Microsoft commits to ban non-competes and increase pay transparency in the US

The technology giant is making four broad commitments to US-based employees, including the removal of controversial clauses from employee contracts.

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Magdalena Petrova

Microsoft has launched four new employee workforce initiatives aimed at creating a more transparent workplace culture, including the banning of non-compete clauses in contracts and a commitment to improved pay transparency.

The four commitments have been categorized by Microsoft as:

  • Empowering employee mobility
  • Fostering a safe space for concerns
  • Increasing pay transparency
  • Conducting a civil rights audit

The new policies aim to address concerns raised by employees that current non-compete obligations are being used as a forced retention tactic. Consequently, the company will be removing non-compete clauses from US employee agreements and will not enforce existing clauses for workers outside of Microsoft’s senior leadership team.

In addition, the company’s pledge to foster a safe space for concerns aims to address complaints around non-disclosure clauses in employee agreements. Microsoft’s US settlement and separation agreements will no longer include so-called confidentiality language, which prohibit workers from disclosing “alleged conduct that they perceive is illegal discrimination, harassment, retaliation, sexual assault, or a wage and hour violation occurring in the workplace.”

The increased pay transparency initiative will see Microsoft publicly disclose salary ranges in all internal and external job postings across the US, beginning no later than January 2023.

Finally, the company’s pledge to conduct a civil rights audit will see Microsoft commit to a third-party conducted audit, to be completed in the 2023 financial year, with a summary report and follow-on actions to be published soon after.

These changes will only be made to policies and practices relating to US-based employees for now.

The changing legal backdrop

The timing of these announcements coincides with recent changes to employment laws in some US states. Microsoft’s corporate headquarters are located in Washington, a state that recently passed multiple pieces of legislation to prohibit pay discrimination, promote salary transparency, and ban agreements containing non-disclosure and non-disparagement provisions.

Washington is not the first state in the US to outlaw non-disclosure agreements. A bill introduced in California in January 2022 bans the use of confidentiality and non-disparagement clauses in settlements or severance agreements against workers who have experienced harassment or discrimination.

Microsoft’s ‘listen first’ approach to employee wellbeing

In a blog post outlining the changes, Amy Pannoni, deputy general counsel for HR legal for corporate external and legal affairs, and Amy Coleman, corporate VP for human resources for corporate functions and global employee relations, stated that Microsoft has developed a ‘listen first’ approach to evaluating employee wellbeing, allowing the company to identify what is working and what needs to be changed.

The post also noted that Microsoft has sought to improve employee wellbeing over the years by moving towards a hybrid work model in the wake of the pandemic, alongside investing in mental health resources, enhancing its employee listening systems, and conducting regular anonymous employee surveys and investment in HR systems.

Microsoft has also made a number of diversity and inclusion pledges, most notably through the expansion of Employee Resource Groups (ERGs), the creation of a racial equality initiative and a commitment to bridging the disability divide.

The announcement of these new workplace initiatives comes just a week after Microsoft promised to engage with employee unions at the company and stated that it would not seek to stop them forming.

“Recent unionization campaigns across the country — including in the tech sector — have led us to conclude that inevitably these issues will touch on more businesses, potentially including our own,” said Microsoft president Brad Smith, in a blog post published on June 2. “This has encouraged us to think proactively about the best approach for our employees, shareholders, customers, and other stakeholders.”

Copyright © 2022 IDG Communications, Inc.

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