IBM made headlines last month when it filed a lawsuit against its former Chief Diversity Officer and Vice President of HR, Lindsay-Rae McIntyre, claiming that her decision to accept a new position as Chief Diversity Officer of Microsoft violated a year-long non-compete agreement she had signed with IBM. McIntyre, the suit claimed, was privy to data and methods pertaining to IBM’s diversity and inclusion program that constituted trade secrets and would inevitably influence the work she did for their competitor.
In a court filing Monday, IBM revealed that it had settled the suit on February 25 and that McIntyre would delay the start of her new position at Microsoft until July, GeekWire reports:
Terms of the settlement weren’t disclosed, but Microsoft said in a statement this afternoon that McIntyre will be officially starting in her new position this summer. … A judge in the case had issued a temporary restraining order preventing McIntyre from working at Microsoft pending a preliminary injunction hearing that was slated to take place next week.
“We’re pleased the court granted IBM’s motion for a temporary restraining order, protecting IBM’s confidential information and diversity strategies,” an IBM spokesperson said. “We’re glad the action has been resolved to the satisfaction of all parties and that Ms. McIntyre will not begin her new responsibilities until July.”
Two new proposals from the Brookings Institution’s Hamilton Project envision potential reforms to corporate and public policies to protect workers from the negative effects of non-compete agreements and other labor market practices the authors describe as anti-competitive. The first, written by Boston University professor Matt Marx, offers several suggestions for ensuring that non-competes are not abused, such as ensuring candidates are aware of them before accepting a job and improving non-disclosure agreements to be a better substitute for overly-restrictive non-competes.
The other paper, co-authored by economist Alan Krueger and law professor Eric Posner, takes a broader view of the problem of employers using their market power to suppress wages. In an op-ed at the New York Times, the authors highlight the crux of their argument:
The culprit is “monopsony power.” This term is used by economists to refer to the ability of an employer to suppress wages below the efficient or perfectly competitive level of compensation. In the more familiar case of monopoly, a large seller — like a cable company — is able to demand high prices for poor service because consumers have no other choice. It turns out that many corporations possess bargaining power over their workers, not just over their consumers. Their workers accept low wages and substandard working conditions because few alternative job opportunities exist for them or because switching jobs is costly. In other words, in the labor market, effectively a small number of employers are competing for labor.
The authors point to non-competes, anti-poaching agreements, or other forms of collusion, as well as mergers with adverse effects on the labor market, as the means by which companies keep wages low. This might be true, or there might be other tools that companies are using to hold back wage growth (e.g. pressure from the CFO to drive margin, or lobbying states and municipalities to not increase minimum wages). This public policy debate, however, misses a bigger issue that this strategy causes for the companies themselves.
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Two bills that would have all but banned the use of non-compete agreements by employers in Washington State did not come up for a vote before a February 14 deadline for moving forward in the current legislative session, GeekWire’s Monica Nickelsburg reports:
The House bill would have prohibited non-compete agreements for employees working fewer than 40 hours per week or earning less than 200 percent of the minimum wage. Independent contractors and employees taking a second job would have also been protected from non-competes.
The Senate bill is broader. It would have prohibited “any contract that restrains a person from engaging in a lawful profession, trade, or business of any kind,” except for an employee who sells all of his or her operating assets or ownership interest in a business entity to a buyer operating a “like business.” Exemptions would also have been made for partners who disassociate from a business partnership.
This is the third legislative session in which Washington lawmakers have tried and failed to pass restrictions on non-competes. Proponents of this legislation say it would help make the state more competitive with California, where the use of non-compete clauses is almost always prohibited, as a magnet for talent and business investment, particularly in the tech sector. However, Michael Schutzler, CEO of the Washington Technology Industry Association, tells GeekWire that this comparison is misleading and that it was wise for the legislature not to rush new legislation in this regard.
Microsoft announced on Sunday that it had hired Lindsay-Rae McIntyre as its next Chief Diversity Officer, reporting directly to Chief People Officer Kathleen Hogan and leading “a multitude of existing cross-company initiatives to further Microsoft’s progress in building a diverse and inclusive culture.” McIntyre comes to Microsoft after two decades at IBM, where her most recent titles included Chief Diversity Officer and Vice President of HR.
