While the debate over whether Massachusetts should adopt a law restricting the enforceability of non-compete agreements rages on (well, at least among a group of maybe 100 economists, lawyers and business people), California proudly observes that noncompete agreements are unenforceable in that state (except under very limited circumstances). And, economists argue, that is one reason why the high-tech industry in Silicon Valley is more successful than its counterpart Massachusetts.
Now, come to learn, things were not quite what they seemed. I’m sure that 99% of California companies are in fact impacted by the California law — that is, they cannot impose covenants not to compete on their employees. But a few companies — Google, Apple, Pixar, Adobe, Intuit and Intel — figured out an end-run around this law. Apparently, the Federal Trade Commission tumbled to the fact that each of these companies agreed, with one or more of the others, not to solicit that company’s employees. For example, according to the FTC Apple and Google put each others employees on “Do Not Call” lists.
I will admit that it could have been worse – they could have agreed not to hire each other’s employees under any circumstances, even when employees came to them seeking to change jobs. From what I read they didn’t go this far. But still, no-solicit agreements between companies are borderline illegal at best, and when large companies are involved, the border is receding in the rear-view mirror. And, given job inertia, a “no solicit” probably accomplishes 90% of what a “no hire” would do, anyways.
But the question that comes to my mind is, where were the lawyers overseeing this behavior? I will concede that no-hire/no-solicit agreements are not illegal per se, but in this case the companies were competitors (at least for talent) and major employers. It didn’t take Robert Bork to advise companies like Google and Apple this was not a good idea.
Really, Apple and Google. Really.