs. They grow and create demand for labour, the difference is subtle, but easily recognised, as the first thing a business does when growth stops through one factor or another, is to reduce jobs in order to keep growing profit. You talk as though a business is a person, he does this, he does that. No it doesn't. The people who own it, run it, or work in it may do those things. The the deliberate misconception that a business entity is somehow equivalent to an individual, was created legislatively for one reason alone. So human rights could not automatically supercede a powerful elite's little earner. Now take a wild guess at who payed for that piece of legislation. No I don't have the right to steal your (the business) stuff. You (the business) don't have the right to go around stamping "mine" on everything not nailed down either.

Sterling chip Camden
Sterling chip Camden

Especially as it applies to software. But we'll leave that for another discussion.

Sterling chip Camden
Sterling chip Camden

I never claimed to be an anarchist. I do believe in the rule of law, and I have contracts with all of my clients. I am not questioning the rights of businesses, I am merely questioning the propriety of those agreements that prevent competition.

oldjags
oldjags

..throw out patent, copyright and trademark laws as well, and make competition a true free-for-all. I'll spend years toiling and creating and inventing something, and you can just steal my idea and run with it. Sounds like the basis for a truly equitable and just society - we'll all have nothing.

jsbell
jsbell

We are now clearly on a rabbit trail. :)

Sterling chip Camden
Sterling chip Camden

... and you don't think people labor to achieve a "business" relationship with their girlfriend? Most guys I know work pretty hard to get down to business.

jsbell
jsbell

The girlfriend analogy fails because the question is not whether you own the customer but whether you own the advantage of knowing the customer wants your product and how to reach that customer. You did not labor to produce the customer as a person; you labored to produce a business context in which you could sell your product. It is therefore both appropriate and prudent to make and record promises that you will deal fairly with the labor value of another. I do not think such promises (aka contracts) are unreasonable among civilized people.

herlizness
herlizness

> the tooth fairy is not your problem; your lack of faith in almost everyone in your industry IS your problem > obviously there needs to be a mutual understanding of what the parties are agreeing to; but that does not negate my point that honest people do not need to be kept honest by written contract; the corollary rule is that dishonest people CANNOT be kept honest by contract, especially by people unwilling to enforce their agreements

Marty R. Milette
Marty R. Milette

>Honest people don't need any "help" being >honest or they wouldn't be honest people. Ya, and I believe in the tooth fairy too. Stating terms and agreeing on scope and details up front is the only way to stay in business. Perhaps I'm a bit jaded after so many years in the industry, but I have found that it doesn't hurt to have a fallback to a written agreement when things go sour. Maybe in Mr. Roger's neighbourhood things are easier I guess.

herlizness
herlizness

> Don't try to make this a black and white issue; property is an enormously nuanced topic. Arguably the law currently protects far too much property; don't believe it? study the patent game as practiced by the pharmaceutical industry And don't forget that there's really nothing new under the sun ... much of the labor invested in this and that alleged "property" is built on the shoulders of someone else without a nickel changing hands

Sterling chip Camden
Sterling chip Camden

As you indicated, the employer starts with the "advantage of accrued good will", not to mention already having the logistics in place for working with the customer, so the only way it makes sense to compete against them is if you have something significantly better to offer.

Sterling chip Camden
Sterling chip Camden

What is the indication that this list is private? Some companies publish their lists of customers.

herlizness
herlizness

> nonsense; anyone can figure out who the customers are for any given business .. and the employer still normally retains the inherent and significant advantage of accrued good will ... compete away; just don't steal the physical list, the code, etc

herlizness
herlizness

> I'm glad to see some jurisprudential thought around here but I'll have to disagree with the quoted assertion ... the law is not solely concerned with outcome ... indeed, it is equally concerned with the process that is due in it's administration; there is also a convergence; substantive justice is often a direct function of process ... perhaps you've heard the term "substantive due process" Needless to say, the notion is not restricted to the positive law of law the land; for example, in any company of any size, you will of course find formalized process in various forms nominally designed to assure a measure of fairness in hiring, promotion, vendor selection, etc etc ... it doesn't always work but that's beside the point

herlizness
herlizness

Hey, Chip ... I'm all for the competition but don't steal the customer lists I've developed at great expense over a long period of time. I don't need an NDA to protect that. There's a distinction between soliciting the same customer base and flat out stealing the list. It's misappropriation, unfair competition and it's actionable.

