01 Jun 2017
The End of the Noncompete Clause
Can an 80-year-old US labor law change the future for tech employees?by Janelle NanosTopics:
image by Edmon de Haro
Tech recruiters often tout enviable perks as they lure new employees, promising free meals, yoga classes, and unlimited vacation days. But those benefits can come at a cost: Sign on the dotted line, and employees may find themselves agreeing to noncompete clauses that could limit their work options should they decide to move to a new company—or even start a company themselves.
Kevin Johnson (MBA 1986), who has worked for both large tech companies and small startups, wants to change that, using a tactic not frequently associated with the tech industry: labor organizing.
For decades, noncompete clauses were written into job contracts to help protect companies from losing intellectual property by restricting when and where employees could work after they departed their current job. Roughly 37 percent of American workers have signed such noncompete clauses at some point in their careers, according to a 2016 US Treasury Department report.
But across the country, efforts are now on the rise to eliminate noncompetes. Spurred by the belief that their unenforceability in California was key in the development of Silicon Valley, opponents such as Johnson say the clauses stifle innovation and hamstring employees.
Currently, only three states largely ban noncompetes: California, North Dakota, and Oklahoma. Opposition groups in other states are working on several fronts. If they can’t get a ban, they’re pushing to update state legislation to shorten the time employees have to wait between jobs or introduce a requirement that former employees be compensated during the noncompete term.
In Massachusetts, where Johnson founded Common Commute, a commute-sharing startup, noncompete reform bills have been circulating through the State House since 2009. Those efforts, however, have been slowed by strong opposition from EMC, one of the state’s largest tech companies.
That led Johnson to consider an innovative approach to changing noncompetes. With advice from a team of labor law experts, he founded the single-issue union- organizing campaign, Employee Association to Renegotiate Noncompetes (EARN) in 2016. Because EARN’s “pop-up unions,” organized under the National Labor Relations Act, are designed to only engage the company on one issue and then dissolve, companies would rather negotiate and move on than deal with the creation of a full-fledged union in its midst, Johnson says.
EARN’s first test run came during EMC’s recent acquisition by Dell. Johnson orchestrated a pop-up union for EMC’s employees. While the company didn’t publicly acknowledge EARN’s efforts, Johnson sees signs that the pop-up’s work had an impact: After the Dell EMC merger deal closed in September, the company’s president suggested that they would be more “thoughtful and careful” in their use of noncompetes. EARN’s efforts against Dell EMC are ongoing, and Johnson plans to use the lessons learned in this initial effort to encourage more workers around the country to embrace labor organizing as a tool to end the widespread use of noncompete clauses.
“Many tech employees are union-averse, so it’s going to be hard for them to consider joining an established union,” says Johnson. But having a single-issue union would enable them to benefit from union organizing without the long-term commitment. “All they want is to get out of noncompetes, and this is a tool to let them do that,” he says.
Class of MBA 1986, Section B