Curious, I put myself in Shawn Cable's shoes. I burst briefly into song ("There she is, Miss South Dakota...."), then considered my career situation:
If I want to work in this industry, I have to commit myself to one company. KELO won't give me a contract unless I promise not to work for a competitor for at least a year after I quit working at KELO. They can choose not to renew my contract and have no obligations to me at all, but they can require me to remain obligated to them for a full year after they stop writing me checks. If a new, exciting job opportunity opens up at another media outlet, I'm out of luck. I could ask another employer to wait a whole year for me, but what good businessman can wait that long? I love my community, and I want to stay here and work, but if something happens and I leave my current employer, I either have to give up a full year of working in the profession I love and am good at, or I have to move my family to an entirely separate media market. Wow -- and I thought we were a right-to-work state.(I then saw a cloud exhibiting slight rotation and raced after it in my weather Jeep, Dolores.)
Right-to-work state? Seems like some discussion on that topic has arisen lately. MDL's Jon Hunter opined favorably about South Dakota's right-to-work law and lack of unionization as positive factors for economic growth. (Goll darn it! A search of the Leader archives brings up eleven Hunter editorials, but not the July 8 essay on the joys of powerless labor!) Sioux Falls electrician and union rep Jabez Daniel Bruns offers a strong rebuttal in a July 26 "My Voice" column ["Right-to-Work Laws Attract Unskilled Labor," that Sioux Falls paper that makes me look at ads for sex toys just to get the news, 2007.07.26].
Take your pick on where you stand on unions. The question here is, if we truly value the right of employees to work without undue interference in their participation in the free market, then how can we countenance non-compete clauses? One of the most basic formulations of the free market is, "You pay me money, I do what you say." The logical corollary I follow is, "You stop paying me, you stop bossing me." I am beholden to my employer only so long as he keeps writing checks.
A non-compete clause strikes me as an undue extension of an employer's authority. The employer gets a great advantage in the marketplace, but the workers and the general public suffer. The employer gets exclusive rights to the employee's skills and productivity during the term of the contract, which is fine. But then when the contract is over, the employer gets to deny the employee the opportunity to participate in the marketplace for his own betterment. The employer also gets to deny consumers the opportunity to purchase that employee's skills and productivity for the term of the non-compete clause. Self-interest in the free market system is supposed to serve the general welfare. With non-compete clauses, only the employer benefits; all other participants in the market lose. That's a violation of free-market principles.
South Dakota's labor laws exist ostensibly to grease the wheels of commerce while protecting the rights of all involved. SDCL 60-8-3 is the right-to-work statute relating to labor union membership. It doesn't apply to non-compete clauses; SDCL 53-9-11 does:
Employment contract--Covenants not to compete. An employee may agree with an employer at the time of employment or at any time during his employment not to engage directly or indirectly in the same business or profession as that of his employer for any period not exceeding two years from the date of termination of the agreement and not to solicit existing customers of the employer within a specified county, first or second class municipality, or other specified area for any period not exceeding two years from the date of termination of the agreement, if the employer continues to carry on a like business therein.
Ugh -- two years?! It's worse than I thought. Two years out of the workforce can kill one's résumé. How are professionals supposed to stay in their communities and maximize their career opportunities?
This non-lawyer would humbly suggest that SDCL 53-9-11 conflicts with the principles of two other statutes:
- SDCL 60-2-4: "Duties of employee for reward. One who agrees to serve another for a good consideration must perform the service with ordinary care and diligence so long as he is thus employed." Hmm... "so long as he is thus employed." Can a contract provision apply after employment ends?
- SDCL 60-8-4: " Any agreement relating to employment, whether in writing or oral, which by its stated terms, or by implication, interpretation, or effect thereof, directly or indirectly denies, abridges, interferes with, or in any manner curtails the free exercise of the right to work by any citizen of the state of South Dakota, is a Class 2 misdemeanor."
