As we start the session taking a fresh approach to the non-competition problem, it would be helpful to collect stories about situations created by non-competition agreements. Click here for more background.
Please share your story as a reply to this topic.
Personally, I’ve never found non-competes to be enforceable except if IP is stolen (in which case it should have been patented in the first place and non-competes don’t apply). I know it’s hard to just say “junk ’em”, but in the other threads certainly no one stood up for them, so I’m curious — where does the pressure come from to resist the very obvious step of making them illegal? Are MA corporations that powerful?
I think the 6-month / stolen IP is a good “compromise”, although again, I’m left scratching my head — it feels like following the CA model would be a better way to go.
Will,
My personal experience with non- compete agreement is related to salons and spas. The owners tend to take advantage of the employees knowing they have very few options in the area due to non- compete agreements they signed. This leads to unfortunate problems, not the least of which are owners taking advantage (sometimes sexually) of younger employees. We live in such close proximity to other communities here in Belmont that a non- compete agreement which defines the distance one can find employment essentially puts the employee in a very difficult position. I understand that it may be protecting owners of small businesses, and I am one of them, but the loss to the employees is too much.
Kimberly Becker
I signed a non-competition agreement many years ago in another state. I asked the employer about it before I signed, and decided I trusted her to use it only as she said she would: if an employee tried to take a bunch of clients along. But it seemed like a lousy solution, open to abuse by employers. I’m glad you’re looking at limiting it here.
Six months after the employee leaves seems like adequate protection for businesses where a network of client contacts constitutes a major part of the value of the business. Six months from the date the agreement is signed does not.
Such networks are, in effect, valuable intangible capital. It takes valuable time (and other factors of production, but mostly people’s time) to develop them. Insofar as such activity really is productive, entrepreneurs should be able to make money off it, rather than losing out to free-riders. On the other hand, non-competition agreements are, almost tautologically, anti-competitive — which is bad for customers as well as workers.
There’s no perfect solution, but it seems to me that moderate limits can provide a clear improvement over unlimited use, and probably also an improvement over complete elimination.
I see my concern is adequately covered in section (e): “Employee noncompetition agreements do not include … covenants not to solicit or transact business with customers of the employer”.
The bill is satisfactory as it stands.
I am a “tech worker” for a large software company in Massachusetts and I would like to make a strong argument AGAINST any form of non-compete agreements.
Non-compete agreements are anti-competitive and stifle innovation. Regardless of their enforceability, employers tend not to want to get exposed to this liability and will often pass on an employee if there is even a resemblance of an applicable non-compete. Getting sued by a previous employer is about as bad as it gets, and the outcome of the lawsuit is secondary to that.
Non-competes should also NOT be considered for reasons of theft of IP or misuse/exposure of other confidential information. Almost every employment agreement contains a non-disclosure agreement that is separate from the non-compete clause. Theft of IP and disclosure / inappropriate use of confidential information is and remains enforceable under this, regardless of a non-compete agreement.
I have seen non-competes too often used to reduce the mobility of the workforce, and as such, are used as a “stick” to retain workers who may have gotten better pay, better benefits, or a better position if they could have left their company at-will.
Last, we should look at states where non-competes are unenforceable; for example, California. What we have seen there is:
– highly competitive and innovative tech companies that compete for available resources
– a highly mobile workforce that is very productive in the tech industry
– employers who compete on benefits and pay in an open, competitive market
– strong innovation because of the ability to attract highly skilled personnel without the threat of running foul of a non-compete from a previous employer
As such, non-competes are bad for both employees and employers. They should be entirely abolished or made non-enforceable (like in California).
I worked as a software engineer for many years. A lot of programmers do somewhat generic work that they could as easily do for another company than doesn’t really compete with their old employer, like user interface work or database management. But I wrote geometric modeling algorithms for CAD software, which is pretty specific. My non-compete meant that if I left the company I couldn’t do this for anyone else for a whole year because anyone who would have wanted that service from me would necessarily have been a competitor of my old employer. This pretty much tied me to the same job indefinitely. And because they knew they had me over a barrel they didn’t have to give me competitive raises. It was quite unfair.
This is a problem that needs fixing.
