Legislator Drafting Bill to Outlaw Non-Compete Agreements in Massachusetts

12/16/08Follow @wroush

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its old requirement that portfolio companies make their employees sign non-competes, and he urged other Massachusetts venture firms to do the same. (We ran an interview with Sabet on the subject in December 2007.)

“It interested me that a prominent person was against non-competes,” Huang says. Separately, Huang says, she and her Belmont neighbors had been working with Brownsberger on a local environmental issue. “Through that, I saw how the legislative process works, and I thought, ‘Okay, I think something can be done about this.’

The bill Huang and Brownsberger are writing would outlaw non-compete agreements in new employment contracts in Massachusetts. It wouldn’t pertain to mergers, acquisitions, or other situations where competition becomes an issue, and it wouldn’t be retroactive. And it would do nothing to change the law regarding the other trade-secrets protections companies employ, such as non-disclosure agreements.

The bill will have several co-sponsors, according to Brownsberger. Once it’s filed, it will likely be referred to the House Committee on Labor and Workforce Development, which would then be required to schedule a hearing. “That will occur sometime in the spring, probably,” Brownsberger says.

The hearing would be an opportunity for all stakeholders to say their piece about non-compete agreements—including, perhaps, some of the large local companies such as EMC that have attempted to enforce them against former employees in court. “They will certainly have the opportunity to talk—that is the way the process unfolds,” says Brownsberger. “One of the fair questions has to be whether employers can adequately protect their intellectual property using various dedicated tools that are specific to that purposes, such as trade secrets laws, confidentiality laws, and patent and copyright laws,” or whether non-compete agreements are also needed.

Interestingly, however, none of the companies invited to defend non-compete agreements in a Harvard Law School debate on the subject last June actually made an appearance, according to a post on the event by Scott Kirsner.

“We want to have that debate,” says Huang. “We hope it will be civil. We really do care about protecting [employers'] legitimate interests. But I see this as protecting employees’ interests.”

After the hearing, the labor committee would then decide whether to recommend the bill to the full House of Representatives for a vote. But that process could stretch well into 2009, Brownsberger says.

Huang says she has been keeping Bijan Sabet at Spark up to date about her work on the bill with Brownsberger. Sabet is traveling this week, but I reached him by e-mail to get his opinion about the prospect of legislative progress on the issue. He says that he hasn’t yet read the draft bill, but that he is generally in favor of a change in Massachusetts law on non-competes.

“We need a law to match the California statute,” Sabet says. “We need a level playing field for innovation. Now more than ever.”

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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