Legislature fails to pass non-compete legislation by Marjorie Arons Barron

The entry below is being cross posted from Marjorie Arons Barron’s own blog.


State House MAIf you’re an executive for one of the big guys, like EMC or Boston Scientific, or if you depend on the support of the big guys, as does the Greater Boston Chamber of Commerce, you’re probably pretty happy that the legislature failed to pass non-compete reform. Signing non-compete clauses means employees must wait a year or more after leaving a company before going to work for a competitor or starting a new company. The big guys maintain they need non-compete clauses to protect trade secrets and other confidential information and prevent their talent from being lured away. But, if you work for a start-up company or are involved in the venture capital firms that fund them,  you see that very legislative failure as stifling opportunity, both for individuals and companies. (Non-compete clauses have been common in the television industry.) In California, our biggest rival in innovation,  non-compete clauses are largely illegal.

The Massachusetts House and Senate had competing versions of a bill to modify non-competes.  The Senate would have limited the non-compete period to three months and required a company to pay full salary during the period the employee was barred from taking another job. The House bill (which passed 150-0) would have still allowed enforcing a non-compete provision for a year and required half pay during that time. (These requirements to pay are called garden-leave clauses.)  Governor Baker preferred the House version. Both bills would have barred non-competes for hourly workers and interns.  Removing that outrageous restriction is a no-brainer.

But requiring an employee to wait a year before making a move is stifling.  As one tech analyst put it, what’s the employee supposed to do? Write the great American novel? And is it fair for a company to enforce a non-compete clause if it has fired or laid off an employee?

It seems there’s room for compromise here. Why not split the difference between the year the House would permit and the three months approved by the Senate?  Six months with pay, for example. Companies should be working hard to create positive work environments and incentivizing employees to stay.  But if a person’s career will have more opportunity to blossom elsewhere, he or she shouldn’t be locked into indentured servitude because of too-rigid non-complete rules. Regrettably, the legislature has ended its formal sessions for 2016 because members are running for reelection, most with no opposition, and the bill will have to start anew when a new legislature convenes. That leaves the big guys right where they want to be, once again.

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