Much has been written about non-competes in MA and whether our tech sector is at a disadvantage compared to CA. The debate is moving slightly forward (and to the side, unfortunately) with recent comments from the state, which Xconomy covers.
I can see both pros and cons but there is no doubt that non-competes hinder labor mobility and startups’ access to talent. My experience from the recent past:
- One lawsuit preventing an engineer from joining one of my companies. The judge upheld the non-compete. The engineer had a rare and very valuable skillset acquired over decades in the industry. He worked with me in a previous company. I seriously doubt he learned that much new material at the company that went after him. The opposite is probably true–he contributed tons based on what he already knew. That didn’t matter. The domain was deemed “close enough.”
- Two execs barred by former employers from discussing potential CEO or executive chairman roles at another one of my companies looking for funding. No, the company is not a direct competitor of their previous employer. It’s more likely a future partner. Again, however, because the domain is close-enough, the non-compete may be enforced and nobody wants to go to court or have their reputation tarnished by a previous employer talking behind their back about how they violated their non-competes and acted without integrity. It’s hard-enough to find experienced C-level leadership willing to jump into companies before investment, let alone leaders with any specific domain experience. Restricting the pool further leads to fewer companies getting funded, less innovation, less jobs and less revenue for the state.
In technology, velocity of execution is everything. The pace of innovation is accelerating. Twenty years ago, when release cycles took 18-36 months, a one year non-compete wasn’t such a big deal. Today, when agile startups can ship every week, a year-long non-compete can have a significant impact on a company’s ability to compete for and recruit great talent and on individuals’ ability to apply their talents and skills early in the development of new markets.
The other issue is the scope of non-competes. Since the typical wording is along the lines of “don’t do anything similar to what your previous employer did at the time you left,” it risks putting employees in a position of ever-expanding restrictions due to industry consolidation. Startup X is in the block level continuous data protection business but it gets acquired by EMC which is in anything having to do with data and storage. Startup Y is in the mobile geolocation ad targeting space but is acquired by Microsoft which is in everything that’s big.
I wish more people realized that while non-competes haven’t changed that much over the years, the tech industry has. I can appreciate some arguments for non-competes but, if they were to stay, I’d like to see them capped to a reasonable timeframe of 3-to-6 months max and scoped tightly to a core domain.