| Hi folks, it's Brad. On Friday, President Joe Biden signed an executive order designed to promote competition and limit the market power of large companies like the tech giants. Among a veritable bouquet of 72 initiatives, the order asked federal agencies to establish clearer rules on online data collection, restore net neutrality protections and force makers of electronic devices to let customers have them repaired at independent repair shops. One provision even promises to disarm the tech companies of one of their most potent weapons: the non-compete clause. Companies in a variety of industries require workers to sign non-competes, of course, which restrict their flexibility to defect to rival firms for a certain period of time. But in tech, such restrictive covenants have featured in some of the industry's most sensational battles. International Business Machines Corp. recently used it to sue its longtime chief diversity executive after she was poached by Microsoft Corp. Microsoft wielded it against an employee who defected to Salesforce.com Inc. And Google successfully waged legal war against well-known autonomous vehicle engineer Anthony Levandowski for violating the non-compete in his contract, as well as filching trade secrets, when he defected to Uber Technologies Inc. Amazon.com Inc. has been particularly aggressive in its enforcement of non-competes, suing a number of departing executives throughout its nearly three-decade history. My colleague Matt Day recently reported that new Chief Executive Officer Andy Jassy was personally behind lawsuits against Amazon Web Services execs who left for rivals like Google. ("That's Andy feeling a betrayal," one Amazon veteran told Matt.) Non-competes have played a key role in Silicon Valley lore. California rules make it difficult to prevent employees jumping ship. As a result, it's easier for workers to take insider know-how and best practices to other firms, or create new startups. The resulting innovation, some have argued, is the key difference that made the Bay Area into the world's tech Mecca instead of Massachusetts around the 1980s. But other states like New York and Washington haven't passed such broad laws that make it difficult to enforce non-competes (though Washington did pass a more limited law last year that only covers employees making less than $100,000 per year). That's left employees in the middle of a hyper-competitive tech giant battle for every inch of advantage. Corporations generally favor non-competes to prevent employees from taking company secrets to a competitor or starting their own rival company. But right now, there's not much public support or even private lobbying to preserve them. At a time of almost puritanical concern over the sanctity of free-market competition, such covenants have a serious branding problem. The very name, non-compete, makes them unpalatable. "The politics are just bad to lobby in favor of non-competes and to my knowledge there's no major coordinated effort right now to preserve them," says John Lettieri, CEO of the Economic Innovation Group, a bipartisan public policy organization co-founded by renowned entrepreneur Sean Parker. Lettieri believes without non-competes, tech companies "are going to have to work much harder to keep their workers." Biden actually campaigned on killing the non-compete during the last election. "You know, 40% of all the workers in the United States will during their careers have to sign a non-compete clause. Sandwich makers, not a joke," he said in a 2018 campaign speech. But even with the executive order, he hasn't quite fulfilled his promise. Federal courts tend to look dubiously at federal agencies exerting additional powers granted by administrative fiat. And a new presidential administration could always issue an executive order reversing last week's directives. So Biden's order is merely the beginning of the end of the non-compete. A bipartisan group of senators and representatives is pushing for a more conclusive denouement, in the form of a new law that limits non-competes across income levels in all but a few situations, such as founders who sell their startups to a large company. It's called the Workforce Mobility Act, and has been kicking around Capitol Hill for a few years. Now its time may have come. —Brad Stone If you read one thingBillionaire Richard Branson successfully completed a test flight to space on Sunday, along with five employees of his company, Virgin Galactic. Branson started the day posing for a photo alongside Elon Musk, saying at a press conference, "It was so great to find Elon in my kitchen at 3 o'clock" in the morning. The flight sets the stage for the space voyage of Jeff Bezos, who is set to blast off on July 20. In a tweet, Bezos's Blue Origin dismissed Branson's spacecraft as a "high altitude airplane." And here's what you need to know in global technology newsWhat's going on with Binance, the largest cryptocurrency exchange on the planet is facing scrutiny from governments in the U.K., the U.S. and beyond. Instacart is raiding Facebook for talent, the Information reports, hiring away at least 55 people from the social giant. Bitcoin's current slow-moving crash could take the price of the cryptocurrency as low as $10,000, said Guggenheim Investments chairman. Amazon wants to monitor your sleep. Bloomberg's Sarah Frier reviews An Ugly Truth, a new Facebook "takedown" from two New York Times reporters. | 
Post a Comment