Uncertain Fate of Non-competes in Massachusetts: Senate Passes Compromise; Legislation Heads to Conference Committee Negotiations

by Mintz Levin - ML Strategies
Contact

On July 1, 2014 the Massachusetts Senate voted for a compromise on employee non-compete agreements, and the Joint Economic and Emerging Technology Committee heard testimony on the same issue. Governor Deval Patrick spurred debate on the topic in April, when he proposed banning the agreements in his economic development proposal, and as Tuesday’s packed hearing room at the Massachusetts State House illustrated, the subject continues to generate fierce interest.

Proponents of the ban argue that non-compete agreements, which limit employees’ ability to work for their employers’ competitors, stifle innovation and burden the Commonwealth’s unemployment services. Critics hold that non-compete agreements are important tools to help protect companies’ legitimate business interests.

Although the Senate had initially declined to take up the issue in its economic development bill, on Tuesday it voted 32-7 in favor of a non-compete compromise offered by Sen. William Brownsberger (D-Belmont). The provision would limit the duration of such agreements to six months, prohibit their use for hourly employees, and mandate that employers present employees with agreements either when a formal offer of employment is first made, or at least five business days before the employee’s start date. The amendment does not alter covenants not to solicit employees of the employer or solicit business with customers of the employer, or nondisclosure agreements, among other things.

The Senate amendment would also put in place the Uniform Trade Secrets Act (UTSA) to further protect companies’ proprietary information, making Massachusetts the 49th state to adopt a version of the law. UTSA was published by the Uniform Law Commission in an effort to provide a legal framework to provide remedies for trade secret misappropriation, which is addressed at the state level. Under UTSA, remedies for potential wrongs include injunctive relief, damages, and attorney’s fees.

In the House, Rep. Lori Ehrlich (D-Marblehead) is championing a compromise that, like the Senate’s version, would limit the duration of non-competes to six months and exempt most hourly workers from such agreements. Rep. Ehrlich’s compromise also has a provision that would institute “red penciling.” As labor attorney Russell Beck explained when he testified at Tuesday’s committee hearing with Rep. Ehrlich, this would mean that if a non-compete agreement includes an element that is deemed unreasonable, a court cannot alter the agreement, and must void it in its entirety. Currently, Arkansas, Nebraska, South Carolina, Virginia, and Wisconsin enforce similar red pencil laws.

At the Joint Economic and Emerging Technology Committee hearing, committee members, led by co-chairs Sen. Gale Candaras (D-Wilbraham) and Rep. Joseph Wagner (D-Chicopee), heard testimony from a diverse group of approximately 40 individuals, including legislators, entrepreneurs, venture capitalists, professors, and scientists.

Among those who testified were Secretary of Housing and Economic Development Greg Bialecki, MIT Sloan Professor of Technological Innovation, Entrepreneurship and Strategic Management Matthew Marx, and co-founder of Android, Inc. and Google Ventures partner Rich Miner.

While an overwhelming majority of the testifiers supported a complete non-compete ban, Secretary Bialecki signaled that Governor Patrick’s administration would be willing to find middle ground on the issue, so long as the compromise represented substantial reform, as there is concern that non-compete agreements are being used in some inappropriate situations. The Secretary also highlighted the fiscal cost to the Commonwealth when talented individuals are prevented from working, or when promising graduates from Massachusetts’s higher education institutions move to other states — most notably California — where non-competes are not allowed.

The start-up and venture capital community emphasized the administration’s position. Founding partner of VC firm Highland Capital Partners Paul Maeder argued that non-competes are hindering the formation of technology clusters, and preventing Massachusetts from competing with California’s tech industry. Marx concurred, saying he has advised students to consider leaving the state to avoid non-compete agreements.

Because the Senate’s economic development bill includes language on non-competes and UTSA, and the House’s does not, this issue must be resolved in conference committee. Proponents of the ban are hopeful that the Legislature will take action on the item before the fast-approaching end of the legislative session on July 31, 2014.

ML Strategies will continue to monitor developments related to non-compete agreements.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Mintz Levin - ML Strategies | Attorney Advertising

Written by:

Mintz Levin - ML Strategies
Contact
more
less

Mintz Levin - ML Strategies on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.