Noncompete Clauses Foolishly Hinder Fintech Innovation. Let's Ban Them.
Plus, PayPal's days of breakneck growth are over.
Number of the Week: 10 (explanation below)
Noncompete Clauses Foolishly Hinder Fintech Innovation. Let’s Ban Them.
When Sam Altman, cofounder and CEO of OpenAI, was abruptly fired by the board of the San Francisco-based startup in November 2023, it sent shock waves through the technology industry. Corporate palace intrigue aside, the most gobsmacking aspect of the drama was Altman’s ability just a few days later to join Microsoft as CEO of its new advanced artificial intelligence (AI) research team, which would presumably compete with OpenAI, whose largest investor and partner was Microsoft.
If you were to randomly ask employees on the street about Altman’s shocking hire by Microsoft—and, really, who wasn’t paying attention to this business saga as it played out?—the likely reaction: It’s good to be Sam Altman (and that was before his triumphant return to OpenAI, with President Greg Brockman in tow, within five days of being forced out).
That’s because for U.S. employees in most states, the Altman-Microsoft scenario—or anything even remotely similar—is out of the question. Bound by noncompete agreements or clauses, often embedded within other corporate documents that are unwittingly agreed to, employees are handcuffed by post-employment restrictions that prevent them from working at a competitive company, developing a competitive product or launching a rival startup. At the very least, getting out from underneath a noncompete in states that allow them involves protracted, costly legal representation to challenge the agreement’s enforceability. “In general, I consider noncompetes to be anti-employee intimidation. They only serve the company. It can only be good for innovation when they are banned or disregarded,” said Techonomy Media founder David Kirkpatrick, longtime technology journalist, editor, and author of The Facebook Effect: The Inside Story of the Company That Is Connecting the World, in an email to FIN. “Business has become enamored of numerous small offensive and deliberately intimidating legal tactics to ostensibly protect its intellectual property.”