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Kill Georgia’s Amendment One: The Death Of The Tech Startup

We’re now less than a week away from what could be the most important election in recent memory – particularly for those working in innovation-driven industries like tech startups. The ebb and flow of Georgia politics has a momentum all its own, including a who-knows-who’s-funding-them run of negative ads that have made this election season extra-gross for me personally. But at least voters get a crack at changing leadership every four years. If Amendment One passes this November 2, it will never be rolled back ­– mark my words. Regardless of which side of the aisle you prefer (or even if ‘None of the Above’ seems like the best option), next Tuesday needs to begin with a NO vote on Amendment One. Your future earning potential is absolutely at stake.

 

An Enemy By Any Name


Yep, the dreaded Georgia Restrictive Covenant Act (HB173) has taken its slot as Amendment One on this year’s ballot. Just to review the pure evilness of this effort, let’s look at the verbiage that’s on the ballot:

"Shall the Constitution of Georgia be amended so as to make Georgia more economically competitive by authorizing legislation to uphold reasonable competitive agreements?"

Damn, that just steams me every time I read it while knowing there’s absolutely no proof that reducing employees’ rights to change jobs leads to economic competiveness – especially using Michigan as a case study. And the argument it incents more companies to relocate to Georgia has been debunked by arguably one of our town’s most successful relo rainmakers, Nick Masino of the Gwinnett Chamber of Commerce. The good news is I’ve seen a fair amount of negative press around this outrageous language, so my hope is the general public has at least heard something critical about the amendment.

 

Bye, Bye Tech Startups


So if these Draconian rules come into effect, expect two primary types of startup entrepreneurs: 1) kids straight out of college and 2) those with a cash-laden exit event behind them. These will be the only two groups who won’t have the stain of one of these non-competes on them. The big problem is that creates some serious issues for an already-struggling startup ecosystem.

The first is I would contend the success percentage of first-time, under-25 entrepreneurs is a fraction of what a more seasoned executive could pull off. In fact, primary research from my Duke University professor buddy Vivek Wadhwa shows the average entrepreneur is just about 40, married and has kids. Not for long if Amendment One passes. Starting a company is massively hard work, and takes every experience gained over a lifetime of professional experience. It probably goes without saying, but kids like Mark Zuckerberg and Shawn Fanning who remake industries are the exception more than the rule.

And for those fortunate enough to engineer an exit under the old rules, navigating these new restrictions is likely more important than continuing their path of innovation. For their sakes, I hope they made enough money so that working for someone else never comes into play again in their career. That probably means 4-5 successful startups over a career without any necessity to stop-over in a corporate gig with a guaranteed paycheck and benefits. It’s good work if you can get it, but that’s a tall order.

Everyone else in between – especially those who are now employed in corporate with an eye toward starting their own company one day – is just flat screwed. The more innovation you’re creating for your employer, the more likely they are to show up with a new agreement for you to sign. In other words, I’d expect the best of the best to get screwed the fastest. Is it just me, or does this just seem un-American?

So there’s one simple question: with Amendment One as law, do you have the opportunity to be a startup CEO? I’d call it a travesty if you can’t control your own destiny and prosperity in this arena. If you’re ready to risk it all to create better technology, new jobs, more tax revenue, and a better life for your family, why should some pro-big business lobbyist decide you couldn’t by deceiving the electorate into voting in favor of Amendment One?

 

A Well-Informed Voice of Reason


I’m going to conclude my penultimate article on this topic by doing something relatively rare – reprinting an entire opinion piece from the Cordele Dispatch written by Ed Buckley and Tom Stubbs. Ed has consistently rallied against the passage of Amendment One, and makes a great series of arguments from the real-life position of a labor lawyer.

Georgians should vote 'no'
By Edward D. Buckley and Tom Stubbs

Cordele Dispatch

Cordele — (This editorial written by two Atlanta area attorneys is reprinted at the request of Cordele attorney James Hurt).

Georgia voters will soon be asked to vote on an amendment to the state constitution which is intentionally phrased to deceive them.

The language reads: "Shall the Constitution of Georgia be amended so as to make Georgia more economically competitive by authorizing legislation to uphold reasonable competitive agreements?"

This language is a lie on its face. The amendment does not make Georgia more competitive; it makes us less competitive by restricting the free flow of labor upon which that capitalism depends.