Bravo on taking on this issue. A new software engineering employee in my software development group within a 2000-person corporation got sued by their former employer under their non-compete. It was true that our corporation had a competing product, but our group was working on an unrelated, non-competing product. Our corporation fought it in court and eventually prevailed. This new employee was simply a software engineer — a good and capable worker, but she certainly was not a senior employee and didn’t have any exotic skills or knowledge learned at the former employer.
I’m a consultant, doing user experience design for various companies, mostly in the Boston area. I’ve been consulting since the early 90s. I work mostly on Web applications these days, but have done some UI design for hardware products as well.
I have signed a lot of agreements over the years. Some do include non-compete clauses, but not all. Because I work in many different industries, it’s never been a problem — similar work doesn’t come up frequently.
There are two clauses that concern me more. One would require me to return or destroy all material that the client gives me or that I create. The other would prohibit me from using any of my work in my portfolio (or more generally, discussing the work). In all cases, I’ve been able to have the client remove these clauses, saying that as a consultant I have to have a record of my work and discuss it. We agree that I should abide by the non-disclosure clauses and ask permission to post examples in my online portfolio.
This is similar to the non-compete situation in that we agree to abide by the NDA agreements, because it is what really matters. It occasionally takes weeks to reach an agreement, but all of my clients have agreed.
Even a six-month waiting period is a long time. Working in a field lets one learn a lot of general information about, say, HR or banking systems, as well as proprietary information about how a specific company does business. It makes sense to look for a new job in the same industry to make use of that general expertise, but a person can’t do that with even a six-month waiting period. One would have to work in a different field, perhaps not getting the same compensation.
Also, after some number of years, the $250,000 threshold will not have the same meaning it has now. Can that be indexed against something so it rises as salaries change?
It’s good that you’re taking this on.
As a graduate student I signed up for an internship at a tech company then spent a few weeks fretting over whether or not I would be able to continue my research upon return, e-mailing back and forth with the recruiter. I was currently writing code that performed the same low-level function that the company would have me work on in their code. I ended up rushing to get substantial work done before I left for the internship so the company could not claim it as their own. I did not have an issue coming back but it could also be because I ended up branching off into another area anyway.
I’m not a fan of non-compete agreements or other anti-competitive measures.
Dan, thank you. Just to confirm, we are talking 6 months from the date of severance.
Thank you, Kim.
This is an important example to share — it’s not all about high tech companies!
Thank you — this is a very concrete and important example. Representative of many people’s experience.
Yup. These agreements are sometimes used basically as a form of anti-competitive harassment — instead of just competing, employers go to court.
Hal, thank you — all good points. Sounds like you are a wise negotiator on the NDA’s, which our law would not change. Definitely we need to index the $250. Six months is long, but less than the currently common 1 year. Maybe it is still too long — open to continued conversation on that.
Wise of you to worry in advance! Hopefully, we can lower the risks for people in your shoes.
Will,
I thought I would share my non-compete story with you.
I started out of college at a small data analytics company, at a rather junior level position. As part of a large stack of paperwork, a two year non-compete was included. Fast forward a seven years, the company became successful, and was sold in a stock purchase. A new employee agreement was required, but did not include any non-compete language (nor did it state, however, that any prior agreements were voided.) I stayed on for another 2 1/2 years, and pursued another opportunity. The non compete signed 9 1/2 years ago was not brought up, and truthfully was long forgotten about, likely on both sides.
After 14 months at the new opportunity, I was approached by the founders of my original employer who started a new company, which did directly compete with my original company. I accepted the position, gave my notice to my current employer who was disappointing but supportive, and was set to start in a few days. My old employer caught wind of my hiring, and immediately issued a letter with a copy of my original non-compete, stating I would be violating the agreement.
Having resigned from my position and having the company already make plans to hire a replacement, and not being able to join my new company, I am now out of work.
From what you say, this sounds like the overuse of non-competes that we are concerned to end!
The following story was sent to me for anonymous posting. Generally, we require people to post under their true names, but in this context it seemed appropriate to allow this person to share a story anonymously.
Hang in there! Hopefully, we can make progress on this issue in this session!