Sterling chip Camden
Sterling chip Camden

I never said that NDAs or non-competes should be made illegal -- I merely asked why do you need them. I'd rather keep government out of it altogether, pro or con. As I said in the post, NDAs serve a useful purpose. And if a client list is covered by an NDA, the party who signed must honor that. I'm only questioning why anyone needs to do that.

Sterling chip Camden
Sterling chip Camden

... to state exactly what's expected from both parties. And if I believed in anti-competitive practices, I'd want that in my contract, too. But I don't. I believe in doing what is best for the customer, because that's what brings the customer back to me -- not some agreement I have with others not to touch. If one of my colleagues could provide better value to one of my customers than I could, I'd have no problem letting them take over the gig. But I've never even had that kind of thing happen. Instead, the colleague gets hired on alongside. Maybe my involvement diminishes some, maybe I'm needed even more. It's not about who "owns" the customer.

Sterling chip Camden
Sterling chip Camden

If it is spelled out in a contract, then yes you must uphold it. I'm against putting it in the contract. Let's try a better analogy than the pie. How about a girlfriend? Why wouldn't you sue someone for stealing your girlfriend? Because it's assumed that she has a part in that decision -- she is not your property. Neither is your customer.

oldjags
oldjags

Stealing money out of the till is obviously illegal, so why shouldn't taking confidential customer and vendor lists and converting them to your own use be as well? Making non-competes and NDA's illegal would have the effect of crippling small business, as you'd be unable to trust hiring or sub-contracting anyone. I agree that non-competes that prevent someone from working in the same field are bad and should be invalidated, but I've got no problem with prohibiting someone from using an employer's customer list and his personal relationships with said customers to launch his own business. That said, it has to be spelled out at the time of hire that if you take this job, you're agreeing not to do business with my customers after you leave. After all, you wouldn't even have access to my customers and be able to build the personal relationships you'd need in order to steal them away unless I'd hired you first. It's impossible to screen your employees well enough in advance to know who might want to become an entrepreneur in the future, and who might want to do it the easy way by stealing your corporate secrets. Such non-compete agreements are completely legal in that they are contracts, freely entered into between employer and employee at the time of hire, that spell out the conditions under which the employment exists. If you have a problem agreeing to the terms of the contract, then don't take the job. Complaining after the fact that it's an unfair 'restraint of trade' when I take you to court for doing something you explicitly agreed not to do is a pretty poor excuse.

Tony Hopkinson
Tony Hopkinson

This is to protect me from you in case you are a crook... I'm not, I'll sign it. However have you noticed that it's crooks who are most likely to see others as of a similar mind...... Not taking a poke this time, I'm quite happy to admit, I wring every single advantage out any contract I sign. I know for a fact the the guy who persuaded me to sign it is....

jsbell
jsbell

Chip, your comparison between sneaking a baked pie from a roomie and stealing customer lists from an employer is telling. Under the law of larceny, anything can be stolen, even a pie, and even from a roomie. Say you lift his laptop. Different outcome? Why? Not really so different in principle, just in value, especially if the pie is really good (my perspective). The law defines larceny as the trespassory taking of the property of another with intent to permanently deprive the original owner of his property. Here, the "property" is more than just a list of names; it is the marketing value, in dollars (or pounds, etc.), of knowing who is interested in your products. If the law can protect me from a pie thief (and it can), or a laptop thief (and it often does), then why not a labor thief? Therefore, your proposed dichotomy between law and ethics is misleading in the extreme. Law is driven by ethics, and is a valid means of enforcing ethics, especially where the temptation is strong to act in a self-serving manner. The prohibition against murder is rooted in an ethic concerning the value of human life. The prohibition against false imprisonment is rooted in an ethic concerning the value of human liberty. And the prohibition against theft is rooted in the ethic concerning the value of property in the pursuit of human prosperity. In each case, the power of the state is rightfully deployed against those who would disrupt society and bring harm to their fellow beings by disregarding the aforementioned values. A person who makes a promise not to steal information, and commits that promise to a contract enforceable under power of law, should not be too surprised when they are asked to hold up their end of the deal or pay the consequences.