The proposed constitutional amendment will shackle employees to businesses, and strangle the present rights of employees to go out and work for competitors or start new competing businesses.

Voters who are employees of any kind, be they doctors, news people, engineers, mechanics or salespeople should rise up and vote "No" to this radical change to our state constitution.

You'd never know it by reading the ballot question, but the proposed constitutional amendment relates to "non-compete agreements." Employers may already force non-compete agreements on employees -- as long as the agreements are reasonably limited in time, geography and job description.

Under the Georgia Constitution, if an employer imposes unreasonable restrictions, such as banning former employees from working in their field of choice forever or everywhere or in all kinds of jobs, then our courts are required to strike the entire agreement. That process obviously encourages employers to err on the side of keeping the restrictions contained in non-competes reasonable and limited.

This legal framework has worked well for decades. For every non-compete that you see challenged and overturned due to its being overly broad in time, geography or job definition, hundreds, if not thousands, of properly and reasonably limited non-compete agreements are entered and enforced without a hitch every year.

Indeed, business-oriented publications such as Entrepreneur, Forbes, Chief Executive Magazine, and others have consistently ranked Georgia as one of the top states in the country for business. So, current law has worked well for business.

Big Business wants more, however. They want to erode even this minimal protection for employees. How? The proposed constitutional amendment -- drafted by lawyers who work only for management -- permits judges to edit, not just strike, overly broad non-compete agreements.

This innocent-sounding change totally tilts the table on non-competes to favor employers. If this proposed amendment passes, employers will be able to write every non-compete agreement overly broadly, because there is no threat of the entire agreement being stricken anymore.

The worst that can happen is that, at some distant time in the future, a judge may make the employer use more reasonable restrictions in its non-compete agreement. In the meantime, employers can require an employee to sign these overly broad agreements or get fired, then fire them anyway.

The end result? Overly broad non-compete agreements dictate how and where many employees work. The economy loses because labor is prevented from flowing to the place where it is most productive. Consumers lose because entrepreneurs are prevented from leaving mediocre jobs to start their own businesses that offer better products and services.

Employees who don't leave lose because they are stuck at jobs making less than they could make elsewhere. Employees who dare to make a break for new employment are likely to lose, as well. They will have to live under the overly broad restrictions for months, if not years, on the thin hope that the attorney they have to hire -- at great expense -- will some day get those restrictions eased.

The gain? Our already clogged courts gain even more lawsuits, and our judges gain power to become activists who make up and insert completely new terms into contracts.

Georgians should not surrender their constitutional rights to make way for this one-sided, pro-employer and anti-employee new law. This proposed amendment makes no sense whatsoever, but, at a time when unemployment is at record levels, it is especially wrongheaded.

Vote "no" to deceit. Vote "no" to anti-employee legislation. Vote "no" to Amendment One.

It's a lie told to Georgia voters, and it's a lie told to employees at a time when jobs are scarce. Free competition is a sacred American right. Vote "no" to Amendment One to preserve this right.

Look for my final call-to-arms on this topic on Monday, and please do press this topic into conversation at your weekend Halloween festivities. I know I’ll be foregoing the standard neighborhood discussions like stray cats and homeowners associations in favor of educating a few more voters on the topic before Tuesday. You should absolutely do the same!

Previous Articles on the Topic:

KillHB173: T Minus 22 Days

KillHB173: So Long Professional Services

KillHB173: How Natural Selection Should Punish Crappy Employers

KillHB173: How To Guarantee Another Startup Cluster Never Happens

KillHB173: Are You In The Crosshairs?

Employees Chained And Restrained: Why We The People Must Defend GA's Constitution Against HB173

comments 

 
0 # grshrader 2010-10-28 14:00
I'm curious if you can find out and publish which legislators and big businesses got this on the ballot. If this Amendment is really about non-competes then the wording is so misleading that people need to know who is misleading us.

Also, if it passes the counter is to have new hires begin to refuse to sign non-competes when they start (which they may want to do anyway).
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0 # Ryan 2010-10-28 14:14
You can see the entire bill's text, sponsors, and who voted for it (in both the House and Senate) at this page:

http://www.legis.state.ga.us/legis/2009_10/sum/hb173.htm
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0 # grshrader 2010-10-28 14:49
Thanks Ryan I appreciate that. What about the big businesses that the op-ed piece implies actually drafted the amendment language?

