Sometimes Boston feels like the city of inferiority complexes. For years it was the Red Sox thing, feeling bad about coming in second to New York in baseball. Now, it seems to be the Silicon Valley thing, coming in second to California in technology companies and startups. In both of those cases, it seems the object of the complex is blissfully unaware that Boston is pining after its spot.
I attended a seminar at Sloan called Talent Wants to be Free with attorney John Bauer of Robinson & Cole, entrepreneur Branko Gerovac and Sloan Prof. Matt Marx, which seemed to be about the use or misuse of con-compete agreements but turned out to also be a lot about the unfavorable comparison of the Boston metro area to the SF Bay area in tech terms.
Mainly, I want to talk about the non-compete stuff, but I have to quote a couple of the comparisons made on the East coast – West coast discussion. It turns out that Middlesex county MA (roughly the North side of the Charles West to Hopkinton and North to the NH border, including Cambridge, Somerville, and Waltham but not Boston) is very similar to Santa Clara county CA (the area around San Jose, including Sunnyvale, Mountain View and Cupertino but not San Francisco) in terms of population, education and even home prices. But Middlesex has lagged Santa Clara in terms of tech jobs and startups for 20 years. Why? Lots of reasons, some of which were discussed over at BostInnovation recently, but let’s get back to non-competes, which might be one of them.
Prof. Matt Marx (it must be awesome being a business professor named Marx) showed some data from his exploration of non-compete agreements and I found two bits of his evidence particularly damning:
Non-competes are signed disproportionally by younger and less-experienced employees. Older and more experienced employees are more likely to negotiate or even refuse these agreements. You have to figure the older and more experienced folks know something that apparently their juniors don’t.
Non-competes are often sprung on new employees late in the process. Note that I said “employees” not “candidates.” What does it mean when this document isn’t disclosed or even discussed until it’s pretty much too late? A sizable number of Marx’s respondents reported being given the agreement on the first day of work. By then, they had already exited their previous job and (if they were the ethical types) turned down any other offers they had on the table.
I take the latter point as evidence that non-competes are being applied in a stealthy manner, the way you go about doing things when you know they’re a little shady. It can’t quite be called coercive (that would be illegal) since you can always not take the job or quit it. I take the former point as evidence that these agreements are not in the best interest of employees, even when you take into account the honor of taking the job.
It’s got to be hard for Massachusetts companies to give up this seeming advantage, even the ones that want to, because their competitors may still retain it. Of course, in some sense, MA companies are competing with CA companies for talent, albeit only the sort of talent that’s considering a 3,000 mile relocation. What’s interesting is that Google’s MA office is sticking with the California model and not doing any non-competes with employees. I doubt they’re suffering for it.
I’ve only scratched the surface here, but I suggest MA employees in the process of a job change or even just thinking about one should do these things:
- Discuss your current non-complete agreement with a lawyer. It’s not as expensive as you think, and it could certainly save or earn you a lot of money in the future.
- If you’re at the offer stage with a new opportunity, ask to see the non-compete (if any) before you sign, and discuss it with a lawyer. Do not assume there is no agreement if they haven’t mentioned it.
I’m not a big fan of excessive regulation on legal agreements between rational parties, but what I heard at the panel suggests that non-compete agreements are neither as controlling or enforceable as employees often think, nor as helpful as companies often think. It looks like without these agreements, more business grow faster and employees earn more. Exactly how can that be bad?