07-07-2024, 09:13 AM
This post was last modified 07-07-2024, 09:17 AM by FlyingClayDisk.
One of the areas I see these clauses used quite frequently is in government work, so I have kind of mixed emotions about this. I'll try to explain. ...
What will happen is one government contractor will have a person working for them and over time they develop a needed skill set. Then another contractor will try to lure that person away offering better pay. If it ended right there, I'd say 'yay for the employee', but it doesn't end there. The government entity is often paying several times the person's wage for the employee to begin with. In the industry this is known as the "multiplier" (I will skip all the details behind what makes up a multiplier for now). When the employee leaves one employer for another, assuming both companies have similar structure and thus similar multipliers, then (in theory) it should force the new company's multiplier downward (paying the higher wage means less of a cut for them). Unfortunately though, it doesn't work that way in practice. When the employee transitions, the new employer just tacks on their regular multiplier. The government now has no choice but to pay the higher rate if they want that person.
If this scenario only happened once, or twice, it would be one thing, but what you have in reality is people who play this "job shopping' game constantly. The non-compete clauses prevent this. Most government contractors have unwritten rules internally to screen for these types of employees and refuse to hire them (not out of ethics mind you, but to prevent pissing off the client), but the trouble is, these people aren't easy to spot. Many of them work behind 1099's and minority subcontractors, so it's not a simple matter of just looking at who they worked for last (that might not reveal anything).
Federal acts like Davis-Bacon regulate wages for trades personnel, but there isn't any such act for professional personnel so the sky is the limit.
Similar things also happen for actual government employees. They'll work for a government for all their training, and then leave and go to work for a contractor at 4x-5x their original salary. And the kicker is, the employee is maybe only making 120% of their original salary while the contractor pockets the extra 280% to 380%. 1099's can leverage some of this back, but never more than about 40%.
Us taxpayers wind up paying for ALL of these gymnastics because the government doesn't have any money of its own.
It's a complicated and frustrating game. Unfortunately, I work in this world and it can be really frustrating.
In any case, as you note, these non-compete clauses are generally unenforceable. This doesn't stop them from being used though, even if only as a scare tactic.
What will happen is one government contractor will have a person working for them and over time they develop a needed skill set. Then another contractor will try to lure that person away offering better pay. If it ended right there, I'd say 'yay for the employee', but it doesn't end there. The government entity is often paying several times the person's wage for the employee to begin with. In the industry this is known as the "multiplier" (I will skip all the details behind what makes up a multiplier for now). When the employee leaves one employer for another, assuming both companies have similar structure and thus similar multipliers, then (in theory) it should force the new company's multiplier downward (paying the higher wage means less of a cut for them). Unfortunately though, it doesn't work that way in practice. When the employee transitions, the new employer just tacks on their regular multiplier. The government now has no choice but to pay the higher rate if they want that person.
If this scenario only happened once, or twice, it would be one thing, but what you have in reality is people who play this "job shopping' game constantly. The non-compete clauses prevent this. Most government contractors have unwritten rules internally to screen for these types of employees and refuse to hire them (not out of ethics mind you, but to prevent pissing off the client), but the trouble is, these people aren't easy to spot. Many of them work behind 1099's and minority subcontractors, so it's not a simple matter of just looking at who they worked for last (that might not reveal anything).
Federal acts like Davis-Bacon regulate wages for trades personnel, but there isn't any such act for professional personnel so the sky is the limit.
Similar things also happen for actual government employees. They'll work for a government for all their training, and then leave and go to work for a contractor at 4x-5x their original salary. And the kicker is, the employee is maybe only making 120% of their original salary while the contractor pockets the extra 280% to 380%. 1099's can leverage some of this back, but never more than about 40%.
Us taxpayers wind up paying for ALL of these gymnastics because the government doesn't have any money of its own.
It's a complicated and frustrating game. Unfortunately, I work in this world and it can be really frustrating.
In any case, as you note, these non-compete clauses are generally unenforceable. This doesn't stop them from being used though, even if only as a scare tactic.