Marty R. Milette
Marty R. Milette

For Tony, "Is non-compete clause honest, or simply pragmatic / self serving." What's wrong with a clause in a contract between you and your client that says, "I agree not to poach your employees and you agree not to poach mine." Or for employes hired to work for you, "You agree not to steal our customers for x months after leaving us." Assign whatever date restrictions you think fair and you and the other party can agree upon. What's wrong or unfair or self-serving with that? I don't see any problem. It seems to me that the only person who would object to that would be someone who intends to be evil. As mentioned previously, some employers take this way, way too far -- like one contract I refused to sign that demanded 100,000 Euro in cash if I were to work for their client. We always have a choice what we sign and agree to. I've often pointed out bad clauses in contracts and had them changed. Sometimes the managers don't even know what is in their 'boilerplate' contracts and they need to have unfair clauses pointed out to them. Would you really WANT to work for an employer who insisted you to sign a bad contract? That would be the first warning to RUN AWAY in my books at least.

Tony Hopkinson
Tony Hopkinson

That the contract is 'honest' Is non-compete clause honest, or simply pragmatic / self serving. I agree completely that if you sign it, you should abide by it, but given that I do, that just means, I'm honest not 'you'.

Marty R. Milette
Marty R. Milette

Chip, do you make contracts with your clients? Do you ever hire anyone to do work for you -- and if so, do you not have contracts or agreements with them? As a consultant, I wouldn't THINK about starting any job -- no matter how small -- without having a writtent agreement -- call it a contract if you like -- in place. As much as I'd like to believe that people are honest and fair, over 20 years of IT industry experience -- half of which spent contracting -- has proven quite the opposite. Of course a contract or agreement won't keep someone planning to be a crook from doing so, but it does tend to help keep honest people honest.

Sterling chip Camden
Sterling chip Camden

... doesn't mean you own those clients. They make a decision every day whether or not to stay with you, and you need to respect that they own that decision. I agree that it is unethical to steal business from someone you've been working for. Just as unethical as eating a pie that your roommate baked and left on the counter to cool. But I don't think we need to get the law involved. Take it as a lesson in character and move on. Sure, someone might take advantage of you for a while, but unless they really have the skills in question it won't last for long. Concentrate on providing value instead of legal protections, and the business will stay with you.

Tony Hopkinson
Tony Hopkinson

If you are just starting out, or struggling, you could easily end up signing to a very unfair non-compete, simply to get a job. Now to me, you signed it, gave your word etc, so you should stick to it, or perhaps re-negotiate it as you become more valuable. A lot of people don't agree with that, especially employers. Many busineses are for instance quite happy to sell contact info. Who actually owns that, them or the contactee. If Fred the consultant having left Marty Millette inc can do me a better deal, is it fair for you to deny me that opportunity? Just thinking, not picking, the situation is nowhere near as clear cut as people on both sides of the fence would like it to be.

