For some years, Kevin Johnson, who lives in Lexington, Massachusetts, didn’t pay much attention to the noncompete clause included in the fine print of many employment agreements.
Then, several friends in Michigan (where he had grown up), were forced to sign them—to keep their jobs, after the state legislature inadvertently reversed a longtime ban on noncompetes. The video production company where one friend was working required all its employees to sign noncompetes—ultimately a major factor in his move to another state.
“It’s hard to imagine that Michigan’s former ban on noncompetes didn’t contribute to the state’s dominance of the auto industry from its early entrepreneurial start,” says Matt Marx, an associate professor of strategy and innovation at Boston University’s Questrom School of Business. “The main designers of Henry Ford’s Model T were the Dodge Brothers, who honed their skills at Oldsmobile, and couldn’t have been hired by Ford—under a strict noncompete law. They then went on to found their eponymous car company, which could have been blocked in most other states, except California.”
Active since 2007 with noncompete reform in Massachusetts, Kevin Johnson redoubled his efforts—after his son was required to sign a one-year noncompete agreement for a three-month summer software internship—a situation that has become common. Johnson has worked continuously with state legislators to limit their use and impact on employees. An IEEE Member, he was honored earlier this year with the IEEE-USA Award for Distinguished Public Service—for his continuing leadership in furthering reform of noncompete agreements.
The original purpose of noncompete agreements was to protect company secrets when an employee—usually at a senior level—left to work for another employer in the same, or an allied, field. But as a May 2017 article in The New York Times points out: a broad shift has occurred. Companies now claim ownership over employees’ work experience, as well as their work. In turn, this activity has accelerated the growth and the legal enforcement of noncompete agreements. Recent noncompete cases that were decided in favor of the former employer include a blue-collar textile factory worker, and an employee of a national chain of sandwich shops.
How pervasive are noncompete agreements in the U.S. economy? A 2016 United States Treasury Department report indicates that some 37% of American workers have signed noncompetes at some point in their careers. Another recent survey shows that 20% of workers in this country are currently bound by a noncompete clause. Moreover, only three states ban noncompetes: California, North Dakota and Oklahoma.
“The use of noncompete agreements hits Massachusetts especially hard because of its historic role in the tech world,” says Kevin Johnson. He points out that from the 1960s through the 1980s, the fabled Route 128 outside Boston was considered the heart of the industry; such then-giants as Digital Equipment, Wang and Data General had their headquarters there.
“It’s ironic that the most outspoken opponents of Massachusetts noncompete reform are some corporate attorneys, who are exempt from noncompetes in all 50 states, under laws passed at the behest of the American Bar Association,” says Johnson. “Those same corporate attorneys personally benefit from enforcing noncompetes. According to the New Jersey Law Journal, ‘It’s not only the substance and effect of noncompete agreements, but also disputes over where and how to adjudicate them, that breeds litigation, and thus work for attorneys.’”
Along with many economic and labor law experts, Johnson believes that the prevalence of noncompete pacts in Massachusetts is a huge factor working against further technological growth—to the advantage of Silicon Valley. Because California prohibits noncompete agreements, engineers there are free to follow their entrepreneurial ambitions, as well as join other companies.
According to Evan Starr, an economist at the University of Maryland’s Robert H. Smith School of Business, Massachusetts employers would pay technical workers about seven percent more if the state’s noncompete practices reflected those of California. Unlike states such as Massachusetts, California’s Silicon Valley, and other regional economies get a boost when noncompete clauses are not part of an employment agreement.
Johnson, who has worked for both large tech companies and small startups, is working for change in Massachusetts—and perhaps elsewhere. What’s more, he’s using a strategy not commonly found in an engineer’s vocabulary: labor organizing. Although the Massachusetts legislature has debated bills that would reform the law governing noncompetes for some years, opposition from a few of the state’s large companies—notably EMC, one of the biggest tech firms in Massachusetts — has slowed progress.
In early 2016, with advice from a team of labor law experts, Johnson formed the Employee Association to Renegotiate Noncompetes (EARN) to help employees eliminate their noncompetes, one employer at a time. It’s a so-called pop-up union—a single-issue labor organizing campaign. Organized under the National Labor Relations Act, the pop-up concept is designed to engage with a company on just one issue—and then dissolve, Johnson says.
Later in 2016, Johnson implemented the first pop-up campaign—during the $67-billion merger of 70,000-employee EMC, located in Hopkinton, Mass., with Dell. Despite EMC’s prior record of public opposition to meaningful noncompete reform, when the Dell EMC merger deal closed last September, the company’s president said they would be more “thoughtful and careful” in their future use of noncompetes.
At present, Johnson is mainly focused on two areas: in Massachusetts, where a state committee will soon hear several noncompete reform bills proposed during the current legislative session; and in helping tech workers elsewhere in the nation adopt pop-up unions, as a tool to help abolish the widespread use of noncompete agreements.
In Massachusetts, Johnson says there’s bipartisan support in the legislature for meaningful reform, including the possibility of enacting “garden leave.” It would provide at least partial salary for employees after they leave their employer, as long as they are restricted in where they can work. Mandated in most developing countries and China, garden leave originated in Britain.
“EARN’s experience with EMC shows that pop-up unions can be effective to stem the use of noncompetes elsewhere in the United States,” states Johnson. “We welcome hearing from skilled, non-supervisory employees, including researchers and those with advanced degrees. If they are secure in their careers, but frustrated that they can’t change jobs due to their noncompetes, EARN may very well be able to help them.”
“A single-issue union,” he concludes, “can help tech employees benefit from union organizing, without the long-term obligation to a union. This is simply a tool to help them end noncompetes.”
Kevin Johnson can be reached at kj@noncompetes.org.
Helen Horwitz is an award-winning freelance writer who lives in Albuquerque, N.M. She was with IEEE from 1991 through 2011, the first nine as Staff Director, IEEE Corporate Communications.
