When the United States Federal Trade Commission signaled early in January that it wanted to ban the practice of noncompete agreements nationwide, I was curious—are noncompete agreements widely present in the world of game development?
I shot the question out on Twitter, and within 24 hours, I found out "yes." Developers from across the United States—and some who'd worked in Europe—chimed in to vent about their experiences with oblique or explicit noncompete agreements.
That's actually fairly surprising. First, after years of covering the exploitative and abusive practices of different companies, noncompete agreements hadn't really come up that often.
Second (as Bloomberg reporter Jason Schreier noted in a reply), noncompete agreements are banned in the State of California. They've been banned since 1872. That's 17 years before Nintendo was founded.
Since many of the United States' largest game companies operate in California, you'd think there'd be incredible gravity exerted to not use such language.
And yet, the opposite was true. Even in California, developers said they'd encountered language in their contracts that seemed intended to put the fear of legal retaliation in them.
Additionally—while they are not banned in California—developers expressed anger at how many of their employers tried to restrict their ability to work on side projects, or claim ownership of said side projects.
"If we can't have you, then no one can."
Digging up stories of developers being directly impacted by noncompetes was a little tricky. Plenty of folks had seen the language in contracts, but not many had had them actually enforced.
Scott Hartsman, a game development veteran who spent time as an executive at Sony, Trion Worlds, and Wargaming, was one of the few I spoke with who'd ever had a noncompete clause in his contract enforced by a former employer. He explained to Game Developer that early in his career (real early—he was employed while in high school and college), he was employed by a then-prolific role-playing game studio in an era where designers and scripters also handled community support and moderation.
He said he left the studio after "4-ish years," with "no hard feelings." "I just couldn't put in the closer-to-full time ours any more."
A friend of Hartsman's was running a "small company" that sold entirely different games (poker and chess titles), and needed some help with customer support and community management. Hartsman took the gig, relieved at the idea of working for the same pay with less hours.
After a week at the new company, Hartsman and his friend were stunned to receive a cease-and-desist letter from his former employer's attorney. The letter (which we were able to review under an agreement of confidentiality) said that Hartsman was in direct violation of his non-compete agreement with the former RPG studio. Both he and his friend would be sued if he stayed employed at his new job.
Hartsman and his friend didn't have the resources to fight this fight. He asked his former employer if he could be released from the agreement, but they said no. He described their response as "a cartoonish 'no, if you we can't have you, then neither can anyone else. Remember, you agreed to it.'"
Now Hartsman looks over all his contracts with a steely-eyed gaze, watching for noncompetes or any other exploitative clauses. He said he helps friends and former coworkers do the same. (And he urged our readers concerned about similar clauses to talk with a lawyer immediately).
Hartsman's story is peak worst-case scenario for non-compete agreements. His former employer walked him right up to the point of being sued for thousands of dollars, and it could have destroyed his career and his friend's company.
Most devs we spoke to implied that noncompetes usually don't get that far—often, the goal is to intimidate or exert control before any lawyers get involved.
Where do noncompetes usually show up?
With noncompetes banned in California, where do they show up? Lawyer and USC Gould School of Law professor Thomas Lenz explained to Game Developer that though they're explicitly banned, some companies do try to make the most of them.
That would happen for two reasons—the first is that companies may be unaware of California's restrictions on noncompete agreements. The second is that if the company operates out of state, they might say the relationship between employee and employer isn't in California's jurisdiction.
Regulations on noncompete agreements are "a patchwork from state to state," he said. Even in states where they are permissible, there may be good-faith or other exceptions depending on the circumstances, which only adds legal thorniness to the whole affair.
He added that in contract law, companies banned from doing something explicitly might use "subtle hints" in verbiage to achieve the goal of "controlling the marketplace in some particular way."
Multiple devs who weighed in on this story (who all requested anonymity in order to speak freely about their experiences) agreed that noncompete agreements generally appear in contracts at the company executive level. Developer and streamer Will Overgard said he'd seen them used "around anyone interacting with new tech, or things coming into the gaming space from the tech industry."
He also added that they've mainly appeared in contracts of salespeople or heavy business-to-business positions. "Any role that the studio wishes to lock someone into."
Overgard said he once spoke with a colleague at Game Developers Conference who had recently left a triple-A company with the intent of founding his own studio—but he realized there was a noncompete clause in his old contract. "This would leave him unable to take an industry job for five years while legal nonsense played out," the developer explained. "By that time the funding was gone and all momentum was lost. It was utterly heartbreaking to hear."
