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The Jewish Ethicist: Non-Compete Clause

The Jewish Ethicist: Non-Compete Clause

I want to find a new job but the only job I'm qualified for is with a competitor.


Q. I sought a job in a line of work where I had little experience. The boss agreed to teach me on the job, but only on the condition that I wouldn't compete with him for a year after I leave. Now I want to find a new job, but the only job I'm qualified for is with a competitor.

A. Non-compete agreements from the point of view of Jewish law are discussed at length in Rabbi Aaron Levine's book, Moral Issues of the Marketplace in Jewish Law. Rabbi Levine discusses the issue from a number of perspectives.

The first approach is that of contract law. Jewish law, much like English common law, generally does not favor "specific enforcement" of contracts; breach would normally be sanctioned through an award. Rabbi Levine suggests that we frame the agreement as one that provided such a fine for breaching the non-compete agreement, and see if the level of the fine is a fair recompense for whatever special training was obtained by the worker. As Rabbi Levine writes, "the trade secret and the training provided are both subject to a fair market evaluation." So one condition for the validity of the agreement would be that the sacrifice the worker is called upon to make is commensurate with the benefit he obtains.

Another approach is that of "informed consent" or "meeting of the minds." An agreement that does not meet this standard is known in Jewish law as asmakhta. Does the employee truly understand the agreement and consent to it? Or does he view it as some kind of formality? Rabbi Levine suggests that there may be significant obstacles for the worker in particular to truly understand the value of the right he is signing away and even the value of the benefit he is entrusted with.

There are also considerations that militate in favor of fulfilling the agreement.

In general Jewish law demands the fulfillment of agreements even if they cannot be legal enforced. The Talmud tells us that a person who doesn't fulfill is word is deemed "untrustworthy". (1) So in general we would expect a person to fulfill the agreement even if the above considerations make it unenforceable in court. However, Rabbi Levine points out that while a person may not give a promise in bad faith, without any intention of fulfilling it, a person may retract a promise if there are significant unforeseen consequences.

Furthermore, Jewish law forbids excessive interference with another's livelihood even if there is no contract or promise. While in general Jewish law upholds the right to fair competition, certain types of competition are considered unfair. In particular, it is improper for one competitor to take advantage of investments made by another. In your case, it would be unethical for you to take advantage of customer lists or customer goodwill that were substantially created by your current employer.

If you think the original agreement was fundamentally fair and you are able to find a good job while adhering to it, then you should honor your word. But if you think the agreement was originally drafted in a way that imposed an incommensurate burden on you, or you originally felt it was fair but changing circumstances have made it impossible for you to make a living while adhering to it, then there is no ethical bar to your engaging in fair competition with your former boss. It goes without saying that all relevant secular laws should be adhered to.

SOURCES: (1) Babylonian Talmud Bava Metzia 49a

December 12, 2009

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Visitor Comments: 4

(4) elf, August 20, 2010 3:43 AM

more questions and comments... pt3

2cont) Even someone who can determine if the ordering or structure 'looks right', based on their training and experience with a competing system, is of immense value. Any insider knowledge, when trying to replicate, duplicate, confuse, absorb, or analyse a competitor's system, will usually significantly reduce _all_ costs of the project. 3) '...The sacrifice the worker is called upon to make is commensurate with the benefit he obtains.' There is no parity in this statement for the employer, who is (potentially) sacrificing itself and its dependents on the basis of a signature, for the benefit of the knowledge and efforts of the individual signing, and the trust that the individual will work on its behalf. 4) I find the "informed consent" argument somewhat peculiar. In what way can there be a distinction between the signing and witnessing of an agreement (with copies held by all parties, etc) and the acceptance of its terms? Surely both parties resolved any disputes as to the terms beforehand, else why would they sign? (Duress, of course, excepted.) 'Ignorance of the law exempts one from following the law' seems, well, dangerous... ex. My Aramaic isn't so good, so, since I didn't read it all well beforehand and understand it, I'm not bound by its terms. (Get out of here!) 5) Without being able to see the future, neither employer nor employee can know the value of entrusting the benefit to the employee. I strongly disagree with the concept of a 'right' being 'signed away'. To me, there seems to be a dangerous sense of entitlement. An employer offers a livelihood to an employee. The employer entrusts itself as an entity to the goodwill of that employee. The only protection against unintentionally leaked information is through the employee being _temporarily_ excluded from future employment in the same specialisation. cont