Not so fast, says IBM, which filed suit against McIntyre on Monday, claiming that her new position at Microsoft violates a year-long non-compete agreement and puts IBM’s trade secrets at risk, GeekWire’s Todd Bishop reported:
The suit, filed federal court in New York today, describes McIntyre as one of the company’s “most senior executives with knowledge of IBM’s most closely guarded and competitively sensitive strategic plans and recruitment initiatives,” including “confidential strategies to recruit, retain and promote diverse talent.”
In her new role at Microsoft, she would compete for the many of the same types of hires she previously recruited for IBM, the suit says. … IBM claims in its suit that it will be “inevitable” for McIntyre to use IBM’s trade secrets against the company.
In its complaint, IBM argues that Microsoft itself recognizes the competitive advantage of keeping diversity data and strategies private, pointing to an ongoing class-action lawsuit alleging that Microsoft discriminates against women, in which the tech giant has resisted efforts by plaintiffs to force it to hand over detailed diversity data: “As Microsoft has admitted, disclosure of the very type of confidential information that McIntyre possesses—non-public diversity data, strategies and initiatives—can cause real and immediate competitive harm.”
In 2016, Massachusetts state lawmakers failed to reach a compromise over a bill that would strictly limit companies’ ability to enforce non-compete clauses in employees’ contracts, slowing the momentum of a trend among states to restrict the use of these agreements in roles where they were unnecessary or would overly limit employees’ future career prospects. The bill was widely expected to be revisited in the state’s next legislative session; sure enough, it has, and members of the Massachusetts House and Senate are now close to reaching a deal on a bill that satisfies both houses’ concerns, Jon Chesto reports at the Boston Globe:
There are still some issues to be worked out between House and Senate negotiators. The legislation will most likely include noncontroversial elements such as bans on using noncompetes for lower-paid hourly workers, such as camp counselors and sub-shop employees. But the two sides have yet to agree on how long noncompete contracts can remain in force. In 2016, the House leadership supported up to 12 months, while the Senate backed a three-month limit. Another potential sticking point: the wording for how departing employees should receive payments, known as “garden leave,” while their noncompetes are in effect.
Advocates for curbing the use of non-competes in Massachusetts say it harms the state’s ability to leverage its highly educated workforce and become a full-fledged tech startup hub like California, which is one of the few states where the use of such clauses is almost always prohibited and where courts generally have refused to recognize them. Most other states have laws that limit the use of non-competes to the protection of trade secrets and other confidential information, but impose a varied range of standards for determining whether an agreement is enforceable.
Lawmakers in three other states—New Hampshire, Pennsylvania, and Vermont—are also considering new restrictions this year, Jackson Lewis attorneys Daniel P. Schwarz, Martha Van Oot, Erik J. Winton and Colin A. Thakkar write at SHRM:
Last March, the US Treasury Department issued a report examining and criticizing a recent trend in which employers were including non-compete clauses in contracts for workers who were unlikely to become privy to the kinds of trade secrets such clauses are meant to protect. In a feature last week at the New York Times, Conor Dougherty explored the impact this trend has had on employees, many of whom find themselves unexpectedly unemployable after leaving a company with whom they had signed a non-compete agreement:
Companies have always owned their employees’ labor, but today’s employment contracts often cover general knowledge as well. In addition to noncompete clauses, there are nonsolicitation and nondealing agreements, which prevent employees from calling or servicing customers they have worked with in the past. There are nonpoaching agreements that prevent employees from trying to recruit old colleagues.
Put it all together, and suddenly some of the main avenues for finding a better-paying job — taking a promotion with a competitor, being recruited by an old colleague — are cut off.
Deliveroo, a UK technology company that connects restaurants with delivery workers through an Uber-like gig economy platform, has simplified and changed the terms of its agreement with couriers, removing several controversial provisions that had attracted unwelcome attention from lawmakers, Sky News reports:
The company has removed a stipulation in earlier contracts saying that couriers could not challenge their self-employed status at an employment tribunal – a clause that had been described as legally invalid and which people close to Deliveroo said had never been enforced. The document also includes the explicit clarification that couriers can work for other companies at the same time as they undertake work for Deliveroo – a key change that MPs had urged in a critical report on the so-called “gig economy” earlier this year. …
At four pages, the new “contract” is a quarter of the length of those used by Uber, the ride-hailing service, and one-fifth of those used at Amazon, the internet retail behemoth, according to details submitted this year to the Work and Pensions Select Committee.