Revised Noncompete Legislation Doesn’t Go Far Enough

7/20/09

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chilling effect. Why? History shows the Massachusetts companies pursue these lawsuits and Massachusetts courts enforce non-competes more than more than other states according to a UCLA study.

4. Ultimately we believe (especially in this market) it is simply unfair that employees are getting laid off and still subject to a non-compete agreement. That is a double whammy. If employees are that important to the company then you should keep them or at least pay them to sit out of the market. (Again you are still bound by NDAs, NSAs, etc.)

5. Opponents of change say that their business will be hurt by ending non-competes in this state. I respectfully disagree. Our company, Spark Capital, doesn’t have non-competes. It doesn’t hurt us. I don’t see CEOs of Apple, Google, Facebook, eBay, Intel, Broadcom lobbying to implement non-competes in California. Companies in California are able to hire the best people they can under the law. That level of open competition is a good thing.

California companies know that innovation doesn’t happen in a vacuum. Innovation occurs in an open market where competition and interaction exist. I also believe that EMC & Akamai would be just fine if for some reason they one day picked up and moved to California. They wouldn’t be harmed by this issue. EMC just bought California-based Data Domain for billions. Data Domain was able to be successful because of their technology and because they were able to hire the best people they could. That’s how this works.

6. This state needs bigger and more successful companies. We are limiting our potential by restricting the labor market. Bigger companies will help small and large companies as well in the long run.

7. Opponents of this change also suggest that the lack of non-competes is hurting California. California is certainly having their economic challenges but it’s not because of this issue. Otherwise, California CEOs would be screaming from the rafters. California has a meaningful revenue shortfall and their expenses are beyond their ability to meet them. But keep in mind, they are creating valuable and growing companies of all sizes.

We will continue pushing for significant reform on this issue. We hope that this bill continues to evolve and returns to the idea of ending non-compete agreements and at the same time protecting companies with other current legal agreements and laws.

We will continue pushing on the grassroots efforts. If you would like to show your sign of support please blog about this, tweet about it, tell your local elected officials, tell your VC, tell your colleagues and let us know by joining our list of supporters.

Bijan Sabet is a general partner at Spark Capital in Boston. Follow @

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