Microsoft overhauls staff contracts, abandons 'non-compete clauses' to comply with state laws

Microsoft has announced a set of revised policies that will decrease the legal restrictions placed on US employees, as well as making a number of improvements to the transparency offered by the company in areas such as salaries and civil rights.

It said the new initiatives were made with a view to improving the company’s workplace culture and further deepening the company’s relationship with its employees.

The decision coincides with new laws enacted in the state of Washington, in which the company's Seattle headquarters are located, laws that appear to have influenced at least half of Microsoft's new policies.

The first of the four new changes is the removal of non-compete clauses in new hires’ employment contracts. The company will also ignore all the non-compete obligations that are currently embedded in all US employees’ contracts going forwards.

All Microsoft employees currently have non-compete obligations inserted into their contracts, and a policy to ignore them for existing workers, and eliminate them from future contracts, applies to everyone except for senior leadership members, such as partners and executives.

Microsoft said it rarely exercises these existing clauses, but also does not believe in using them as effective talent retention tools.

“In practice, what this means is those US employees will not be restricted by a non-compete clause in seeking employment with another company who may be considered a Microsoft competitor,” it said in Wednesday’s announcement. “All employees remain accountable to our standards of business conduct and other obligations to protect Microsoft’s confidential information.”

The tech giant has also made changes to help foster a culture that allows for more open discussions about potentially illegal issues that have occurred and been resolved through internal processes.

Despite having existing provisions that allow employees to discuss matters such as their terms of employment or concerns of possible misconduct, there have been occasions where employees have received separation benefits or have settled matters internally and then been bound by non-disclosure clauses.

This appears to be a direct result of the introduction of a new Washington state law, House Bill 1795, which came into effect today, although there is no mention of this in Microsoft's announcement.

Another of the policy changes likely driven by new legislation is Microsoft’s commitment to including all salary ranges on job postings, starting January 2023, the same date that Senate Bill 5761, which mandates clear salary information on new job postings, takes effect.

Microsoft cited its annual equal pay analyses and the company’s ambition “to implement best practices to further strengthen our equal pay approach” as the drivers that informed its decision to stop asking applicants about their salary histories “several years ago”, and that the new policy builds on this “best practice”.

The final commitment by the company will be to conduct a civil rights audit using a third-party company during its fiscal year 2023. It will make the findings public and report on its planned follow-up actions.

“This audit, to be conducted by a third party, will be guided by US civil rights law and Microsoft values with the purpose of identifying areas of opportunity for Microsoft to address,” it said.

IT Pro asked Microsoft if it was considering making similar policy changes in the UK or anywhere else in the world, but it did not reply at the time of publication.