To Compete or Non-Compete, That Is the Question

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.

About Maurice T. Cunningham

Maurice T. Cunningham is Associate Professor of Political Science at the University of Massachusetts at Boston. He teaches courses in American government including Massachusetts Politics, The American Presidency, Catholics in Political Life, The Political Thought of Abraham Lincoln, American Political Thought, and Public Policy. His book Maximization, Whatever the Cost: Race, Redistricting and the Department of Justice examines the role of the DOJ in requiring states to maximize minority voting districts in the Nineties. He has published articles dealing with the role of the Catholic Church in Massachusetts politics and on party politics in the state. His research interests focus upon the changing political culture of Massachusetts.
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4 Responses to To Compete or Non-Compete, That Is the Question

  1. Christopher says:

    It’s hard to imagine this was ever legal. Seems to me once you leave employment you should be completely free to seek any other employment.

    • Dr. Ed says:

      The issue I always had involved situations where the employer terminated employment and then was able to preclude employment by anyone else — this would even be in violation of a creative reading of the 13th Amendment. While there is that provision that arguably exempts “indentured servitude” from that which is prohibited, I don’t believe that either “indentured servitude” or compelled employment to pay off debts to the “factory store” is permitted today.

      I am neither a lawyer nor is labor law my forte, but something tells me that it isn’t. If I’m right on that, and in light of the fact that ability to earn a living is a necessity, then would not the same principle(s) extend to preventing someone from being employed elsewhere? That’s why I don’t think these things are legal — and if they are, why haven’t they been used by management in labor disputes?

      I’s one thing to have a “lockout” or to hire “replacement workers” — to tell the strikers that they will never work at that factory again. It’s a much higher level of coercion to tell them that they won’t be working anywhere else either, and when you take a look at the number of different jobs that are in a factory, there are very few things that one could do that wouldn’t be covered by a blanket noncompete agreement.

      Hence you’d be unemployable — and as employment is a necessity, how is that different from indentured servitude? In either case, you are compelled to work for that employer.

  2. Dr. Ed says:

    I’m going to bring a real situation in here, one where I left a job for a very legitimate reason yet would have (theoretically) been very badly burned by a noncompetitve agreement and I don’t think there is any exemption for a situation like this.

    I was employed by a contractor that was employed by what was then the SD Warren paper mill in Westbrook, ME. I quit the first day — it wasn’t even the hardhat literally split off my head as much as the boss’ response to it which told me that I didn’t want to be working for him. Let’s assume, for the sake of argument, that I’d actually been employed by SD Warren and not Industrial Vacuum Inc — in an earlier era I would have been. (Industry eventually realized that it was cheaper to hire a contractor to come in with their people and equipment than to do certain things “in house” and buying expensive equipment that would only be used occasionally.)

    I’m thinking of that particular mill, there were an awful lot of different “trades” employed and if the noncompetitive agreements that I’ve seen were written relative to that mill (which it would have been), I would have been barred from almost any blue-collar job which is an issue in light of the facts as I explain them below.

    We were scraping what was essentially lint off the walls of what was essentially the drier shaft of a paper-making machine. (Think of your clothes drier being vented up through the roof of your house rather than out through the wall, and because of both the volume of moisture involved and the amount of air being moved, being a 10′ by 10′ square — that went up about five floors to the roof overhead.) We were using something similar to the tool homeowners use to chop ice off their sidewalks — a metal blade with a 6′ wooden handle.

    A stoned-out-of-his-mind co-worker was up on the roof scraping from there while I had climbed halfway up the shaft and was scraping from there. I was at least 30 feet above the factory floor, probably closer to 50′, and the only protective gear I had was the plastic hard hat on my head. As instructed, I’d used the connecting joints and other outcroppings to climb the shaft and my weight was being supported by the outside of one foot and one hand — I had neither a safety harness nor safety net below to protect me in the event I lost my grip, a serious OSHA violation, and wasn’t particularly happy about the chunks of lint that were falling on/around me, which was probably also an OSHA violation, particularly since I didn’t have a respirator.

    The co-worker dropped his scraper which (I believe) hit the visor of my hard hat, I realized that had the scraper been a few inches over, I’d be dead — memory is that the hardhat was broken when I later found it, and that along with how it came off my head is all I really know — but I think it is reasonable to conclude that had it hit me on the top of my head, that or the subsequent fall likely would have been fatal.

    I wasn’t particularly happy about that, but I was even less happy when the boss said that it was a “good thing” that it had hit me because otherwise he’d have had to pay for damage to the equipment below. It was a significant amount of money (memory is five figures) but when I realized that he was more concerned about having to pay for something than my death, I also realized that I didn’t want to be working for him.

    Had I been employed for the required number of months, I would have been eligible for unemployment compensation even though I had quit — it would be construed as a “constructive dismissal”, it would be hard to argue that something this outrageous wasn’t. Yet wouldn’t I be bound by a noncompetitive agreement?

    And in the case of the SD Warren Mill, that would include just about every blue collar job that I can think of, including driving a truck. Hence had I not been a 20-year-old college student doing this as a summer job, a noncompetitive agreement could preclude me from being able to work AT ALL — anywhere, doing anything.

    Even though I had a very legitimate reason for leaving. And even if a court would not enforce an agreement under these circumstances, and well might not, what employer would take the risk of litigation (and the related expense) when they could hire someone else? Die on the job here or starve to death — what a choice…

  3. Dr. Ed says:

    I want nothing to do with the left-wing looser on this site — this is harassment and will be pursued CRIMINALLY as such as necessary — LEAVE ME ALONE!!!!

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