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The “Job Creators”

Two from CBS about the CEO/MBA-class preventing competition in the job market:

Feds sue eBay, accuse ex-CEO Whitman of enforcing noncompetitive agreement

WASHINGTON: The Justice Department alleged Friday that Meg Whitman, the former CEO of eBay (EBAY), was intimately involved in making an anticompetitive agreement that prohibited eBay and Intuit (INTU) from hiring each other’s employees.

Twinkies maker Hostess going out of business

IRVING, Texas: The maker of the iconic U.S. snack Twinkies said Friday it is going out of business and laying off all of its 18,500 workers after a national strike crippled its operations.

EBay and Intuit sought to cap salaries for tech workers by agreeing not to hire from each other, i.e. not to compete for labor. When you are in the field you normally sign a contract that limits your ability to move to a competitor of your employer, but EBay and Intuit aren’t competitors for anything except labor.

In the case of Hostess, the hedge fund that owns the operation had already extracted concessions in a 2004 Chapter 11 bankruptcy, and was demanding more concessions from workers. Management hadn’t developed new products to boost its falling sales, they were simply milking the operation for every dime it could produce. They were always going to shut down, or they would have developed something to appeal to the current generation of consumers.

They had no intention of negotiating with the workers, they were simply seeing how low they could go with wages and benefits before shutting the operation down.

2 comments

1 Steve Bates { 11.18.12 at 11:11 am }

The strangest non-compete clause I ever heard of was back during my contracting days, and it was aimed, not at me, but at one of my best friends. He was applying for a job selling futons. Yes, futons.

The business owner wanted him to sign a fairly long-term non-compete clause covering just about every other place in the greater Houston area that sold futons… about eight org’s, if I remember right.

My friend objected, on two grounds:

One, he already had independent experience as a futon salesman, acquired on other jobs unrelated to the one he was applying for. He knew the market; he knew the products… from his own independent experience.

Two, the business owner was effectively trying to prevent his working in the field (other than for her) over a large geographical area and for a period of years.

The owner was unrepentant. My friend really needed the job, and signed the agreement. He left for another job… not selling futons… as soon as he reasonably could.

Eventually he went to law school, and discovered that such a clause would probably not stand up in court, as it is “unconscionable” to foreclose someone’s other livelihood options for so long. But there are some serious a$$holes out there among employers.

Me? I’ve signed some, in cases where I was confident I would not be affected; I’ve refused others… and the contract as well… when I thought they were too draconian. Win some, lose some… I don’t doubt they found someone to take the contracts.

2 Bryan { 11.18.12 at 4:29 pm }

Steve, the non-compete was between businesses, not the business and an employee, and that is an anti-trust violation on its face.

Actually a non-disclosure is a safer clause for businesses than a non-compete, and more apt to stand up in court. I did that as a matter of normal business, i.e. I didn’t discuss my clients with other people. That is a holdover from my military and law enforcement days.

Non-competes don’t really work very well because the best people usually won’t agree to them, and those who do agree, you really want working for the competition.