(3) elf, August 20, 2010 2:26 AM

more questions and comments... pt2

What is the likelihood that you will be hired as someone who knowingly breaks contracts? What is the likelihood that you will damage your reputation in possibly permanent ways? --- Rabbi Meir: With all possible respect, I strongly disagree with several aspects of the analysis presented here. My field is mathematical computer science, and I have worked primarily in defence, anti-spam AI, and large-scale secure business logic machines. I am within several active NDAs and two active NCAs (of varying scope) at this time. 1) A trade secret cannot be subjected to a fair market evaluation, by any definition of which I am aware. How can the future total value of a company/division be calculated? The development costs of a trade secret may be calculated; the current revenue from it may be calculated; its future development potential cannot be, nor can the damages resulting from its dissemination be assessed. What happens to the market as a whole if a correlation discovered by one shop is stolen by another? What is the cost to your local ISP if a bigname blacklist's honeypot locations leak out? Could Coca-Cola recover if a competitor had its recipe? Only secrets being sold as assets by a defunct company can be viewed in terms of a fair market; all others explicitly break the independence, and should be valued by their future development/revenue potential and by the damage the company and all those depending on the secret remaining secure sustain. This does not seem to be calculable. 2) Training _by a specific competitor_ cannot be subjected to a fair market evaluation. To use a somewhat dodgy analogy, Vanunu, who had no documentation, demonstrated his claims simply by drawing objects and structures he was trained with, as well as the procedures used... Without knowing what is being developed by the competitor, how could the value of knowledge of the systems be assessed? ...cont

(2) elf, August 20, 2010 12:42 AM

more questions and comments... pt1

How long have you been working there? The current employer gave you knowledge, understanding, training, and a livelihood, while all you offer him (initially) is risk and a guaranteed drain of resources. Training someone, especially someone clearly unqualified, is time-consuming, exhausting, risky for the business' reputation (if they screw up badly) and significantly reduces the efficiency of all those with whom you work closely (which is a significant financial drain). Have you repaid your employer for the costs (both financial and goodwill) that you have incurred on him, and which he accepted on the basis of your signature alone? Why do you want to find a new job? Are you being exploited, abused, in a hostile/dangerous environment, or the like? Are you not able to physically work there (due to transportation, distance, disability, etc)? Are you not making enough to support yourself and your family? Are you simply looking for greener pastures? Are you bored? Or something else entirely? In almost all of the above cases, meeting with your boss or someone up the chain of command to discuss what's bothering you (provided you think carefully beforehand, present your issues respectfully, listen, and are willing to compromise) could be helpful. If you've been a winning risk, a good employee, and work well with your group, many employers will try, within reason, to reach a good solution to keep you there. There is another important utilitarian/legal concern. You stated that you were inexperienced/untrained before your current job. If you decide to try to get a job elsewhere, on what basis will anyone hire you? If you do not put the current position on your resume, you're still untrained and inexperienced (and falsification of a resume is usually grounds for immediate dismissal). If you do put it on, they will call for a reference, and you will be clearly, knowingly, provably violating the terms of the agreement.

(1) SusanE, January 5, 2010 5:43 PM

How Can This Agreement Be Questionable.

The worker is only qualified for one job in the world ???Because of the kindness of his boss who agreed to on the job training he now has knowledge. The boss was very generous in asking for only one year of abstaining. If the worker wants to quit that job then he should work at McDonalds or Wal-Mart for a year before going into competition with his former boss. Most people are qualified to work at one of those places. House cleaning, lawn mowing, computer research, selling Avon, waiting tables, the list is endless for jobs to pay the bills for one year. Or he could go to night school to learn a trade so he can quit this job, and work at that trade for a year.. - - - - - - - - - - - He stayed to learn what he needed to learn. Now he wants to take that knowledge and compete with his generous employer immediately. That is simply unethical.

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