Noncompete Madness

contractHere in California, we don’t have to give much thought to noncompete agreements: contracts by which, typically, an employee agrees not to go work for a competitor or start a competing business for a certain period of time after leaving a job with the employer. The reason? These contracts are illegal in California. California law plainly states that a noncompete is an impermissible effort to limit the employee’s ability to earn a living in his or her chosen field. California employers have tried to get around this prohibition in different ways over the years, without success.

An article in the New York Times illustrates how far employer overreach can go in states that don’t protect employees in this way. The article (“Noncompete Clauses Increasingly Pop Up In Array of Jobs“) describes noncompete arrangements mostly in Massachusetts; the employees asked to sign them include a hairdresser, a pesticide sprayer, an intern at an electronics firm, and a camp counselor. And, the article explains that some employees are driven out of the workforce altogether for the length of the noncompete, because they fear being sued if they take a job in their field near their home. (Believe it or not, the hairdresser actually was sued for going to work for a nearby salon. And he lost.)

Employers use noncompetes for a variety of reasons. Many have a legitimate concern with protecting their trade secrets. However, some employers cited in the article took a broader view of their rights. Because they had invested in employee training, for example, or had a particular business model that was successful, these employers felt entitled to avoid giving these assets to competitors. The problem is that, in these cases, the “assets” are people, with careers they have invested in, bills to pay, and homes they don’t want to leave. Forcing them to change fields, move, or spend a stint unemployed in order to get a job is problematic at best.

A spokesperson for a group that opposes proposed protections for Massachusetts employees in this area said that noncompetes are working just fine, “to the seemingly mutual satisfaction of employers and individuals.” That seemingly says a mouthful: What interest would an employee possibly have in signing a noncompete, significantly limiting his or her rights in the future? Typically, employees sign them only because they are required to do so in order to get or keep a job. These agreements offer no benefit to employees, only to employers. This doesn’t make them illegal (in most states), but it should at least change the terms of the dialogue a bit.

If you’re faced with a noncompete agreement — or your company plans to require employees to sign one — check out our article Understanding Noncompete Agreements.