Are Employee Non-competes Obsolete? [Oct. 9, 2014]
By Gwen Moran
These once-ubiquitous agreements may be hurting both companies and employees more than they're helping. Here's what works instead.
Thomas Erickson had never really given much thought to employee non-compete agreements.
But recently, the CEO of the Burlington, Massachusetts-based software company Acquia, Inc., says he's been getting some push-back from new hires who weren’t happy signing contracts that restrict them from working for competitors or within the same industry after they leave their jobs.
After a few conversations with his human resources department, Erickson spoke with his executive team and abolished employee non-competes at the company for all but a few senior executives. Out of Acquia’s more than 500 employees, roughly five or six are still bound by their non-compete agreements, he says.
At the same time, Massachusetts Governor Deval Patrick was challenging longstanding non-compete legislation in the state. In late July 2014, after heated debate, the Massachusetts legislature failed to pass new legislation vastly limiting these agreements. But Erickson and groups like the New England Venture Capital Association are still trying to make the case that they’re obsolete and bad for business.
“There are cases where technical teams have worked for very poorly-run companies, going the wrong direction. They build up a lifetime of expertise, but when they leave the company, they’ve been prevented from using that expertise and have to change their line of work and take salary cuts,” Erickson says.
ARE EMPLOYEE NONCOMPETES OBSOLETE?
While Governor Patrick’s push to ban most non-competes grabbed headlines, there isn’t exactly a national rush to get rid of them. California bans non-compete agreements, except in some very specific circumstances. A handful of states, such as Florida, Virginia, and Washington, specifically prohibit overly broad non-competes.