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Editorial

Noncompetes should protect IP, not trap employees

January 22, 2018

Getting new employees up to speed, from the time of hiring to when they are productive members of your team takes time and money. As employees become more effective at their jobs, they help the company achieve its goals and become more prosperous. So what happens when that talented employees want to take their talents, and deep knowledge of your organization across town? It seems reasonable for a company to say, "Don't take all this knowledge you've gained here and use it against us."

Two years after the latest measure to address the noncompete agreement issue stalled out on Beacon Hill, the Massachusetts legislature again is primed to write and pass a reform law regulating aspects of noncompetes, such how long these agreements can stay in effect, who can be covered by them, and how employees under such restrictions are compensated.

The reform law still is being worked out, but the details will fall something akin to noncompetes being limited to only higher-paid salaried employees and enforceable for only three to 12 months, while workers who leave a company will receive up to 50 percent of their salary while under the auspices of any noncompete agreement. After nearly a decade of debate and false starts to reform, we think of these new provisions are reasonable and should become law.

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Common sense would suggest if a company can give new employees 90 percent of their needed training in the first week or two, pays them less than $30 an hour or $60,000 a year, or can replace them without much difficulty, then they shouldn't be using noncompete agreements. Yes, there is always the danger of smaller companies becoming farm systems for larger, higher-paying organizations (a frequent complaint of manufacturers). But in a market where unemployment is at historical lows, it can become untenable to be matching increasingly higher salary offers just to keep an employee on the bus. Good organizations know the game and work hard to have culture and other intangibles right so that money is not the sole decider in employees seeking greener pastures.

California – held up on Beacon Hill as a thriving high-tech economy – essentially does not allow noncompete agreements. However, we feel noncompetes are a legitimate way for businesses to protect their intellectual property from being used by a competitor who hires away an employee, or in the case of a startup founded by an ex-employee who is looking to pilch clients or proprietary information from their former employer. These agreements should allow some protection for the keys to the kingdom you bestow on select senior staff. Yet they shouldn't be used to trap employees in their jobs. If an employee has reached the top of their salary range for their position and you don't have the willingness or ability to promote them into a higher-paying position, then both sides need to live with the fact it is time to move on.