SDCL 53-9-11, authorizing non-compete clauses, serves companies trying to take advantage of skilled labor. Sure, you can argue that no employer forces an employee to sign a contract. But imagine you're the next Shawn Cable. You want to work in boradcasting in the Sioux Falls market. You'd also like to keep your options open. But every employer says, "You can only work for us if you promise not to work for anyone else in the industry for two years after you quit or we fire you." Some choice.
The free market is supposed to be free for all participants, capital and labor, buyers and sellers. When it's not, we have something else (oligarchy? plutocracy? communism?).
"Non-compete clause" -- in its very name, such a contract obligation violates the very principle of competition that supposedly makes the free market the best economic system. Prospective employees aren't in any position to fight these clauses -- they need the job, and the law gives their employers the power. We need to repeal SDCL 53-9-11 and put our money and our contracts where our mouths are on being a real "right-to-work" state.
It sucks, but it's the nature of the beast... Now that's not to say that Shawn COULD NOT go to work for MySiouxFalls.com. First, it's an internet medium... which is different than being on television (non-competes usually prohibit one from working in the same medium). If he wanted to go to work for KJAM, for example, he could do that without violating his non-comptete... unless KELO has some draconian non-com in place!
ReplyDeleteAs far as I know... I don't have a non-com. And since I came aboard, labor laws say I can't be forced to sign one without some mutual compensation (more pay, benefits, etc.)
But don't worry, I don't plan on going anywhere! :D
Non-competes are commonplace in broadcasting.
ReplyDeleteThe fear from stations like KELO is this. They invest years into someone like Shawn Cable, and don't want to lose him as a free agent to KSFY (or whoever).
From KELO's perspective, I understand they don't want their competitor to capitalize on a long tenured employee's departure. I'm sure that would sting, if you were in management at KELO.
But Cory, as you rightly point out, that's not free market economics.
KELO would surely argue they made Cable who he is. He's a product of years of KELO's ratings success.
But, why shouldn't Cable be allowed to take his talents elsewhere?
Happens in other industries all the time.
You can't tell me tech companies don't pay top dollar to steal talent from the competition.
Sports franchises do it all the time.
I've never understood why broadcasters take such offense that their talent might want to leave for a competitor.
You're right, Steve -- if I were KELO management, I wouldn't want to see personnel who've trained under me put their training and experience to work for a competitor. But to what extent will we permit employers to lay claim to their employees' knowledge as property? An employee is still a human, not just another piece of purchasable capital. Non-compete clauses seriously overstretch the realm of the owners' control over labor. Employers may want employees who behave like machines, but until they can buy robots, it won't happen.
ReplyDeleteI'm o.k. with the idea of these clauses in general. In most other industries I think it would be easier to find a new job that wasn't in competition with the previous employer. And the importance of the clause would be clearer. An insurance agent could all too easily take all of his contacts and clients with him and start his own agency and seriously hurt the company that gave him those clients. I don't think it would need to be 2 years. That is just excessive. But a margin between employment to ensure a broadcasting employee isn't going to pull away advertisers that KELO's marketing people worked to bring in is entirely fair. I think it should be knocked down to 6-8 months though. Short enough that somebody like Shawn could pull through staying where he was without a large gap in his resume, but long enough to ensure the valued resources his previous employer gave would have expired as far as unfair advantage goes.
ReplyDeleteMelita was asked to sign a non-compete at one of her jobs here in Sioux Falls. She brought it home for me to look over, and I refused to let her sign it. Essentially it told her that she couldn't practice massage within 150 miles of the existing establishment for 2 years... no matter the reason for her leaving that job. (ie they could have fired her and left her without work or pay for 2 years, unless she was willing to move to Webster, Winner, or Omaha) They didn't even offer her any incentive to sign it, so I just told her to shred the document and make them force the issue on her (they didn't).
ReplyDeleteThe whole idea behind it was that there was a co-worker of hers who was taking clients initially established at their place of business and then serving them out of his home (or the client's home) to cut the business out of their percentage of the massage fee... even though it was likely the business's advertising dollars that created the client-therapist relationship in the first place. So I can see their side of it, too. It's pretty sneaky to build up a practice using someone's (costly) marketing literature, trademarks, etc, and then pull all those clients away once you feel you have critical mass.
