The truth about noncompetes and Massachusetts politics
In Massachusetts, we pride ourselves on attracting people who devote years — and often $100,000 or more — to earning an advanced degree. And we like to brag about being the state with the most educated workforce.
But once you’ve crossed the stage, framed your diploma, and actually joined that workforce, you’re often required to sign a contract that promises you won’t jump to a competitive company when you leave — sitting on the sidelines for a year or longer. That contract is valid even if your job responsibilities change, your salary is cut, or you’re laid off.
Effectively, we’re telling workers that even if they’ve just spent six years earning bachelor’s and master’s degrees in chemistry or computer science, once they spend a year or two working for an employer, that employer has invested more in them than they have invested in themselves and should therefore be allowed to curtail where they can work next.
We’ve now spent about a decade debating whether to change that — and watching state legislators file bills that would limit the influence that your current employer has on where you can work next. But a compromise is now being hashed out on Beacon Hill, and it could head to the full Legislature for a vote later this spring.
Over the past decade, I have been collecting stories about how these contracts restrict the freedom of everyone from video game developers to after-school gymnastics instructors to practice their craft where they want.
Let me tell you what should happen and what looks likely to happen.
First, some terminology. These contracts are technically called “employee noncompete agreements” because they are a promise that a worker won’t leave one company to go work for a rival, at least for a specified period of time.
It’s important to note that there are a few professions that have exempted themselves from having to work under these contracts, including doctors and lawyers. They can leave one medical practice or law firm Friday and start working for another Monday.
But lawyers like the status quo — because these noncompete contracts sometimes generate business for them, in the form of lawsuits. Oh, and nearly a quarter of our state legislators list their profession as attorney, according to the National Conference of State Legislatures.
When an attorney explains to you why businesses need to be able to lock up their workforce with noncompete agreements, here is a handy question to ask: How is it that law firms thrive in Massachusetts, when their top talent can choose to walk out the door at any moment? Follow-up question: How do we have some of the best hospitals in the world, when doctors and nurses are completely free to leave Beth Israel for Brigham & Women’s?
In my heart, I know that these contracts are pointless. Former governor Deval Patrick tried to do the right thing in 2014, when he proposed an outright ban on noncompetes. But business groups rose up against that.
A good compromise, in my view, would involve limiting the duration of noncompetes to six months, requiring the former employer to pay the worker’s full salary during that time period if it wants to keep him or her from working somewhere else, and nullifying them in cases where workers have been laid off or fired without cause.
What would this accomplish? Rather than forcing the smartest workforce in the United States to spend a year struggling to scrape by with no income, it would allow them to spend six months taking online and offline courses, networking and learning about what’s happening in their field, being with their family, and perhaps even cultivating an idea for their own business.
What will actually happen in this legislative session, according to a compromise bill that came out of the House Labor and Workforce Development committee Thursday, will probably be much less significant. It will limit the duration of the contract to a year (longer if an employee exits with a list of customers, manufacturing method, or other “trade secret”). Employees under age 18, as well as college or grad school interns, will no longer be subject to noncompetes.
Employers will have to show the noncompete contract to prospective employees with their offer letter, or at least 10 days before they start work — and let them know they can consult an attorney before signing. It will require employers to pay some amount during the period which a former employee is twiddling her thumbs — but that amount could be 50 percent of her old salary, or “mutually agreed upon consideration,” which might be $1,000 or $10,000.
Imagine the fun of coping with Boston’s high cost of living for a year at half your salary . . . or a grand! If you decide that the “mutually agreed upon consideration” isn’t enough to live on, you get to take your old employer to court. More money for the attorneys.
Who’s behind this incrementalism? One important player is House Speaker Bob DeLeo, an attorney by trade. He supported a similar House bill in 2016 that would have implemented a one-year limit and involved “mutually agreed upon” compensation during that period.
Seth Gitell, DeLeo’s chief of staff, says the 2016 House bill “was a product of extensive discussions and various compromises by different stakeholders. DeLeo continues to support and honor that agreement and looks forward to seeing what the committee puts forward” in the next few weeks, Gitell says.
DeLeo is also one of the top cheerleaders for Boston’s bid for Amazon’s secondary headquarters, dubbed HQ2. If Amazon chooses the former Suffolk Downs racetrack as its site, it would be a next-door neighbor to DeLeo’s district.
Amazon uses noncompetes, and it has filed lawsuits in recent years when employees have left to join other companies.
So with Amazon’s civic beauty contest now down to 20 cities, including Boston, just how aggressive do DeLeo and other legislators want to be when it comes to tinkering with the law surrounding noncompete contracts? Not very.
That makes sense if you’re desperate to lure a big employer to town. But it sells short the smartest workforce in the country, protects the interests of established companies, and hampers the growth of the state’s indigenous startups.