We’re writing a new law on noncompetes — let’s get it right
The dizzying job growth and investment Cambridge has experienced during the past decade has unlocked opportunities and prosperity that few other cities can match. But for those of us who have fought for the development of more market-rate and affordable housing, a $15 per hour minimum wage, and paid family leave, we know that opportunity is not equally distributed for livability, job mobility, and wage growth.
Expanding opportunity access across the Massachusetts economy requires that we also take a look at the hardships caused by unfair employee noncompete agreements. These agreements limit an employee’s ability to switch jobs, work for other companies, and start new businesses that might “compete” with their current employer. They are deeply unfair to workers, and Cambridge should lead the way in advocating for a statewide ban or restriction.
This is not a problem isolated to Kendall Square. Nearly 40 percent of Americans have had to sign a noncompete, including laundromat operators, restaurant staff, construction workers, teachers, engineers, and physical therapists.
Why should we care? Noncompetes have a broad effect on state economies. States that facilitate the enforcement of noncompetes see lower hourly wages by an estimated 4 percent, and lower job mobility by an estimated 8 percent. The formation of new companies drops by nearly a fifth where noncompetes are easy to enforce.
Most important, noncompetes are unfair to employees. They are rarely negotiable, and even if they were, new employees have almost no bargaining power. Worse, most noncompete agreements require that the employee pay legal fees if the employer sues to enforce the agreement.
For innovative industries, there are many tools available to keep trade secrets safe that don’t disadvantage their workers, such as intellectual property assignment and nondisclosure agreements. But noncompetes will continue to be used and abused in the absence of equitable regulations from the state that protect workers.
That could soon change — but we need to do it right. The Legislature is considering a bill on noncompetes. Lawmakers should be applauded for trying to tackle such an important issue, but the current form of the bill does not do justice to this cause — and could make matters worse.
The Legislature should make key changes to the bill before passing it:
• Noncompete agreements should be banned outright or limited to not more than a three- to six-month period. The current bill allows them for one year — with additional wiggle room for employers — too long for many to live without pay.
• During a reduced enforcement period, employers should pay 100 percent of the employee’s salary. The bill shouldn’t allow employers to significantly undercut this amount in negotiations stacked to their favor.
• Arguably the worst feature of the bill is that it seems to allow judges to redefine noncompetes to prohibit employees from working for other companies in the field, even if the employee did not sign one. Courts would also be allowed to rewrite restrictions they find too onerous, rather than just ruling them invalid, as is currently practiced. This workaround would incentivize companies to write overly broad noncompetes and place the burden on an employee to take the company to court for relief, and should be curtailed.
Massachusetts’ position at the forefront of science and technology allows us to influence employment practices across industries and states. We should make sure that our example is one where employees have the best chance at a level playing field. Better protections for workers from noncompetes are overdue in Massachusetts; let’s make sure we get them.
Marc C. McGovern is the mayor of Cambridge.