Marty R. Milette
Marty R. Milette

Chip, how is it possible you can't see the wrong when an EMPLOYEE steals company assets? Be it customer lists, or actual customers themselves? Let's make it simple. You hire or contract someone to work for you. You train them in your techniques -- stuff that one would assume has some value in the market place. Three simple scenarios: 1. The employe steals your customer list and starts marketing these skills to YOUR customers AGAINST YOU. Naturally, since he has no overhead or expenses to cover and can start instantly (he already knows the skill you taught him, which may have taken years for you to learn yourself) and compete directly against you at lower prices. Additionally, instead of having an 'exclusive' market, you now have the first of what will probably become MANY direct competitors -- all with your 'special' skill which ain't so special anymore. Prices drop, competition rises -- customers love it, but you are hurting big time. Should you have no protection whatsoever - or do you consider it 'fair competition'? 2. Your customer HIRES the employee away from you. They offer a better package and your guy jumps ship within days of arriving on the customer site. This leaves you without the resource you invested time training in AND leaves you without a customer you worked hard to obtain. The customer is happy, they now get the same services cheaper. (They don't have to pay your overhead or profit anymore.) The former employee is happy -- they get a better package and do the same job for more -- maybe even better future prospects because their new employer is probably a bigger company that Chip Co. Maybe the former customer finds it such a good deal they poach ALL your staff -- leaving you with nobody. The first case is covered by a simple, fair and reasonable non-compete clause in the employment agreement or contract -- such as, "I the employee shall not work for any clients of Chip's company for 6 months after leaving the position. In the second case, the contract with the client should have a clause like, "We agree not to hire or contract any of Chip's staff for a period of 6 months from the data of termination of this contract. 3. Let's say you are the evil one -- and the moment you get on the customer's site to do the work, you find that HE has a lot of great people working there and YOU start poaching the client's staff and get them to work for you. Now, you have broken the trust of the client by stealing their employees. Is that any more fair? Again, easily solved with one sentence added to the contract: Chip's company also agrees not to poach any of customer's staff for the same period. Do you have any idea what it costs to recruit someone these days? It is not unusual for an employment agency to charge 3 months to 1 year of salary. Call around and check it out. Theree simple sentences -- one in the employee contract and two in the customer contract and EVERYBODY CAN BE HAPPY. (Unless they are PLANNING to do something evil at least...) Perhaps your training and your special skills may be worth nothing (as stated by some people rather bluntly in the previous thread) -- but the real and physical cost of recruiting new staff is not 'free'. What I don't get is how you can assert that these scenarios (which, by the way are QUITE real) should not be guarded against through some form of non-compete or -- if you prefer the term, non-poaching clause. It isn't like you could (even if you wanted to) come up with some total lifetime ban or anything -- the idea is just make it so that the person can not 'jump ship' and be working directly against you using the tools that YOU gave him the very next day. Even 3 months is enough 'thinking time' for the employee to decide whether the grass is really greener -- AND give you time to at least complete the contract you have in-hand.

jsbell
jsbell

Please note that customer lists are just one form of labor-derived data. The general principle that the law should protect labor investment is much broader, and the type of data protected by noncompetes typically includes more than customer lists. However, the principle of behavior modification through disincentive does work. People will not do that for which they do not gain an economic advantage. It is a law as inescapable as gravity. Some customer lists might be so limited and so obvious there is no special economic advantage in trying to protect them, as would be true in certain small niche markets. Other lists might represent thousands of hours of research, cold-calling, networking, golfing buddies, etc., and would represent significant value to whoever has possession of them. Therefore, if the value of the labor in generating the list is routinely given away to competitors without penalty, players will find more economical ways to acquire the same data, such as stealing from naive players who are still under the delusion they will be rewarded for their efforts. Such a system cannot work without a victim class, some group who will foolishly do the work because they believe their ownership interest in the fruit of their labor will be protected. So, to answer your question, people will not stop doing tasks that fail to give an adequate return on the effort expended, as long as they don't know they are in fact wasting their efforts. Does that make it right, or does that magically ensure inevitable progress towards prosperity for society as a whole? Hardly. Any thief in their time may have a period of success, of temporary, individual wealth-gathering at the expense of naive idealists who believe in a moral concept of intellectual property ownership. But on the whole, and over the long term, the moralists tend to win, because morality is connected with economic truth, such as the principle that undeterred stealing destroys the trust and cooperation essential to prosperity. Do you really want to live in a society that sees victims as the key to survival? I hope not. And I hope that our system of law continues to reject thievery as a social norm.

Sterling chip Camden
Sterling chip Camden

Then taking that list is breach of contract. Nothing more. And if it wasn't covered by NDA, then it's open game. Now I would never take my clients' customer lists to use for my own purposes, but that's my own ethical decision -- not a legal one.

