Chris DeVore has devoted many hours over the past few years to figure out how state and local government can best help startups.
Now the Founder’s Co-op General Partner and Chair of Seattle’s Economic Development Commission has a new idea for Washington’s politicians: Increase technical talent and entrepreneurial activity in the region by no longer enforcing non-compete agreements.
As used by Seattle tech giants like Microsoft and Amazon, these agreements allow companies to prevent workers from going to a competing company, or starting their own, for a set period of time. Some may also include clauses that prevent former employees from revealing trade secrets.
This, DeVore argues, hurts innovation.
“But there is one regulatory change that has been shown to have a significant positive impact on the availability of high-performing technical talent to the innovation market: invalidating the enforceability of non-compete agreements for departing employees,” DeVore wrote in a blog post.
Washington, like a majority of U.S. states, allows companies to enforce non-compete agreements. But DeVore points to California, home of the startup mecca, where the state government outlawed the agreements more than a century ago. He also cited this study, which argues that states that do not enforce non-competes “have more startups, venture capital, growth, investment in human capital, and patenting.” In fact, this study from the University of Toronto shows that the lack of non-compete agreements was key to Silicon Valley’s growth as a global innovation hub.
Meanwhile, MIT Sloan assistant professor Matt Marx writes that non-compete agreements “constrain those who sign them, often leaving them with a choice of staying where they are, or taking a career detour that can lead to lower pay and less use of the skill sets they have developed over years or even decades.”
Though the number of companies that include non-compete clauses in employment contracts is rising, some states, like Massachusetts, are taking steps to ditch non-competes. DeVore hopes that Washington will follow and help fix what he believes is ultimately hindering innovation: lack of available technical talent.
“So the next time someone asks you what the public sector can do to foster innovation, don’t let them walk away thinking tax policy is what matters — remind them that talent, not capital, is the key ingredient in innovation, and ask them to help strike down the enforceability of non-compete agreements in Washington State,” DeVore wrote.