Non-compete agreements are coming under increased fire.
In the latest attack, Massachusetts Gov. Deval Patrick has promised to send a major commercial legislative package to the state legislature, the highlight of which would outlaw the non-compete contract.
Patrick’s stance is expected to spark a battle between big business, which supports non-competes, and venture capitalists and entrepreneurs, who abhor them.
If his proposal is enacted, Massachusetts would join California as the second state with a major technology presence to ban non-compete clauses.
“We feel like non-competes are a barrier to innovation in Massachusetts,” said Greg Bialecki, Massachusetts secretary of Housing and Economic Development.
C.A. Webb, executive director at the New England Venture Capital Association, wrote a BostInno Channel post in support of Patrick’s proposal.
“The consequence of non-competes has been a brain drain as employees who would be compelled to start new companies or join other early stage companies in Massachusetts instead leave the state for fear of being taken to court by their former employers. California … and other states with thriving tech economies banned non-competes long ago — and have benefitted from our use of them.”
Patrick has been mulling the impact of non-competes on the state’s business community for several years, the Boston Globe reported.
He finally became convinced that the stifling effect such agreements have on business development, particularly in the tech field, outweighed the protections they provided to employers.
In a radio address prior to his announcement of the upcoming legislation, the governor foreshadowed his intention to ban non-competes.
“In California, another tech hub, they don’t have non-competes and they’re doing pretty well,” Patrick said. “We want to enable that same free flow of talent in an innovation hub here in Massachusetts which is booming and it ought to have as few restraints on it as possible.”
In an online column on the legal news portal Mondaq, Boston attorney H. Andrew Matzkin speculated that “the bill will be modeled after California’s analogous regulations, which essentially declare such covenants to be void when based solely on an employment relationship. …
“Gov. Patrick appears mindful of the concerns of businesses and lawmakers – the proposed bill would allow businesses to continue limiting certain activities by former employees (such as stealing clients), and would not affect nondisclosure clauses that prevent former employees from publicizing private company matters,” Matzkin wrote.
As a sop to big business, Patrick said he’ll push to have the state adopt the Uniform Trade Secrets Act, which provides enhanced protections for a company’s intellectual property.