Sterling chip Camden
Sterling chip Camden

that companies will stop trying to get new customers because they're afraid of having their customer lists stolen?

jsbell
jsbell

There are (at least) two fundamental theories for the existence of law. Traditionally, law largely represents fixed and transcendent morals as applied to the more fluid details of a specific culture. However, since the Enlightenment period, law has come to represent a relatively arbitrary means of engineering an equally arbitrary social outcome. Because outcome is all that really matters in this second system, any means of accomplishing the same outcome is acceptable. Here, if the desired outcome is general prosperity, then any act, even theft, may be justified if it supports that outcome. Traditionalists (like myself) cannot go there. Theft, even if it "works," is still a moral wrong subject to the operation of law. But what about when the thing stolen is just data? John Locke's theory of ownership was the idea of labor investment. Anyone could come upon an "unowned" plot of ground, work it, plant in it, grow a crop, and thereby assert a right of ownership. Customer lists do not fall spontaneously from the sky. Labor is invested to create such data, and the theft of it is as real as the theft of any physical object. It is confusing, though, because unlike a stolen purse or wallet, the original remains in possession of the true owner. Therefore, it doesn't "feel" like theft. Knowledge is power, and the thief is just equalizing their power to compete. But, using the Lockean labor theory of ownership, we can see how the unchecked theft of hard-earned data might destroy the incentive to do the labor required to produce that data in the first place. In other words, if our legal system does not provide a means of protecting the investment of labor in creating valuable data, we will discourage the labor that creates the data. This is an undesirable outcome, although the loss it incurs is not as immediately obvious as the loss of a purse or a wallet. Therefore, to the extent non-competes punish the theft of labor-derived data, they serve a useful purpose, in that they tend to enhance long-term investment in the kind of labor which is the basis of prosperity. Interestingly then, the law, when used wisely, can succeed both as a means of producing useful social ends, and as a means of expressing those fixed and timeless principles of right and wrong that guide our moral vision.

Aaron
Aaron

We spend our lives teaching companies that data is an important asset. When someone takes customer lists from an employer and starts using that 'data' then they have stolen a corporate asset. That is theft, and last I looked theft is considered to be naughty

reisen55
reisen55

Do not short sell my comprehenion but if you are anti-outsourcing, more power to you sir. My apologies.

Sterling chip Camden
Sterling chip Camden

... it's time to find a new market. If prices are too low, it means there are too many providers already.

reisen55
reisen55

Respect for the individual. Go the extra mile to do a thing right. Spend alot of time making the client happy. Thomas H. Watson, Sr.

Tony Hopkinson
Tony Hopkinson

buying our legislature to reduce the effort they need to expend in competing. The the little guy on the street doesn't need to come up with people's action movements like save american jobs. The whole thread of my argument, is that anti-competive legislation that benefits vested business interests is already in place, so them whining about some more that isn't helpful to them, reeks of hypocrisy. So all of it, or leave it alone.

AlexNagy
AlexNagy

Linux: Microsoft is ever prevalent. Vendor lock-in clauses, "ease" install, "ease" of use, not associated with "scary" hackers but sensible people. It's all marketing. What Linux needs is a better PR guy. It is technically superior. Ease of use does vary by distribution, but that's not something a typical end user has to worry about. I had a good buddy of mine, very much not a computer geek, install Ubuntu with little problems on his end. It was sickening to an old school linux user like myself to see how easy it was for him. I'm used to spending at least 2 hours configuring and tweaking before I actually load the OS onto the system. Granted, that's what I like and why I use Gentoo. The only thing that Windows has going for it - especially with Vista - is amazing(ly annoying)graphics. Microsoft has a monopoly-like hold on the global desktop computer market because they know how to market their product well, and as I said earlier, it isn't necessarily associated with "scary" hackers.

Tony Hopkinson
Tony Hopkinson

Where are the slighly better, better and much better alternatives. In short what are they comparing what they have to to say I'll go with cheaper... How come Linux hasn't put windows out of business, for instance..... You can hardly say it's that much worse and it's certainly cheaper. There's far more things 'balancing' the market than some potential legislation that will cut the big boys profits.

Sterling chip Camden
Sterling chip Camden

If people are happy enough with lower quality, then the lower cost solution will win. Consumers (at all levels) have to value quality enough to be willing to pay for it. Aside from that equation, anything else that seeks to artificially "balance" the market will only make things worse.

