Bill to End Non-Compete Agreements Filed on Beacon Hill

Massachusetts Representative Will Brownsberger filed a bill today calling on the state legislature to outlaw the non-compete agreements that prevent many Massachusetts residents who leave their employers from finding work at similar companies.

The brief bill, entitled “An Act to Prohibit Restrictive Employment Covenents,” would amend Section 19 of Chapter 149 of the General Laws of Massachusetts, which deals with general employment provisions. It renders void and unenforceable “any written or oral contract or agreement arising out of an employment relationship that prohibits, impairs, restrains, restricts, or places any condition on, a person’s ability to seek, engage in or accept any type of employment or independent contractor work, for any period of time after an employment relationship has ended.” Violators would be liable for the affected employee’s attorney fees. (We’ve reproduced the full text of the bill on Page 2.)

I first wrote about the pending bill last month. Brownsberger, who represents the 24th Middlesex district, including parts of Belmont, Cambridge, and Arlington, said then that he’s primarily interested in helping service workers such as telephone agents, who often leave their positions only to find that the non-compete clauses in the employment agreements prohibit them from finding comparable positions in their industries. “I’m concerned that these agreements are often entered into by employees who are at a substantial bargaining disadvantage,” Brownsberger said.

But non-compete agreements are also the subject of debate in the entrepreneurial community. Critics such as Bijan Sabet, a general partner at Spark Capital in Boston, have said that they retard innovation and hurt Massachusetts startups relative to their rivals in states like California, where non-compete agreements are illegal.

In a recent blog post, Richard Tibbetts, a co-founder and software architect at Lexington, MA-based StreamBase Systems, called Brownsberger’s proposal “a simple legislative change which will cost the government little and have a big impact on Massachusetts competitiveness.” Tibbetts posted the text of a letter he wrote to his Congressional representative, Sean Garballey, urging him to support Brownsberger’s effort. The letter says in part:

In some cases, potential employees have declined to pursue discussions with me, fearing legal repercussions from their previous employer. In other cases, employees have requested that they not work with certain customers or on certain lines of business, in order to avoid the appearance of impropriety…While these agreements are seldom enforced, their existence and the legal grey areas surrounding them are a drain on our economy. They hurt workers, who are not able to change jobs freely and make use of their skills in the best jobs possible. And they hurt companies, making it harder to recruit the best employees. Removing noncompetes will help everyone in Massachusetts benefit more from our skilled workforce.

According to Tibbett’s post, Massachusetts Senator Patricia Jehlen plans to sponsor a Senate version of Brownsberg’s bill. Other legislators wishing to co-sponsor the anti-non-compete bill have until February 6 to add their names to the bill. The bill is expected to be referred to the House Committee on Labor and Workforce Development, which will likely hold a hearing on the proposal this spring, Brownsberger said last month.

Update, January 16, 2009: New blog posts applauding Brownsberger’s initiative have been published this week by Scott Kirsner of the Boston Globe and Angelo Santinelli of Dakin Management and North Bridge Venture Partners.

Rep. Brownsberger’s legislative aide provided the following text of the bill filed today:

“AN ACT TO PROHIBIT RESTRICTIVE EMPLOYMENT COVENANTS

Section 1.  Section 19 of Chapter 149 of the General Laws of Massachusetts is hereby amended by inserting at the end the following new paragraphs:

Any written or oral contract or agreement arising out of an employment relationship that prohibits, impairs, restrains, restricts, or places any condition on, a person’s ability to seek, engage in or accept any type of employment or independent contractor work, for any period of time after an employment relationship has ended, shall be void and unenforceable with respect to that restriction.  This section shall not render void or unenforceable the remainder of the contract or agreement.

For the purposes of this section, chapter 149, section 148B shall control the definition of employment.

Whoever violates the provisions of this section shall be liable for reasonable attorneys fees and costs associated with litigation of an affected employee or individual.

This section shall be construed liberally for the accomplishment of its purposes, and no other provision of the General Laws shall be construed in a manner that would limit its coverage.  Nothing in this section shall preempt tort or contract claims, or other statutory claims, based upon an employer’s use, or attempted use of an unlawful contract or agreement to interfere with subsequent employment or contractor work.

This section shall apply to all contracts and agreements generated after the effective date of this act.

Section 2.  Section 42A of Chapter 93 of the General Laws of Massachusetts is hereby amended by striking the words ‘in violation of the terms of such agreement’ where they first appear.”

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

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