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.