American_IT_GUY
American_IT_GUY

Why would IT consultants give a flip about pretecting their livelihood? Why would companies want developers from a certain country? Good looks? better genes? How about a simple reason, costs? Employers have been exploiting resources since the firt shingle was hung. It is the natural order. Why did offshoring start? Because it was finally technically doable (i.e. Internet) Allow me to exagerate a bit to make my point. How America was structured, trending, and recent evolution in global resource allocation: -American talent was getting more scarce by the day. Companies went looking. On the one side, Joe Public in America has a 33% tax burden, unemployment insurance, medical benefits, high property payment requirements to sustain, fees and taxes at every corner, outrageous tuitions for the kids, company training etc. On the other side, 6 developers live in an apartment and have no responsibilities and call themselves developers in about 20 computer languages. These same folks will work for subsistance at first and are happy to have a shot at the good life. They live in a place with a primitive infrastructure and cost structure. Thia "resource" is a sexy proposition that only a fortune 500 idiot would ignore. ---There is your playing field. The end results are: 1) manifested in websites that barely function for many huge well known companies. 2) the cost structures in BoomTown city, US are going into the red from company after company bailing to the "new I/T world" on the other side of the ocean. My summary: If you like America you better protect your way of life.

Sterling chip Camden
Sterling chip Camden

I'll let others worry about holding markets captive -- I'd rather gain my clients through quality of service provided. I couldn't respect myself if I took any other approach.

Sterling chip Camden
Sterling chip Camden

as the only barrier to entry. Obviously, that perfect world will never actually happen. But I'm in favor of promoting it insofar as it can be.

herlizness
herlizness

I'm just saying that there are providers offshore that can find a market -- if that's a problem for someone then maybe they should study the reasons why, rather than just trying to prevent it with legislation It's not necessarily about "preventing it with legislation" ... we come here to a question of sovereignty and I think you've got this inside out. There's no inherent, natural law right for foreign nationals to enter the US and compete for jobs; that right was given to them through legislation in the first instance, and there are those who believe that legislation was misguided and should be pared back or eliminated altogether. What grates about this issue is the implication that every American who opposes the various work visas is "afraid of competition" or is incapable of competing with the foreign workers. Over the years, I've seen a lot of them ... some talented, some not so talented and I certainly am not fearful of competing with them on skill. But competing with them on labor rate or project cost is another matter entirely. The problem, frankly, is that the foreign worker is essentially a free rider on the system; sure, they pay taxes and some may even make wonderful contributions to their communities ... but in the typical case they have not been contributing for decades and generations to the economic, social, political and legal infrastructure which has incubated and nurtured the companies which now employ them. We end up with a form of labor rate arbitrage, with foreign work visa employees quite understandably willing to work for 500% of what they could earn at home and 10-50% cheaper than the US worker can possibly work for. Schematically, Group A builds the business upon the understanding that in return they get to work for the business; midstream, the rules change, the plan discarded, and Group B comes in to reap the benefits of A's efforts and social contributions. Amazingly, people run around shouting "free trade," "open markets" and expect the displaced American worker to be enamored of these kinds of developments ... and further have the unmitigated gall to be offended when they actually try to DO something about it. Tell you what, let's open the flood gates wide ... NO borders, NO visas, NO licenses ... in short: all barriers to entry into a business, trade, occupation or profession GO out the window ... the sole barrier to entry going forward is your own skill and wits ... AND let's make this the modus operandi across ALL nations of the world. If you can get on board with that, Chip, I for one am game and all for it ... but if you're not (and I hate to put it this way since you're generally a sane, temperate and reasonable voice here) then take your plan and shove it because you don't have a plan for a fully competitive market. Deal?

Sterling chip Camden
Sterling chip Camden

EDIT: I meant this for your other response below. People don't automatically go with cheaper -- they often go with what seems most comfortable or less risky (whether it really is or not). Just because other folks can compete on price doesn't mean they will necessarily take away your market. If it does, then that means you aren't adequately selling your quality.

Tony Hopkinson
Tony Hopkinson

I do. It was you who linked anit-outsourcing with anti competitiveness. At least by putting both bit's in your post. It's the link I challenge...

Sterling chip Camden
Sterling chip Camden

I'm just saying that there are providers offshore that can find a market -- if that's a problem for someone then maybe they should study the reasons why, rather than just trying to prevent it with legislation.