For much of my adult life, the terms “Capitalism” and “Free Market” were almost interchangeable. Thinking through the structure of a worker cooperative has opened my eyes to a different perspective.
The capitalist consulting firms I’ve worked for in the past did not want a free market!
I’ve been afraid to even discuss these ideas in the past because of the absurd employment contracts I’ve been forced to sign in my career. Bullshit contracts are now done!
Some Definitions
Capitalism is an economic system around owner-controlled enterprises. Decisions are made based on a % of ownership of a corporation. Profits are allocated to shares owned.
Economic Socialism is an economic system around worker-controlled enterprises. Decisions are made democratically – one-person one-vote. Net income is split between profit allocated to invested capital and surplus allocated to workers.
There is also a concept of political socialism: government-controlled enterprises and the economy. I’m not talking about this system at all, and I have no practical experience with it.
A Free Market has quite a few components – but it’s pretty much what it sounds like. Buyers and sellers are able to make informed choices without interference from a third party.
(I would argue a truly free and transparent market has to factor the total cost of externalities into the product or service, which would necessitate intervention from government. Health risks, pollution, and end of life disposal cannot be ignored; those issues are interfering with the costs of other markets. Maybe a blog for another day.)
Why Did My Employers 💩 on the Free Market
Money.
Capturing a market is generally more profitable than a free market. If workers were completely free to participate in a market, their wages would go up. When wages go up, and customer pricing doesn’t change, there are fewer profits for the owners.
I’m not trying to pick on only my employers. To my knowledge, most professional services firms do the same thing. These agreements are all done in secret. I have no idea what everyone else does!
Below are some of the ways they try to capture markets and make them less free.
Post Employment Non-Solicit and Non-Compete
The employment agreements I signed have all kinds of clauses about talking to former colleagues and former clients. These “agreements” are designed to muddy the waters to scare employees to either not be independent consultants or start a new firm.
The types of restrictions can include:
- Non-solicit of former colleagues
- Non-solicit of former customers or prospects
- Non-compete in the same “industry”
- Agreements between consulting firms and their customers to not solicit each other’s employees
- Restrictions on an employee’s “inventions”
To make it even more confusing, these agreements will take effect based on affiliations, subcontracting, or acquisitions. An employee cannot realistically keep track of all this nonsense and know what they’re allowed to do. This is part of the design – put people in a state of legal limbo to avoid competition.
Contractual agreements should have fair consideration for both sides. If you don’t want an employee to compete with you because of the impact to a business, the answer is simple. Pay them. Their full salary. For the length of the restriction.
Lack of Competition
In a competitive market, companies should be trying to one up each other. When it comes to things like non-solicitation agreement terms or a 40-hour work week, why is there no competition between companies?
In a competitive market, there would be more options for workers. These options would be advertised and publicly available. I was never even given these documents until I was past the interviewing and salary negotiation.
The lack of competition is also a counter argument to “you signed this agreement voluntarily.” Is signing something really voluntary if every company requires the exact same thing? No, it’s effectively a mandatory condition of employment in this industry.
Secret Salaries
Until I cofounded Cooptimize, I had never worked for a company where pay information was transparent. Pay scales weren’t transparent. Decisions about how pay were calculated weren’t transparent.
A free market needs transparency to function efficiently. Sellers of labor – employees – have to know the price range for labor, how their skills fit into the range, and how wages change over time.
At a job years ago, I was part of making salary decisions. The process was completely random! Even as managers we didn’t have access to pay ranges. We just looked at a person’s salary history and picked a new number.
I personally have always been the worst at blindly negotiating salary. In my defense, it’s incredibly frustrating to negotiate something with zero information. I could have come up with perfectly fair numbers had I known what the ranges were for my level. Even if I was being paid fairly, the fact it was kept secret always made me believe I wasn’t paid fairly.
“We offer competitive salaries.” DO YOU?!?
Severance Conditions
I don’t actually know what my specific employers did in terms of severance. Many employers force employees to sign clauses restricting their speech after they are fired.
The FTC Agrees with Me
The FTC (partially) agrees with me, and changes may be coming in 2024.
How Economic Socialism Can Mean a Free Market
In the process of helping design a worker cooperative, we were forced to come up with a different set of rules than we’d encountered in our careers. Those rules happened to push us towards a freer market – some kind of weird Economics 101 panacea wasn’t our goal.
A free market happened to be beneficial for our desired outcomes.
Freedom to Fail
Failure was (and is) a possible outcome for Cooptimize. If for whatever reason the cooperative doesn’t work, or we organized it in some way that was fatally flawed, we had to be able to still make a living. Therefore, putting any post-employment restrictions on our careers made no sense.
The same thing still applies to new workers. Cooperatives may not be the right organizational structure for everyone. Individuals need freedom to go down a new path if it doesn’t work.
Employment Restrictions (From the Cooptimize Handbook)
Other Jobs
As a full-time employee, Cooptimize related tasks must take priority over other employment.
You should inform Cooptimize of any paid work similar to the services offered at Cooptimize.
Non-Compete / Non-Solicitation
Employee cannot be compensated directly or indirectly by a Cooptimize client or the clients’ employees while employed by Cooptimize.
While employed by Cooptimize, employee cannot solicit a Cooptimize client, or an external entity in which Employee has interest, for any verbal or written agreements between the Employee, and the Client.
Employee can apply for a job with a Cooptimize client while employed by Cooptimize.
At the end of Cooptimize employment, Employee is not restricted by any Non-Compete or Non-Solicitation clause.
Freedom to Compete
A faction of Cooptimize employees, or one person, could break off and form a competing consulting firm. Other than the logo and company name, there is nothing contractual in our way – all source code is MIT Licensed and there are no post-employment restrictions.
If this happens, it will suck. I would be emotionally devastated.
It’s still their right to make a living.
Freedom to Run the Business
If you’re going to operate a business – which you must do in a worker cooperative – you need access to information. Cooptimize LLC information – financials, salaries, operating agreements, contracts, etc. is available to everyone in the company.
I always tried to work at every job as if it was my own business. It’s hard enough to run a business with all the information – it’s impossible with a fraction of the information.
The salary formula and benefits are also available on our website; if you’re going to join us you probably want to know how much money is involved!
Rethink Employee Restrictions
6,726 Days. 18 1/2 Years. October 17, 2005 to March 17, 2024.
That’s how long I signed away my agency, ideas, and freedom to a faceless corporate entity. Gross. Never again.
Non-solicit, non-compete, and other restrictions that stifle competition and threaten employees with lawsuits need to end. The Professional Services industry needs to change.
Compete on innovation. Technology. Efficiency. Collaboration.
Don’t compete on suing former employees.
Employers shall make no contracts abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Internet for a redress of grievances.
1st Joelmendment
Addendum: Employment Agreements I’ve Signed “Voluntarily”
Dynamic Consulting / sa.global 2.0
Greenlight BTS / Systems Advisors Group / SAGlobal / sa.global / 360 Solutions / HSO ProServ
Joel Leichty 