Legislators Hear Testimony on Non-Compete Restrictions
Today marked a milestone in the legislation relating to non-competes in Massachusetts. The Joint Committee on Labor and Workforce Development held its public hearing on two house bills that would attempt to redefine the rules governing “restrictive employee covenants and non-compete agreements.”
This effort began in early January when Rep. William N. Brownsberger (24th Middlesex District) filed House Bill No. 1794, which would effectively prohibit restrictive employee covenants in line with similar provisions in the State of California. Rep. Lori Ehrlich (8th Essex District) also filed House Bill No. 1799, which made significant clarifications to non-compete agreements in line with the State of Oregon. Subsequently, compromise legislation was drafted by Rep. Brownsberger and Rep. Ehrlich.
A good summary of the salient points of this bill can be found at the Trade Secret and Noncompete Blog that is run by Russell Beck of the Foley and Lardner law firm, who participated in the drafting of this legislation.
The hearings on non-competes began with introductions by Rep. Ehrlich and Rep. Brownsberger, who cited complaints over abusive and over-reaching non-compete agreements. They highlighted the fact that the current law is over 200 years old and the rewrite has been long overdue. Attorney Russell Beck and Robert Mantell of the Massachusetts Employment Lawyers Association provided a detailed summary of the compromise legislation and described the key provisions of the bill.
At one end of the spectrum, the committee heard from those who made the argument that the original Brownsberger-Jehlen Bill No. 1794 was “the only ethical thing to do.” The committee also heard testimony from those who felt that the “200 years of jurisprudence” was perfectly adequate and did not need any change.
Up until now, the discussion of these changes has been largely in the blogosphere, and the participants represented members of the high technology sectors of the industry. At the hearing however, members of the non-high technology sectors and small businesses presented strong argument against the proposed changes.
“Talented individuals are leaving the state in large numbers because they see non-competes as unfair,” said one concerned individual who favored changing the current law. “I am willing and able to work but no one will hire me because of the non-compete that I have with my previous employer. Therefore, I am collecting unemployment. Non-competes are not fair,” and “Full pay and health insurance coverage should be guaranteed during the period of the non-compete,” said other supporters of change.
One opponent of the reforms, who highlighted the fact that forty-nine states honor some form of non-compete agreements, said, “California is the only state that has outlawed non-competes entirely; I do not want Massachusetts to be the only other state.” A small business owner against the changes said, “A single bill cannot cover all industries and people. In my business, individuals making much less than that threshold ($75,000 per year) have access to critical information and should be covered by a non-compete clause.” Another small business owner said, “Small companies employ more people in the state and the proposed changes will be devastating. These companies form the backbone of our economy.”
Matt Marx, an assistant professor at MIT’s Sloan School of Management, said his research on non-competes showed a significant number of employees were asked to sign non-compete agreements that lasted over three years! Almost one-third of employees do not receive their non-compete agreements till their first day at work, and are pressured to sign them.
To me, it is clear that a significant number of skilled employees in the state are suffering under the current law, and Massachusetts has to use every available means to retain talent and help grow the economy. This is a challenging issue and the committee got to hear a broad spectrum of views. With the public hearings now completed, the bill will be taken up by the committee, and hopefully brought to the floor during the current session.