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The New Amazon HQ - Is the Key to Your City Winning The Competition Eliminating Non-Competes?

In case you missed it, Amazon announced in early September that it is planning to open another headquarters called Amazon HQ2 in US city TBD.

Amazon HQ2 will cost $5 billion and eventually house up to 50,000 Amazon staff, and the company has said it wants HQ2 to be in a metropolitan area with a "stable and business friendly environment" and more than 1 million people. The company also wants HQ2 to be within 45 minutes of an international airport and in a location where there is potential to attract strong technical talent.

Simply put, it's the biggest single economic development item that will happen for an American city in the next century.  While many cities will bid, it stands to reason that there's only a handful - including my homer call for the Amazon hqATL - that have a realistic shot at landing the new Amazon HQ.

Competition will be fierce.  Is it reasonable to assume that cities will pull out all the stops to attract Amazon?  Of course it is.  That's why a recent Op/Ed piece from University of Chicago Law School professor Omri Ben-Shahar calling for Chicago to outlaw Non-Competes as a means of attracting Amazon was so interesting to me.  More from the Chicago Tribune:

But there is an additional strategy to entice Amazon, one that does not cost a penny and that could make Chicago all the more attractive. Ban the noncompete agreements in employment contracts. Open the job market for competitive mobility, allowing Amazon to poach the best workers for its new hub. Gov. Bruce Rauner has recently put forth such a proposal to ban noncompete clauses, and it is time for Illinois legislators to write it into the law.

The workers Amazon plans to hire in its HQ2 will not arrive by trains from Seattle to their new city. They will mostly be hired locally. With so many new jobs to fill, a major reshuffling of employment will occur in the hosting city. But only if workers are free to leave their existing employers and take new jobs with competitors. The problem is that many are not free, locked into their present workplaces by the notorious noncompete agreements they signed when originally hired. A statewide ban of such noncompete lock-ins will release a major barrier to economic growth, and make Chicago more competitive in bringing in out-of-state tech companies.

Since you and I deal with human capital issues daily, we know the reality of non-competes - they are easy to write and hard to enforce.  Still, Amazon will undoubtedly have to spend tremendous resources to litigate a bunch of non-compete issues.  Once Amazon announces a city for the new HQ, watch the activity that happens to lock down critical parts of workforces - pay increases, culture enhancement and yes - forced signing of non-competes for those that don't have them in place.  If you're an incumbent employer with a professional, technical product workforce in the city named for the new HQ, you've got to be prepared to go to war - winning hearts and minds as well as doing some nasty stuff to play hardball with the looming Amazon threat.

But it could be that a city that can line up 3-4 incredible items like the elimination of non-competes creates the tipping point necessary for Amazon to grant the new HQ to the city in question.

I'm not sure it matters.  When it comes to legal skirmishes over things like non-competes, the company with the biggest checkbook and raw will usually wins.  And Amazon has a bigger checkbook than anyone.   

More from OBS on the benefits of not having non-competes:

But, surprisingly, researchers have found that greater job mobility improves overall worker training. True, employers may invest less in training workers if their investment is not protected by the noncompete clauses. But there is an even stronger flip side: Workers who are free to switch jobs invest more in self-training. Noncompete agreements reduce, not raise, the overall investment in human capital. Their ban would therefore enhance the quality of the workforce, and firms would benefit.


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