Careers: Don’t get burned by a noncompete
“Does your employer have the right to limit where you decide to work next?” asked Scott Kirsner in The Boston Globe. In most states, the answer is basically “yes.” Noncompete agreements that bar workers from taking jobs at other companies in the same line of business cover about a fifth of the U.S. workforce. Now Massachusetts is trying to rein in their spread. Thanks to a new state law that goes into effect Oct. 1, employers there will have to tell prospective workers about a noncompete when making them a formal job offer, or at least 10 days before they start working, instead of hiding it in “a stack of other paperwork for you to sign on your first day.” The noncompetes also can’t cover hourly employees, and can’t last longer than a year. That’s a plus for workers, because the length of time these agreements stay in force has crept upward. Noncompetes in the food and wine world “can be particularly cruel,” said Jennifer Gould Kiel in the New York Post. One winemaker who sold his company had to promise not to make another zinfandel for eight years. “I’ve learned a lot about zinfandel, and a lot about myself, in that time,” he says.
The original idea behind noncompetes made business sense, said Sabri Ben-Achour in Marketplace.org. Companies don’t want to share “trade secrets with an employee, only to have that employee take them to a competitor, or become a competitor.” That’s why corporate executives are often made to sign these deals. But noncompetes have also been imposed on fitness instructors and hairstylists—to stop them taking clients to a new employer—and even on dog walkers and kids’ soccer coaches. Economists believe that the agreements suppress wages and paralyze the labor market by discouraging employees from searching for a new gig—and a higher salary. California’s strict limits on noncompetes are often credited with helping propel the free flow of talent that created Silicon Valley. After Hawaii banned noncompetes for tech workers in 2015, the wages of new hires climbed 4 percent and the mobility of workers in the tech sector increased.
If companies insist on noncompetes, said The Economist, they “should be negotiated before employees accept a job offer and they should apply for short times.” Noncompetes might be less harmful if firms that used them had to “pay extra to compensate employees for signing away some of their rights.” Workers who found out about a noncompete only when they started a job earned 10 percent less than those who knew about it in advance. So ask before you take a job, while you are still able to negotiate the terms.