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Compete with That?
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Today the BABY is going into an arcane subject --- one which might make your eyes glaze over, but which in fact plays a significant role in the creation of technology companies, and which when well understood, can be either a benefit or a significant drag on the entrepreneur.
I am talking about non-compete clauses.
What is a non-compete clause? It is an agreement that many employees sign at the beginning of their job which essentially says that if you leave the company, you cannot just go to work for a competitor. You are barred from competing against your first employer.
We see this often in technology companies where the value of the intellectual property is significant …..and also where there are what I call “star inventors” – the guys whose ideas, brains, patents and technology form the basis for the entire company.
But that is only one area. You can see it in something simple and mundane…for example, you go to work for a bagel company...you learn to make great bagels and a competing bialy company wants to hire you away.
Interesting situation…in California, you can probably go down the road and start boiling and baking bialys…..in Massachusetts, you would be blocked…..in Connecticut, you can do your bagel thing and in Florida, no way. Ironically, it is geography that seems to define non-competes….specifically the courts in California are reluctant to enforce them.
Part of what has made Silicon Valley the center of innovation in America is not only the culture, but also the mobility…..geniuses can go from company to company selling their brains to the highest bidder.
But the employer or purchaser does have some recourse…you can’t steal trade secrets. You can take your brains across the street, but if you take any code, secrets, products, or proprietary material owned by the company, they have a strong case to forbid you from doing so.
However, to complicate the matter, let me give you a different example. You sell your company to Joe’s Bialys – a giant concern. Joe gives you 9 million dollars and says you cannot go into the bagel or bialy business for 24 months and not within a 24 mile radius. That is enforceable…you received significant compensation and Joe is entitled to make sure you don’t just go down the street and open a competing store.
It is a thorny area – for more on this topic, listen to our legal eagle expert, Amy Wintersheimer to parse out a few more of the nuances.
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Mexican Sandwich?
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It seems that Panera bread has a clause in its lease at the mall that prohibits the white city shopping center in Shrewsbury, Massachusetts from renting to another sandwich shop. And, since Gdoba Mexican Grill wants to locate in the same mall, Panera says that a burrito is a sandwich.
The judge has ruled in the case – and in his words, the difference comes down to two slices of bread vs. A tortilla.
And the winner is Gdoba….
Judge Locke, citing Webster’s Dictionary, wrote in his decision - a sandwich is not commonly understood to include burritos, tacos or quesadillas. Panera argued that a tortilla is bread and that when filled with rice and beans, it becomes a sandwich. Voila!
You gotta love lawyers. Qdoba brought in experts from the USDA as well as famous culinary chefs. Panera brought in language experts to parse the definition of sandwich, going back to English history and the famous earl of sandwich who started this whole stupid argument.
Observers in the courtroom had a sense of how the ruling might go, when they spotted the judge during his lunch break wolfing down two fish tacos in his chambers…..
In the court of public opinion, how would you decide?
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Berried by the boss
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We have a slowing economy….we have a corporate culture of greed and corruption…..we have a diminishing middle class and a rise in the gap between rich and poor ----
We are a country in search of a new entrepreneurial spirit --- a spirit enhanced and enabled by the rise of technology……we are a wired world and we are a flat world and we have to compete in a global environment….
No longer will there be the cushy pensions of general motors negotiated by short sighted union leaders waiting to comfort the soft landing when you retire with a gold watch…..as a matter of fact, we will be lucky if there is even a general motors in 10 years……Toyota has already eaten their lunch and is now preparing to eat their dinner as well….
And so as the American worker seeks to improve his personal lot in life – along comes a new roadblock – this one erected by none other than the pencil neck legal eagles of the litigation species….
Here we go BB ---
You know that the Blackberry patent infringement case was recently settled for 612 million dollars, and don’t get me started on patent trolls --- but more to the point – it is the Blackberry and the PDA and the cell phone and the laptop that have raised the efficiency of American workers…and that has contributed to the increase in corporate profits which are currently being enjoyed by the Fortune 500…
And it is true that there have been many articles discussing the fact that many workers are wired up – available 24 -7 …..these devices allow the worker to be more effective and more efficient…
But litigation looms --- “It is naïve to think that giving a Blackberry or PDA or cell phone to a non-exempt employee won’t lend itself to them saying they are doing work after hours” – said Jeremy Roth, an employment attorney in San Diego with the office of little Mendelson…..
In other words, the lawyers want to make sure that the non-exempt worker --- who has access to these devices – gets paid for overtime…….in theory – if they are on call 24 – 7…then they should be paid for 24 hours per day….
Gimmmmmmmme a break……
First, let me explain the issue carefully….a non exempt worker is an hourly worker….an exempt employee is a salaried worker who does not qualify for overtime….he is not paid hourly….
But consider the argument…..if you are an hourly worker and you want to increase your output….efficiency, effectiveness – in other words, if you want to do a good job for your employer --- then you shoould have access to the exact tools that will make you a better employee and in theory help you rise through the ranks to be come an exempt employee…..not an hourly wage worker….
In other words, in an effort to better yourself, you expose your employer to a lawsuit – and in fact there is now a case where a work claims that the Blackberry made me do it….24-7….
I teach entrepreneurs and I invest in young companies – and the single most important quality I look for – the absolute key component in the founder is both the desire and the ability to walk through walls…..
Entrepreneurs do not count hours……
Listen to Roth --- “Doing work and responding to work questions off hours – those are work hours no different than taking a call at home or stopping into the office at night….”
So --now managers are being encouraged to tell their hourly workers to turn off their Blackberrys and phones and PDA as well turn off their brains when they leave work.
How the fuck can America compete in the global economy when we fear litigation over being crushed to death by the Chinese, the Japanese, the Germans, the Indians, the Koreans….
I assure you – there is no lawyer in any of those countries filing a class action lawsuit against employers who are providing equipment designed to improve output and efficiency….
Have we finally become a country run by the lawyers…….which as a single group have contributed dubiously to the success of this country. Washington did not have a lawyer when he was crossing the Delaware advising him that
a. The rowers get a 10 minute break every hour
b. If he pees or throws a sandwich into the water, he may be liable to the epa for pollution
c. If the boat is not us coast guard approved, he could be liable for people drowning
d. If he does not get across by 5 pm, he owes the boys overtime……
What has happened to this country…..
The solution advanced by the legal eagles is a simple one --- tell the worker to never check his email or phone or even think about work after he punches out on the time clock…
as the lawyer notes – there is nothing wrong with someone working at home at night --- but if they are, you need to pay them….
So, if you build a culture that will walk through walls to win, where people are focused on the goal, where yes, there is the 24-7 mentality……then you are likely to be the recipient of the Crackberry addiction lawsuit….
I am not a slave driver….I get it…..but the dark, rotten part of this legal sham is the it is the hourly workers who want the technology to advance….who want to make their mark….who want to go from non-exempt to exempt….
The legal argument that 24-7 is an abuse of an employee is a ruse……yes, there may be cases where it needs to be curbed.…..and no one is really on call 24-7…….but the truth is – I see it as another way for the legal tort litigation community – under the guise of class action protection of the little guy – are really simply looking for another way to sap the creative, vibrant, entrepreneurial desire to get ahead ----and in the process extract millions in settlements and fees from the American economy….. Which leads to Baby billionaire rule # 129 --
Life is 24-7 and the entrepreneurial mind set is never rewarded on an hourly basis ---
I’m Neil Senturia --- and I come from the Vince Lombardi school of creating value……
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