As lame duck initiatives go, the effort by Governor Deval Patrick to outlaw non-compete agreements as reported in the Boston Globe is one of the more contentious and interesting. Non-compete agreements are employment clauses imposed on employees by corporations that restrict the employees from working for a competitor for a period, like a year or two. It’s a political science mini-lesson in itself: political culture clashes, demographic change, political economy, interests, symbolism, and more. What fun!
Who wants to do away with non-compete agreements? Well, innovators, entrepreneurs, youthful techies – the young guns of the economy. You can guess who wants to keep non-compete agreements, — larger, stodgier firms, albeit some of these established businesses are in the tech industry themselves like EMC Corp. An attorney who represents small business spoke up in favor of the non-competes too, remarking that the system has worked well in New England for 200 years. On the other hand, we are a bit past non-competes for shop girls in the Waltham mills two centuries ago.
In addition to big vs. small, young vs. old, established vs. entrepreneurs, we have a political culture clash in that those who favor the change believe that Silicon Valley has an advantage over Massachusetts because non-competes are illegal in California. That promotes openness, transparency, ideas developing and clashing and transmuting and leading to new and more innovative approaches. This isn’t California, it’s Massachusetts where in the political world “he wouldn’t tell you if your coat was on fire” is high praise indeed. As much as we hate change here, Governor Patrick believes it may be time.
Let’s cast this in favor of something we all profess to care for, say the advocates of change – freedom:
This is just about allowing people to have the freedom and flexibility to pursue the best opportunities,” said Jeff Bussgang of the venture firm Flybridge Capital Partners, who has spoken to Patrick directly.
Who can argue with that? Don’t we treasure freedom and believe in free enterprise?
Well, we praise competition but work very hard to make sure we limit it in our own fields. To paraphrase Warren Buffett if you own the only bridge from Cambridge into Boston and can charge a toll you are in pretty good shape indeed. Practices that make it hard for vibrant competitors to enter the field – regulation for instance, or limiting access to the labor force – can make sense for established businesses. Remember years ago when regulation slayer Governor Bill Weld tried to do away with board and commissions that regulated hair dressers, plumbers, etc.? Let the market rule! Not so fast – those regulatory bodies proved popular with the regulated themselves, who appreciated their role in limiting access to new entrants.
Another bad sign for the EMCs of the world is that the Massachusetts High Tech Council seems ambivalent about non-compete agreements. When an industry is divided, maintaining the status quo is made that much more difficult.
Then there are the wonderful stories in favor of Gov. Patrick’s legislation from Globe correspondent Scott Kirsner. We understand politics through symbolism and stories, and Kirsner has some good ones against non-competes. There’s the Weston PhD working with a California start-up who wants to open a Massachusetts branch but can’t because the employees he needs are shackled by non-compete agreements. In California, according to Kirsner, Pinterest poached Facebook’s employees – and both did very well. Out of work hair stylists, even teenage camp counselors have all been held back by non-compete clauses! And somehow the EMCs of the world do fine in California, where no one can hold back software engineers or camp counselors.
For those looking for footnotes, this is a blog post; but read Deborah Stone, Policy Paradox and John Kingdon, Agendas, Alternatives, and Public Policy. You’ll have more enjoyment with stories about issue like non-compete clauses.