I guess I was thinking about a follow up piece on TechDrawl that explained who the sponsors are, where they're from, why they did this and who paid them to do it. And include the businesses that helped draft it. This would help the tech community here in Atlanta to know who is helping and who is not. The state of startup politics is worth shining some light on for current and would-be entrepreneurs.
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0 # GFRRTDEFF 2010-10-28 21:20
While I certainly don't have the full backstory, Lance is absolutely correct below in that Rep. Kevin Levitas is the legislative face of the bill. From an industry perspective, telecomm seems to have their hands all over it in that AT&T's Courtney Brinson (regional director of external affairs) has been involved in the statewide roadshow along with Jobs For Tomorrow staffer Brett Grayson according to their own website: http://bit.ly/cnz5rm. In addition, former BellSouth CEO Duane Ackerman is listed as the CEO according to this article: http://bit.ly/acbRjB.

The other entity supporting Amendment One is TAG, which I assume has deployed its Government Relations group toward its passage. Melanie Brandt of TAG has previously provided this link in an effort to explain their position (along with her comment on piece): http://bit.ly/dcMTJN. I understand the motivation (TAG constituents are primarily corporations), but it's disappointing to me nonetheless. This is a litmus test issue in my mind, and supporting startups and entrepreneurs will always be my first priority.
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0 # grshrader 2010-10-28 21:41
Great info Dave. Thanks. I guess I'm surprised but not surprised about TAG's involvement. No actually I am surprised. So basically TAG is a State level lobbyist for established technology companies? I feel a little duped.
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0 # Lance Weatherby 2010-10-28 20:15
According to the AJC Rep. Kevin Levitas is the man behind the amendment.
http://bit.ly/cxH9xW
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0 # Evil Cthulhu 2010-11-03 11:29
The Amendment #1 has sadly passed in GA with a huge majority. The vague wording caused me to vote "no" a couple of weeks ago when I cast my ballot during the early voting period. I was completely unaware of that particular ballot issue when I walked in to vote. Something in the back of my mind caused me to think "non-competitive" contracts rather than "competitive" contracts when I read that amendment proposal. Since that day, I've been spreading the word to friends, family and co-workers to vote "no". Everyone I spoke to was hard against the concept of non-compete agreements, so hopefully I swayed a few votes. My belief is that many other Georgia citizens were caught unaware by the wording of the amendment on the ballot. I've done a bit of research and found that vague ballot wording is frequently used to gain passage of unpopular legislation. (no surprise there!) My most fervent hope is that someone will take this issue to court. In the past, courts have forced re-votes of vague ballot items with clarified language. I Hope that happens in this case! If people knew what they were actually voting for, I doubt Amendment 1 would have passed!
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0 # Lance Weatherby 2010-10-28 20:40
I think it is safe to say that if amendment one were law 15 years ago that the Internet security cluster that Internet Security Systems spawned would have never developed.
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+1 # Lina Inverse 2010-10-29 19:56
Feh; from what it sounds like, your current non-compete regime is like those in all other states ... except California. Which hasn't allowed them for more than a century.

Whether or not this passes, Silicon Valley/SF is still going to leave you in the dust. Especially since all your "stuck" employees burdened by non-competes can just move there and be free of them.
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0 # grshrader 2010-11-01 14:56
That's kind of the whole point of the problem...


1) Georgia's current non-compete structure has worked as a decent balance between business and workers rights. Any change to this structure should have its motives stongly questioned. And any Constitutional change in general should be strongly debated in public...which this one has not been.

2) If our State legislators care about economic growth then they shouldn't slip misleading Constitutional changes onto the ballot which ultimately add more incentives for economic talent to move away and take their innovated ideas with them.
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0 # mlk 2010-11-01 13:32
Weak, indifferent reply here,

http://boortz.com/nealz_nuze/2010/11/georgias-constitutional-amendm.html
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0 # LiveImagePhoto.com 2010-11-03 05:36
http://elections.nytimes.com/2010/results/georgia

Allow enforcement of contracts that restrict competition yay:66.2% nay:33.8%

Georgians are stupid fucks
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0 # Angry 2010-11-04 19:18
I am now officially an indentured servant to my employer. He can cut my salary, my commission and force me to work longer hours. My organization is flat. If I want a career path I need to go to a bigger company in my industry. I have ethics and would never have stolen business away from them. Now I have no choice and would have to start out in another field.

Is there any recourse that voters have to fight the deceptive wording on the ballot? I want to fight.
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