But as far as I know, you have to voluntarily sign non-compete agreements... so they don't impose any true loss of liberty on career-seekers. Shawn could have turned the job down if he saw that a non-compete agreement was required. If he has to go to Webster to forecast live doppler weather for 2 years, it's his own signature's fault.
Well, David, what if all of the employers of massage therapists in the Sioux Falls region decide it's in their best interest to impose non-compete clauses on their employees? Whither Melita's liberty then? What if there are only two really big employers, against whom independent operators simply cannot compete?
ReplyDeleteThe loss of liberty remains: workers faced with non-compete clauses from controlling employers cannot participate as freely in the free market as their employers can. Non-compete clauses give employers an advantage where employees have none.
Actually, Webster's only 40 miles from Aberdeen, so Shawn would be S.O.L up there (KELO has a satellite station in Aberdeen!)
ReplyDeleteAnd my lovely wife gets me thinking about Steve's comment -- good point about sports stars, Steve! Why not grant all workers, including Sioux Falls's humble weathercasters and massage therapists, the same right to work accorded our hulking jock stars?
ReplyDeleteIt sounds like non-compete clauses inhibit innovation and increased overall productivity. Suppose Shawn Cable has the best weathercasting talents in Sioux Falls. Suppose he has some ideas on amping up the Doppler radar to make 14-day forecasts. Suppose KELO for some reason declines to permit Cable to engage in this innovation, fearing the risk might upset their stable business model. Cable might love to put his innovation into practice at another media outlet, and another media outlet is willing to shell out the cash to bankroll the innovation. KELO is able to impose its resistance to innovation on the entire local marketplace, and everyone loses out. That's not the result the free market is supposed to produce.
"Non-compete clauses give employers an advantage where employees have none."
ReplyDeleteSo don't you have any sympathy for employers whose employees are pimping the company brand name to siphon off clients (or customers or weather-forecasting prestige) for their own personal gain?
Cory, If all the massage therapist employers demanded all of their employees sign non-compete clauses, then it would just take a single "innovator" to not demand any clause and either pay its employees a little less than the competition so it can better undercut its competitors prices, or pay the same and gain an advantage in hiring the best hands in the land. The market would correct itself so long as real competition existed. My earlier argument against it being so long was strictly focused on the impact in an individual case. The market will balance out compensation on its own, but the market also doesn't care if it loses talent to other communities or other states. It also assumes business recognizes what is in its own interest and will act on it, when they often do not.
ReplyDeleteI have sympathy for the employers in that case, David, but it's a risk one takes in business. Non-compete clauses are an overreaction and an overextension of employers' property rights over the very persons of their employees. The contract offered Melita would have essentially made her skills and career hopes the property of her employer; isn't that why you told her not to sign it?
ReplyDeleteLet's compare harms:
--Under the status quo, employees find their participation in the free market severely restricted. Their job moves and even their choice of where to live are restricted by employers protecting their capital advantage. Innovation is stifled. Employees are essentially deemed property of their employers.
--Post repeal of SDCL 53-9-11, employers face a greater risk of competition from employees whom they train. Employees enjoy greater freedom to leave their employers and seek better employment situations.
Non-compete clauses, if abused, benefits employers, people who already have lots of power. A system without non-compete clauses, if abused, benefits employees and consumers, people who have less power. Every law (or lack of one) can be taken advantage of by various unscrupulous parties. When in doubt, we take the route that allows the least abuse of power and greatest amount of freedom (and, for free-market theologists like you and Phaedrus, competition and innovation).
Oh, oops, sorry, Phaedrus. I forgot: we don't have to think about morality or justice: the Great Spirit of the Free Market will answer all of our prayers, just like it does with health care (and of course, only the chosen people of the USA can recognize that cosmic truth, unlike the vast majority of the industrialized world which has given in to the sin and corruption of socialized medicine... alas, Babylon!). Therefore, the Free Market tells us that non-compete clauses are good for competition. Let us all put our faith in oxymorons. All hail the Free Market... now shut up and do what the rich guys tell you.
