The noncompete agreement—a key tool employers use to keep talented employees from jumping ship to join competitors—is under scrutiny in Massachusetts, where the governor wants to ban them. The tech industry says a ban is needed to boost innovation, but business groups have a different take.
The noncompete clause—a common contractual tool employers use to prevent competitors from poaching their employees—is drawing new attention in the Bay State.
Massachusetts Gov. Deval Patrick (D) proposed legislation in April that would ban the practice of keeping employees from working for a competitor under most circumstances. In exchange for a ban, he supports passage of a separate bill, the Uniform Trade Secrets Act, which would prevent workers from taking intellectual property from one company to another but would allow them to leave for different jobs when desired. Most states have a version of this bill already on the books.
But last week, House Speaker Robert DeLeo (D) left the ban on noncompete clauses out of an economic development bill, though Patrick’s office said there’s room for compromise.
CLAUSES IN UNLIKELY PLACES
As Patrick’s plan has drawn attention, so have examples of noncompete agreements turning up in unlikely situations.
In one particularly controversial case, teenage camp counselors in Massachusetts who had worked for a company called LINX were barred from working for a competing camp and even babysitting for families they met while working at its camp. LINX argued that it was trying to protect information on its unique training methods from competitors, the New York Times reported.
And a Massachusetts hairstylist who was fired and went to work for another salon lost that job after his former employer went to court to enforce his noncompete agreement.
“It’s hurting growth in the economy by decreasing worker mobility and squelching startups,” state Rep. Lori Ehrlich, a sponsor of the bill containing the ban, told the Times. “They’re hurting families by making it so people are unable to work for an extended period of time. This has increasingly become exploitative to workers.”
WHERE INDUSTRY GROUPS STAND
The proposed ban has earned support from tech groups, who say that noncompete clauses stifle innovation in Massachusetts and are giving California’s Silicon Valley the upper hand in recruiting, even though the Northeast has a major research hub in the Massachusetts Institute of Technology. California is one of just two states (along with North Dakota) that ban noncompete clauses in most cases.
“We are imploring the legislature to ban noncompetes in hopes of driving innovation in Massachusetts, helping us catch up to California and drive more jobs,” New England Venture Capital Association President C.A. Webb told The Boston Herald.
That sentiment isn’t shared by business groups such as Associated Industries of Massachusetts and the Greater Boston Chamber of Commerce, which contend that noncompete clauses work for both employers and employees. They argue that the tech industry’s claim that noncompete agreements are bad for jobs doesn’t hold up, noting that California has a higher unemployment rate than Massachusetts.
“If we’re looking for ideas to be swapped, California should look to borrow Massachusetts’s policies, rather than the other way around,” Jim Klocke, the chamber’s executive vice president for public policy, told The Boston Globe.
