If a tech company has to pay a scientist half her salary to keep her out of the industry for a year after she quits, that’s still a bargain.
Sure, that’s more than the zero dollars to which workers who’ve been sidelined by noncompete agreements are entitled under current Massachusetts law. But employees’ time and freedom are worth something, and when they’re restricted at an employer’s demand, some compensation is in order.
The sooner state lawmakers recognize this, the sooner they can resolve what’s becoming an annual conflict on Beacon Hill over noncompetes, the contract provisions that companies use to keep workers from jumping to rival firms. The latest bill from the Legislature’s Labor and Workforce Development Committee stakes out a Solomonic middle ground: While it allows noncompete agreements in certain circumstances, it also requires companies to pay at least 50 percent of affected workers’ salary as long as the restriction remains in force.
For several years, a group of legislators, venture capitalists, and rank-and-file workers have been making a heartfelt — and entirely persuasive, I’d argue — economic and moral case for an outright ban.
But maybe the question these reformers should have been asking employers all along is: If you want to preserve noncompetes, what’s it worth to you?
Some of the state’s large employers — most notably EMC, the Hopkinton data-storage company now being acquired by Dell — have long insisted they can’t protect trade secrets without noncompetes, the contract provisions that prohibit a worker from taking a job with a rival company. Yet the clauses, which are enforceable in Massachusetts, keep some workers from getting new jobs in industries for which they’ve undergone years of academic training. Other workers flee to Silicon Valley, where the clauses generally aren’t enforced and where the fluid movement of talent among companies has created the world’s most potent innovation cluster.
Under the committee bill, Massachusetts companies could still restrict the future movements of employees with the greatest access to trade secrets. But requiring firms to pay what’s known in Europe as “garden leave” — compensation for the time workers spend out in their yards as they wait out their contracts — would discourage companies from locking down middle managers and front-line employees.
The provision grates at local business leaders who thought they’d reached a deal around a more modest bill — and who can’t wrap their minds around the idea of paying people for not working. “I just can’t envision a situation where that would feel right. ‘Here’s some money. Stay home,’ ” Greater Boston Chamber of Commerce president Jim Rooney said in an interview.
In other contexts, companies that want to protect their own options know there’s a price tag involved. If a condo developer might want to buy a certain waterfront parcel at some point next year, he’ll have to pay the owner not to sell it to someone else before then. If a commodities trader wants to reserve the possibility of buying soybeans or lean hogs at today’s price six months from now, that flexibility will cost her.
Yet when the commodity involved is human workers’ time, some companies — and not just the ones using noncompete clauses — presume that different rules should apply. A simmering issue in retail is on-call scheduling, under which workers must keep certain time slots open for shifts that they might not end up working. In essence, employers have helped themselves to free options on employees’ time.
Like anything else that’s given away for nothing, those options are bound to be overused. On-call scheduling can’t have been too helpful to Gap and J. Crew, because the companies quickly dropped the practice once it began attracting bad publicity and regulatory attention.
Similarly, absurd revelations that summer camps and the sandwich chain Jimmy John’s have used noncompetes show that the clauses are far easier to impose than they are necessary. Maybe Jimmy John’s uses a proprietary technology that never occurred to anyone else in our long history of stuffing meat and cheese into oblong pieces of bread. Or maybe the company insisted on noncompete clauses just because doing so was easy.
The state’s traditional business groups were ready to back certain limits on noncompetes, including a requirement that companies give employees advance notice and time to consult a lawyer before signing. But lawmakers should make a sharper departure from the status quo, which stinks for the average employee.
The bill that came out of the labor committee is excellent, and shouldn’t be a stretch for any company that uses noncompetes discriminately. It would forbid noncompetes for hourly workers and college interns. It would end the worst form of abuse: when a company lays off an employee and then enforces the restriction anyway. (This scenario, a local employment lawyer once told me, is “kind of like when you break up with someone, and then you tell them they can’t see other people.”)
Absurd revelations that summer camps and Jimmy John’s have used noncompetes show that the clauses are far easier to impose than they are necessary.
Even the garden leave is easy to square with other rules of the business world. A worker’s time is like everything else with economic value. Nobody should dictate how it’s used without paying for the right to do so.Dante Ramos can be reached at email@example.com. Follow him on Facebook: facebook.com/danteramos or on Twitter: @danteramos.