Massachusetts lawmakers are considering a ban on noncompete agreements. Those are the clauses in employment contracts that bar an employee from working for a competitor, sometimes for several years.
The debate pits many established Bay State corporations against Greater Boston’s tech sector.
'People Are Just Going To Move To California'
Last month, James Mitchell gave his two weeks notice. The 32-year-old told the Boston Web marketing company he worked for he was leaving to join a startup. And he was sure that he was not violating the noncompete clause in his contract.
"I have a list of 37 companies that I’m not to go work for," he said. "The company I chose wasn’t on it. My actual boss who I resigned to hadn’t even heard of the company I was going to. And then all of a sudden in the legal documents I got it became a competitor."
The debate pits many established Bay State corporations against Boston’s tech sector.
Mitchell’s first day at his new company, set for last week, never came to be. His previous employer decided to enforce his noncompete agreement. Mitchell said he can fight his work ban in court, but it could cost tens of thousands of dollars and take months, if not years.
"People are just going to move to California," he said. "At the end of the day, they’re not going to deal with this. And we don’t have to. Because there’s plenty of good companies in California that pay and they don’t make you sign one of these noncompetes."
Opponents of noncompete agreements say they stifle mobility of the labor force and are a drag on the fast-moving tech economy.
Gov. Deval Patrick agrees. His administration is asking state lawmakers to ban noncompetes, like California does. Massachusetts’ economic development secretary, Greg Bialecki, says they’re a crutch for businesses.
"If I run a workplace, I don’t have to work as hard to keep my employees happy and motivated because I know none of them can leave, and if they leave I'm going to threaten to sue them," Bialecki said. "And so their only choices are to leave their profession and work in a different field, or leave the state."
Supporters of the noncompete agreements, though, say they need the option.
"If you don’t like noncompetes, don’t use them," said Chris Geehern, who's with Associated Industries of Massachusetts, a trade group that represents thousands of Bay State companies, including manufacturers.
Geehern says they need to have the option of noncompetes to protect their competitive edge.
"These companies have invested a lot of time and a lot of money into proprietary information," he said. "Whether it’s computer code, whether it’s genome sequencing, whether it’s a new formula for an industrial coating, they’re using noncompetes to make sure that those assets don’t walk out the door."
Noncompete opponents say proprietary trade secrets are covered under other contracts, such as nondisclosure agreements. And they say if it’s really about trade secrets, why are noncompete clauses showing up in more sectors of the economy, including service jobs?
Pushback Against A Growing Trend
Colette Buser, 19, has worked for the last three summers at LINX, a camp for kids in the Boston suburbs.
Buser said the part-time job paid minimum wage, and this summer, she wanted to work for another camp. But LINX evoked her one-year noncompete agreement. The head of the company told The Boston Herald the techniques and training are proprietary. Buser disagrees.
"If I had gone to a new camp, I don’t think that LINX would have suffered because I had taken their secrets," she said. "I think that most of what I did at camp was common sense and just knowledge and working with kids. I like working with kids."
Without being able to work for that other camp, she’s been babysitting this summer instead.
The proliferation of noncompetes underlines a symptom of the transition to a knowledge economy, said Suffolk University business school professor Jodi Detjen.
"I think the big companies are really trying to protect what they have, and they’re very afraid of this innovative disruption that’s happening all around them," she said. "But let’s be real. When you don’t allow people to be creative and move around and do all these things, you can’t innovate. It’s the exact opposite of what they’re trying to achieve."
State lawmakers appear to be reluctant to ban noncompetes outright. They’re considering limiting them for salaried workers to six months and banning them for hourly workers.
Many in Boston’s tech sector say that would be an improvement, but that six months is still an eternity in the startup world.
This segment aired on July 7, 2014.