ReplyDeleteOh, and "the market also doesn't care if it loses talent to other communities or other states"? Well, I do, and the market should. If it won't, society has every right to kick the market into shape with some regulation.
On that last line, Phaedrus, about communities losing talent, see Mrs. Madville Times's succinct reply from Walter Brueggemann (in the header):
ReplyDelete"There are no meanings without roots."
Your free market appears not to care about roots; your free market is thus sociopathic. I hope there's a version of the free market someone can enunicate that actually respects traditional ideals like community and family.
"The contract offered Melita would have essentially made her skills and career hopes the property of her employer; isn't that why you told her not to sign it?"
ReplyDeleteNon-compete agreements, like all business arrangements, are negotiations. I insisted she not sign the contract because to do so would have been a foolish decision - they offered her nothing in return for a legal pledge of loyalty. Had she been offered, say, an extra million dollars a year and free health insurance... we would have a copy of that agreement signed and framed in our bedroom.
Usually (I think) along with non-compete agreements there is some kind of severance package, to offset the fact you can't work for a certain amount of time. I guess I don't know about broadcast journalists, but that's how it usually goes in the engineering/programming world. If you get laid off by Microsoft, you can't rush over to Apple or Google with all their trade secrets... a 1 or 2 year severance package keeps you at a stable income level, and after 2 years they figure the trade secrets you knew about are already outdated.
Anyway, I don't see that there is anything inherently wrong with non-compete agreements so long as they are negotiated in a rational manner. Shawn Cable's pledge of loyalty to KELO isn't some kind of priceless inalienable right... he probably compared his options, and maybe KDLT didn't have non-compete clauses, but they also don't have the audience/prestige/salary that KELO offered.
Both the employer and the employee can abuse the other. Maybe from your life experience you've dealt with more power-abusing bosses than conniving selfish employees. But both are out there (a fact of original sin), and there isn't anything wrong with one side negotiating to protect themselves from potential abuse.
Cory, I care about a community losing talent too, that's why I noted my concern that the market doesn't care. I also said the market will even things out on its own over time I recognized by implication that competition in a market can only function well when the participants understand all of the dynamics involved. I have known people to be blackballed by former bosses, which serves nothing but vindictiveness. It was certainly not done in the interest of the company. so IF they understand that a non-compete clause can be used just like any compensation and that extending that contract over insane lengths of time doesn't serve anything but a boss's ability to hurt someone out of their pettiness, THEN the market will balance everything out in regard to these contracts.
ReplyDeleteWe both know this isn't reality.
Thus government policy should be to limit these clauses length and scope so they can only be used to protect the employer, and not as a weapon. In my mind 2 years is not quite enough regulation, and society should care about that and shorten that length of time, but I'm glad that society previously cared enough to write the it in the first place. It must have cared about "morality and justice" enough to give the entrepreneur some protection.
Because I believe in free market principles does not mean I worship the chaotic immorality of Libertarianism. Our imperfection, selfishness, and in some people even vicious evil, means absolute freedom is not a good thing.
So don't mistake me for one of THOSE people :)
Regarding -your free market is thus sociopathic- "Neither post-communist Russia nor China nor any other such recovering communist state has adopted a truly Western or American economic model."
ReplyDeleteHow truly tragic for them that they never got there. Are you seriously happy about where Russia has gone since the advent of Putin?
If you want to talk about health care with some serious problems. Russia and China are good places to start. The WHO places Russia's healthy life expectancy below 60 years. Considering we are by a long shot the fattest country in the world we do well to be at about 70 years. Japan the highest at 75 years and while they have universal coverage, it is not a single-payer system, Their Plan is closer to the mandated insurance plan that Mit Romney backed in Massechusetts.
...how did I wander back to the subject of health care? Sorry!