Pure Storage slams 'anti-capitalist' non-compete clauses

Fledgling flash firm claims its home state California has the right idea by not enforcing controversial employee clauses

Pure Storage has slammed the use of non-compete clauses, branding them "anti-competitive" and "anti-capitalist" in a scathing blog post.

The Silicon Valley-based firm claims the success of the region and its explosive growth in the past 50 years has been down to what it calls the "free flow of talent", which is not held back by non-compete agreements. The clauses are regularly used in the technology industry and prevent staff moving to a competitor for a certain period of time in a bid to protect secret company information.

The movement of talented staff is a controversial issue in the industry and for Pure Storage itself. The company is still embroiled in a lawsuit against arch-rival EMC after the latter sued a former employee for defecting to Pure Storage and allegedly taking over secret information.

EMC is headquartered in Hopkinton, Massachusetts - a state which Pure's general counsel, Joe Fitzgerald, said is suffering due to its use of the clauses.

"In a world in which the workforce is increasingly mobile, tech talent is fleeing states, such as Massachusetts, that enforce non-compete agreements," he said. "The Route 128 corridor outside Boston was once a hotbed of technology innovation that rivalled Silicon Valley - but innovation in the region has faded considerably. You see, California not only has better weather - there's a better innovation climate for the upwardly mobile entrepreneur free of non-compete agreements.

"It's not hard to see why some companies like them. The whole point of these agreements is to discourage employees from seeking greener pastures. Employee turnover, especially in talent-scarce areas like sales, marketing and engineering, is a major risk for every tech business. If you can reduce turnover, you can spend less time searching for new talent. And, if you know that the employees you have can't leave to go to a competitive job, you don't have to pay them as much to keep them or incentivise them to stay with perks.

"Tempting though they may be, non-competes are bad for everyone they touch, employees and employers alike."

Fitzgerald cited a 2011 study that he claimed found inventors are snubbing states that enforce the clauses in favour of those that don't.

He added that the clauses are "bad for business".

"They are anti-competitive and anti-capitalist," he said. "While they reduce labour costs, they also provide disincentives to employees to expand their skills. They reduce productivity, create labour market inefficiencies, depress wages and discourage innovation.

"And even if you could get them enforced, is there any sense in developing a reputation as a company that sues its own former employees? That seems to send the wrong message to the very talent you want to recruit.

"Sure, there are times when it makes sense for employers to take measures to protect proprietary information. But there are other solutions to that issue that do not flat out stop talented employees from offering their services in the marketplace. Enough already: it's time to acknowledge that non-competes are a bad idea - and stamp them out."