Do Non-Compete Agreements Hurt Massachusetts Workers?

I had to stop writing for a while because I recently joined the 10% of the population that was looking for work. Happily, my severance package was generous and I have now found a job where I’m working 30 hours a week with benefits. But I discovered two interesting local facts after being unemployed for the first time in many years.

The first is that Massachusetts still has the nation’s most generous unemployment benefits. I actually decided not to file for unemployment until my severance ran out because of the issue described in this post, but by then I had found work. The second is that signing a non-compete agreement now seems to be standard practice in accepting a job offer, and I believe this is a huge disadvantage to Massachusetts workers and entrepreneurs. I got offered two jobs, and non-compete agreements were given to me at each of them. They also came up in other job discussions where I didn't get an offer, and people I know who run local offices of major companies told me non-competes are part of the job offer.

I first became aware of the non-compete issue in Alison Lobron’s fine story in Commonwealth Magazine last summer (I got to catch up on my reading the last three months). The story details how non-compete agreements can not only trap workers in jobs they hate, but also may be stifling entrepreneurship by preventing Massachusetts workers from starting any business that could conceivably compete with their old company for months or years after they leave. And many agreements also include bans against hiring workers from the former company, or taking any type of program or intellectual property – even if it is something like a software program the worker developed by him or herself.

Most states seem to have non-compete clauses but Lobron’s article details how they are unenforceable in California. California certainly has its economic problems, but entrepreneurship is definitely not one of them. The number of startups in technology alone dwarf any other state, and most of these company founders either left their former company to start a competitor or just had a great idea and found the venture backing to start it. Naturally, the first place they tap for workers are their former colleagues who can easily jump ship because of the lack of non-compete agreements.

This is largely not possible in Massachusetts, where restrictions in non-compete clauses can be harsh. Recently two PR agencies went to court over a former employee allegedly breaking a non-compete agreement. The case has not been decided yet, but the contract’s language – not working for another PR firm within 50 miles for six months – is not unusual. Restrictions like that can put a damper in any employee’s job search, even if they want to leave on good terms.

New restaurants are founded all the time in Boston, mostly by sous chefs who want to own their own place and cook their food their way. What if there was a non-compete clause in the restaurant business (please tell me if there is) and sous chefs were forbidden from cooking at another restaurant within 50 miles for six months? It would sound ridiculous. And it is ridiculous. Yet workers – especially those who are unemployed or looking for their first job – are forced to sign non-competes that handcuff them to companies or prevent them from looking at competitors that might pay and treat them better. They often have no choice. In this economy Massachusetts needs good new businesses, and workers should not be restricted from their livelihood if they want to leave.

My lawyer told me there is always a way to go around a non-compete. This can include paying someone as a consultant until the time limit expires, or having your colleagues contact you for a job if you are forbidden from soliciting them. But not everyone can afford a good lawyer, and local businesses and workers shouldn’t have to resort to loopholes. And if an employee is fired or downsized, the non-compete should immediately become null and void.

Hearing vs. Listening

I’ve talked enough in the last few posts about anti-incumbency and mad voters driving recent election results from Virginia to Massachusetts. Here in the Bay State, some politicians seem to listening. Here is Rep. Stephen Lynch (D-MA, 9th district).

“I think there is a message there and the people of Mass want us to listen. They are not happy about the economy. They're not happy about this health care bill. So they want us to listen.”

But then there’s this from House Speaker Nancy Pelosi:

You go through the gate. If the gate's closed, you go over the fence. If the fence is too high, we'll pole vault in. If that doesn't work, we'll parachute
in. But we're going to get health care reform passed for the American people.

And this gem from The New York Times:

But it should not be impossible if Congressional Democrats and the White House show courage and creativity. Health care reform is too important to throw away,and it is not too late to persuade voters that it is in their interest.

This is the difference between listening to voters, as Rep. Lynch seems to be doing, and just hearing noise as Pelosi and the Times editorial page does. I had cited the Suffolk poll the day before the election as the bellwether to watch. Not only did it nail the election results, but also cited that 51% of Massachusetts voters oppose the health care plan and 61% said the country cannot afford it. And this is in Massachusetts, which already has a universal health care mandate!

Much has been written about the health care bill legislation and debate being conducted behind closed doors, and only getting passed with sweetheart deals to specific senators. The lack of transparency has only exacerbated public opinion against the bill. The health care debate was never properly communicated and sold to the public in the first place.

Should Democrats not listen to the voters of the “blue” states of New Jersey, Virginia and Massachusetts, it is proof they have no interest in what the public has told them. The American people do not want this bill, and if the majority party covers its ears and keeps ignoring what the voters are telling them, prepare for a GOP resurgence in November.

Roll Over Ted Kennedy

Once again, the political future hangs in the balance of a Massachusetts Democrat. I would not be at all surprised if history repeats itself again. Mike Dukakis and John Kerry were both able to snatch defeat from the jaws of victory, and Martha Coakley looks ready to do the same. What would Ted Kennedy say?

I first met Scott Brown a couple of years ago at a local event and my first thought was, “This guy is way too smart to be a state senator.” When he announced his candidacy I didn’t think he had a shot at winning, but didn’t think Coakley would underestimate him. I was wrong on both counts – Brown has campaigned hard (I’ve run into him twice by chance as he was pounding the pavement) and Coakley took the race for granted. The polls have been everywhere, but I’d place my money on Dave Paleologos’ Suffolk poll, which showed Brown at 50%, Coakley at 46%, a libertarian party at 3% and a jaw-dropping 1% undecided. Statistically it’s a dead heat, but that low undecided vote doesn’t give anyone much swing room.

How could this happen in Massachusetts? First, there is the Occam’s Razor principle that I’ve already discussed – Brown was a better candidate and ran a better campaign than Coakley. But you also need to ignore the “Bluest of Blue States” conventional wisdom. Massachusetts is a blue state for presidential elections, but all other politics is local and there is a long history of Republican governors and independent voters here in Massachusetts. If you look at ballot questions over the last two decades Bay State voters have abolished rent control, refused to let supermarkets sell alcohol, rolled back income taxes and refused to let day care center operators unionize. Does that sound like a blue state to you?

I believe Coakley also ran into the anti-incumbent buzzsaw that has sliced up so many elected officials the last two cycles and will likely reoccur this year. Look again at the Suffolk poll and see how many voters dislike the president’s health care plan, think the state is on the wrong track and dislike Governor Deval Patrick, a close Obama aide who also will face an uphill election battle. And those are people in Massachusetts! This is less about which political party has the upper hand and better platform and more about who is currently in office when the voters take their frustrations out on the ballot box. The Democrats benefitted the last two cycles, and it’s quite likely the Republicans will benefit this year.

The race will be close and it could come down to turnout, but I just saw two ads that almost say it all. The first was Scott Brown driving around in his truck meeting people in Worcester. The other was a 527 ad by a liberal group just as heinous as the Swift Boat ads, claiming that Brown will roll back a woman’s right to choose. In the current economy with unemployment being what it is, health care and financial bailouts dominating the news and a huge anti-Beacon Hill backlash evident, it’s safe to say abortion is pretty far down the list of voter priorities this year. How come Team Coakley can’t figure that out?

More Info: Yesterday, Coakley appeared with President Obama in Boston. Scott Brown appeared in Worcester with Curt Schilling and…Doug Flutie! Guess who had a larger crowd?