Are Non-Compete Agreements a Form of Corporate Slavery?

My boss recently asked his sales team, which includes me, to sign a non-compete agreement.  I’ve signed them in the past at other companies, and had to respect one when I left, so I’ve had some experience with them in the past and had no problem signing it after I reviewed the terms.  However, some of my co-workers were a little put off and skeptical of it.  One even mentioned to me that it seems like our boss now owns our career, it’s like we’re slaves!

I’m assuming by the way he said it he thought I’d agree with him.  After all, he has had several conversations with me on economics and philosophy and knows I’m always for liberty, so I think my response surprised him a bit.  I said, “I don’t really have an issue with it.  He pays for our office, phone and internet.  He gives us access to a huge database of leads. He pays for our client appointments, and he earned the contracts we use with our carriers, I think it’s fair for him to protect all that.”

We’re in sales and we get paid a base salary. Our industry also has a fairly long sales cycle.  Of course, we try to shorten it as much as possible, but it’s the natural of the industry.  Sometimes it takes 3 months to get business in the door, other times a few years.  However, we all got paid from day 1.  That means the owner of my company is out of pocket for quite a while due to our base salary.  He hires us with the expectation that we’ll grow the business and eventually earn him some money.  It’s a win-win if we’re able to grow our sales, we all make money.  None of his employees would be able make any sales without the out of pocket capital from our boss.  He sees the base salary as an investment that will eventually have a positive return.

However, he is not guaranteed a return on a new hire.  It could be that he pays a base salary for several months or years and never gets a return on that investment if the salesman cannot sell.  Shouldn’t he be able to protect his capital?  Without a non-compete a disgruntled, or failed salesman could sell his database or trade secrets with a competitor.  Even a successful salesman who was able to build up a big book of business could get lured away by a competitor with an offer of more money up front.  That book never would have been able to grow without the original employer providing the capital.  The new employer wouldn’t be out-of-pocket as much since the salesman now has strong relationships with his clients.  The business would just transfer from the original employer to the new employer.  By having employees sign an agreement that they won’t compete for a year after they voluntarily leave the company doesn’t sound so egregious.

So no, a non-compete agreement is not corporate slavery.  It’s just a way for a business owner to protect his investment and his employee agrees to comply.  I’ll concede that you could imagine an agreement that is essentially slavery, but you can do that with any contract.  No court, private or otherwise, would uphold a contract that says something like, “if you decide to leave the company you may never work again”, or “if you no longer want to abide by the rules of this company you must move to Somalia.”  That’s ridiculous and an unreasonable clause that really makes no sense and would never be considered a valid contract.

4 comments

  1. Of course, I find that non-compete clauses are not slavery in the sense that one is agreeing to them voluntarily and they are limited in time. But I do see them as slavery in the sense that they are limiting your future possibilities by using force against you. How could those be enforced without force? The word “enforce” says it all.

    I was once asked to sign an employment contract with a non-compete clause, and I refused. I kept the job nevertheless. When I quit that job, I didn’t even stay in the same industry, but I am glad I refused to sign that clause. It made me feel very uncomfortable and it was a matter of principle to me.

    My take on this is that everything is negotiable if I am providing value to my employer in exchange for my salary. One doesn’t have to sign whatever a big boss or a big company puts in front of them just because they feel they don’t have enough negotiating power. We have more power than we are aware of. Should one fall on the opposite side (feeling entitled), reality will put them quickly on their place.

    • I’m not against all force and I don’t think most libertarians are either, we’re against force on innocent people. A contract is useless without enforcement. I see nothing wrong with saying “hey you can work here but I spent several years and lots of money building this business so if I’m going to give you access to these resources you have to promise not to go to a competitor and potentially give it away”

      I think it’s great that you chose not to sign the agreement. If you can negotiate that, then that’s great. But it would have been within your employer’s rights to say “sorry, you won’t sign the agreement, we don’t want you to work here.”

      I wasn’t making the claim that you have to sign any document your employer gives you. Everything is negotiable and maybe your employer wanted your labor enough that they decided not to require a noncompete. That doesn’t mean they were wrong or immoral for asking for one or requiring it for new hires that they don’t know if they trust yet.

      • Thanks for your reply and for sharing your thoughts.

        Personally, I am for force to be used only in self-defense. I acknowledge that this form of slavery is not as bad as traditional slavery.

        I don’t think a contract is useless without enforcement. Breaching a contract will damage one’s reputation so that others will be aware that the person in question is not to be trusted. I think that reputation systems (I don’t know if centralized or in the blockchain) will evolve and become more important in the future. These systems provide a non-violent alternative to traditional contract enforcement in court or even in private arbitration, both of which are ultimately based on violence (prison or taking your assets by force). We can already see primitive reputation/voting systems working well for hotels, restaurants, Uber drivers, etc. These systems already work much better in my view than the complaint forms provided by the authorities (the case in Spain). I think that reputation systems will improve so that we can get a comprehensive picture of the other party before we engage in a transaction or interaction.

        In my particular experience, I was aware that my request could be denied and I still took the risk of asking the question because I felt in a position where I could take it. But my employer didn’t know that, which proved to me that the jail of fear didn’t really exist; it was only in my mind.

        • While I do like the idea of reputations as a way to create incentives to abide by contracts and do think it (currently) works very effectively, that doesn’t help you if someone does violate a contract. A violation of a contract is a form of theft, so some amount of violence would be justified to make oneself whole again.

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