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.
To keep reading, click here: Massachusetts Turns Non-Competes on Their Heads
As an employee in Massachusetts, we are elated about this because our employer happens to use this as a means to keep employees from leaving rather than for protecting the company which is what the original intent was.
Exactly! I already signed an NDA. That should be enough. But I think my company uses it to pay below-market wages and offer poor benefits – people are stuck!
And the non-compete showed up a year after I started.
How does only paying 50% help? I’ll still be just as stuck if I have to take a 50% pay cut.
You could change industries or work for a company in the same industry that doesn’t compete with your former employer. It would also be great if you wanted to go back to school for an advanced degree or take a sabbatical.
It’s a threat to the company’s bottom line. Previously if you left the company you couldn’t work in that industry for a certain period of time, and they had to pay the salary of whoever replaced you. Now if they don’t let you work in the industry for a certain period of time they have to pay the salary of the person replacing you AND your salary. That’s a significantly greater expense. The goal is to cause the companies to either restrict their non-compete clauses or to stop using them to artificially lower wages.
I view it as a partial win. Punishing companies for abuse of non-competes is good. It would be better, however, to establish some sort of criteria about when these clauses can be included, however. Like company scrip I view this use of non-compete clauses as an attempt to circumvent employment–you can’t legally chain people to desks, but companies have found any number of ways of trying to accomplish the same thing.
Brilliant!!!!
I am a bit confused about this ruling ( I am totally against non compete agreements which blacklist the employee in the geographical area). The reason I am confused is that certain types of private big employers will use this non compete agreement to keep the employee from finding another job for that year time period which is exactly the same (at least to me ) as giving a pay cut without employee agreement. And depending on unemployment benefits coverage, by the individual state, they may not be able to get them because, technically they are still employed. I look at this ruling as hurting employees from finding a better paying job. If these employers really care to keep employees, they need to make workplace conditions better.
If you make a good wage, half that wage can be do-able. But for minimum wage workers, not so much. Evil HR Lady, does the employer have to include any benefits, such as health insurance during this one year period?
And is the (ex)employee eligible for unemployment at the same time?
It’s not meant to replace salary as much as to be a deterrent, it looks like. If a fast food place says they can’t afford to pay employees a living wage, it’s not likely to want to pay half pay to someone who’s not even working there anymore. The last time I worked in sales (forever ago) they were so cheap that I’m sure they wouldn’t have been appalled at paying ex-employees too, and they had enough turnover that it would have been a scary amount.