A noncompete agreement at Rock Band developer Harmonix Music Systems (now owned by Epic Games) was once so outrageous it landed in The Boston Globe in 2011. A former quality assurance engineer at Harmonix landed another job at now-defunct music games company studio Seven45, but executives at Harmonix "blocked Benson from taking the job."
Studios exert plenty of control over employees already
In the course of these conversations, developers described other frustration with how their employers control their work. Specifically, over terms in their contracts that either deny them from doing "competing business" for other companies or on their own, or terms that grant IP ownership over all independent projects to their employer.
Even where noncompete agreements are banned, these terms (unless eliminated from the contract in negotiations) are on much more stable legal footing. But they present challenges to developers interested in making and releasing their own games while not on the clock.
For instance, one anonymous developer shared a sample of their contract from their time employed at a major video game studio in the United States. The contract stated that this developer would not compete directly or indirectly with any part of the studio's business, or provide assistance to outside to any other "person or organization" without their employer's approval.
On paper this seems like language you'd find in any employment contract. But in the overlapping worlds of commercial business and artistry in video game development, the lines are thinner.
The developer sharing this contract said that inside the offices, they and their fellow employees urged each other not to speak of any independent development efforts around anyone close to management—even if the games they were working on were in completely different genres.
Lenz noted that such language is generally considered legal, even in creative fields. "Employers are generally able to demand loyalty from employees, as well as to protect confidential and proprietary information," he said, nodding to the language of the California Labor Code, which states that "An employee who has any business to transact on his own account, similar to that intrusted[sic] to him by his employer, shall always give the preference to the business of the employer."
He did note that the question of what behavior violates that law, or California's law against noncompetes is often the subject of litigation. The legal questions cut both ways. Companies who don't demand employees sign noncompetes may still be sued for enforcing noncompetitive behavior.
And the question of what employee's off-hours "competes" with their employer's work is a moving target.
In the workplace, these questions can sometimes rise to a level of outright hostility. A different anonymous developer recalled their time working at a major California company, and said that he heard a high-ranking employee openly being "very frustrated" about rumors that a coworker released their own independent game.
The higher-ranking employee wanted that employee terminated over a "conflict of interest."
Over the years, I've spoken with plenty of developers who have found creative ways to negotiate how their employer asserts ownership of "all IP" created during their time at the company. Plenty keep a list of generic project names on hand that they file with their employer at the start of their time with the company, claiming that it's pre-existing IP they already own.
For the most part, this has let developers balance day jobs with side game projects—often thanks to a blind eye of any higher-ups or coworkers they interact with at work. The question of what happens when an employee goes off and works on their own game projects became a slightly higher-profile one in the case of Spintires creator Pavel Zagrebelnyy.
As IGN reported last year, Zagrebelnyy and Spintires became wrapped up in a transnational intellectual property and contract battle that eventually indicated he may have used proprietary code belonging to his employer, Saber Interactive. It was a messy affair where both employer and employee had good-faith arguments to make about the question of who owned the series.
So what's next for noncompete agreements?
However messy the questions of "side projects" get, game developers we spoke with are all in agreement—banning noncompetes would be a good thing.
"They're shit," said one veteran developer. "They have no real value. They're there less to scare juniors—though they do that—and more to prevent senior/leadership folks from jumping to an immediate competitor."
Other folks agreed. "Noncompete clauses are never used to protect the game or project, it's to stop people leaving," another developer argued. "Leaving a big looming sword hanging above someone's head is a trash way to keep the talent."
Hartsman, despite his own bad experiences with an exploitative noncompete agreement, was willing to allow some nuance. "I do think the proposed carve-out where they can apply to founders who are selling their companies may be justifiable," he mused.
He also pointed out that with employment anchored to healthcare in the United States, the stakes of a noncompete agreement can be exceptionally high. His proposal for the future of noncompetes was one that granted way more privileges to workers bound by them.
He proposed that non-competes could remain implementable for the very limited number of positions that could truly "do massive damage" to a company—but the employee would retain their salary, benefits, and insurance through the non-competition period. "Ideally, with a narrow, explicitly spelled out competitor or competitors," he added.
Such a system would hopefully rebalance the risk vs reward calculus when an employee (or their employer) decides it's time for them to leave the company.
For now, the FTC is gathering public feedback on its proposal, and will be doing so until March 10. Lenz did note that even if the FTC passes this regulation, the United States could still see years of court battles as states interested in keeping non-compete agreements on the books argue that they have a right to allow them.
"You could very well end up having tension between federal regulators and state legislation that would allow for inconsistent results," he observed.