A non-compete prevents you from going to a competitor when you leave a job. Instead you are prohibited from working in similar jobs in a geographic region. They make sense when they simply prohibit salespeople from calling on their former customers, but companies were going crazy, and even fast food got involved.

Massachusetts saw that these non-competes were hurting their tech industry. If people weren't free to move from company to company, innovation is stifled and wages are kept artificially low. Because, after all, it's better to get a subpar paycheck than no paycheck. 

But, beginning October 1, 2018, if you sign a non-compete in Massachusetts, your former employer has to pay you out at least 50 percent of your former salary for the time period in which you can't work for a competitor--up to a maximum of one year. They also prevent many hourly workers from being subject to one at all. This means you should be free to quit your job at Cracker Barrel and walk across the street to McDonald's without fear of retaliation. (Note: I'm not claiming either restaurant had non-competes in Massachusetts.)

There is a last-minute loophole--the option for a mutually agreed upon payout. 

Michael Elkon, a partner with Atlanta-based Fisher Phillips, a law firm that specializes in non-compete and trade secrets litigation, told WBUR that "It's potentially a big loophole. Theoretically, an employer and employee could agree that $10 is sufficient compensation."

Perhaps, but because the law requires a mutually agreed upon payout, what motivation would an employee have for agreeing to the $10 payout? I suppose a company could withhold a reference from you if you refused, but giving a false reference is illegal. Additionally, they could make it an original condition of employment, but when you have a good deal of leverage at that point. I hope this isn't as big of an issue as Elkon thinks it is.

In my ideal employment world, only senior executives and salespeople would be subject to non-competes, with very clear restrictions, but this is a start. Just as Massachusetts' rule prohibiting recruiters/hiring managers from asking about salary is spreading throughout the nation, if the implementation of this program goes well, I expect it will spread the same way. And hopefully, employers will prefer not to pay out this "Garden Leave" and instead, do away with non-competes altogether.

Published on: Oct 2, 2018