To Support Innovation, End Non-Competes

Today the Massachusetts Joint-Committee on Labor and Workforce Development is considering a series of proposals to modify non-compete and trade secret law in Massachusetts. One proposal in particular (bill S. 1020) would abolish non-competes in the Commonwealth entirely. I’m a big supporter of this idea, and just sent a letter to the Committee expressing as much.

My feelings on this are largely channeling the feelings of my clients. In my clinic I represent solely college and graduate students with their innovation-related legal questions. When I started the job I expected (and got) a pretty healthy mix of intellectual property, data privacy and security, computer trespass, and media law questions.

What I did not expect—and certainly did not expect a full 10% of all cases to be—was concerns about NDAs and non-competes. Time and again students come to the clinic with concerns about how a summer or part-time job’s non-compete will impact their work, or whether the non-compete their first job out of school is offering will mean they cannot change companies if they get there and find a toxic or hostile work environment, a real and valid concern in the technology sector.

This impacts clients in many different ways. Over the past year I’ve worked with:

  • an undergraduate student, offered a three-month summer job with a one-year non-compete, which would have precluded the student from taking a job in their field the following summer;
  • a graduate student, asked to sign a non-compete to take a summer job, which the employer indicated would preclude the ability of the client to continue their scholarship in this field upon returning to school in September; and
  • a graduating masters student who, after considering job offers in California and Massachusetts, took the job California in part because they feared the Massachusetts job would have locked them into an unwanted working situation due to the non-competition clause in the agreement.

And it’s hard to understand what these clients go through as a lawyer. Massachusetts lawyers, thanks to our ethics rules, do not typically face any sort of non-compete. Perhaps it is because we do not experience it personally that legislators (many of whom are lawyers themselves) will turn around and willingly impose this burden on others.

There are economic arguments against non-competes. Scholars like Matt Marx have demonstrated how non-competes can lead to a “brain drain” of employees to another state. The Department of Commerce’s review emphasized the evidence that non-competes depress wages. You could even argue that non-competes played a role in California’s out-performance of Massachusetts in technology in the 1980s and 1990s—why it’s HBO’s Silicon Valley instead of HBO’s Route 128.

But I see this less economically and more on the personally. From counseling numerous clients in negotiations around non-competes I’ve been struck by deeply and personally this affects young technology workers. I see the non-competition clause as a contractual manifestation of the power imbalance between an employer and an employee. In effect, they force an employee to either put up with a workplace or pick a new career. After all, few graduating students could afford to not work in their field for two years (the present standard duration in Massachusetts), one year (proposed by some of the pending bills), or even three months (proposed by another bill). The prevailing fear I have heard from my clients is that they had better start their career at the right place, for a non-compete may preclude a second chance at another company.

It is also a galling to see how many companies use these documents as a vehicle for a weird form of dominative crocodile tears. Many of my clients report their hiring manager expressing sympathy or regret at asking a new employee to sign an aggressive non-compete. They’ll tell the young client that they cannot change the term because the clause comes from their boss, CEO, legal department, outside counsel, corporate parent company, or other person too busy or far away to negotiate with the employee. They will say that they doubt said unaccountable person will ever enforce the clause—just so long as the employee does not take a job in too close a technology, or with a particular company, or somehow irritate the company with their behavior, or tell anyone about the reason why they departed. The non-compete can thus transform into an anti-whistleblower action, a vehicle for monopolistic power, and a mechanism of worker control, all through its open-ended nature.

But most striking to me are just how many clients are afraid to even negotiate a non-competition clause, out of fear that any pushback will lead the employer to rescind their offer. It feels different to many of them than negotiations over salary and benefits, even after my clinic students and I talk with them and offer to negotiate directly or indirectly on their behalf. This is why I don’t support the trend toward solving this problem by requiring employers to disclose that an employee can have counsel review the provision as a condition on its effectiveness. This strikes me as one of those moments of transparency that won’t actually lead to positive benefits.

In a job where I regularly get to work with artificial intelligence projects, drone flights, elaborate data science experiments, and FOIA requests, non-competition doctrine is definitely not the most inviting legal topic I see. But often it’s the most important, and the Commonwealth could take a big step toward protecting future innovative workers this week by ending these agreements in their entirety.

Statehouse photo CC-BY-SA 2.0 Flickr user ctj71081

Director of the BU/MIT Technology Law Clinic. Technology law, intellectual property, and freedom of expression.