House lawmakers voted Wednesday to reform noncompete employment agreements in an attempt to balance the needs of old and new businesses in Massachusetts.
Noncompete agreements are clauses in a worker’s contract that employers use to legally prevent them from later working for a competing company and exposing trade secrets. The bill passed unanimously by the House would limit noncompete agreements to 12 months and ban them completely for minimum wage workers and college students. It would still allow employers to negotiate with employees ways to prevent their established trade secrets from going to competitors.
Much of the motivation to reform the practice comes from Massachusetts’s own competition with California for startup and high-tech jobs. Noncompetes are illegal in California.
Jesse Mermell, president of the Alliance for Business Leadership, a group made up of progressive business leaders, says noncompetes are hindering competition in the state and hurting the economy’s ability to grow.
“We look at the economic growth that’s happening in California where noncompetes are barely a factor,” Mermell said. “Massachusetts is falling behind because we aren’t keeping up with California and if we want to continue to see economic growth here, we have to get on the ball.”
Mermell also thanked House Speaker Robert DeLeo, saying he understands how crucial these reforms are to the state’s innovation industry.
Associated Industries of Massachusetts, a conglomeration of large and small business groups in the Commonwealth, has long been at odds with reformers who want to do away with noncompetes. AIM too gave credit to DeLeo for putting forward a bill that they say makes changes they favor over the initial version of the bill released from committee earlier in the year.
“The speaker recognizes the need to protect business interests at a time when noncompetes are a vital part of protecting investments and ideas created by employers of all sizes and from all industries. As the speaker has noted in the past, Massachusetts cannot be an ‘invented here and manufactured elsewhere’ commonwealth,” AIM Vice President of Government Affairs John Regan wrote in a blog post on the AIM website Tuesday.
The changes endorsed by AIM include alterations to the arrangements an employee and employer can negotiate before entering into a noncompete agreement, letting courts alter the agreements instead of just invalidating them and moving the effective date from July to October of this year.
“The compromise legislation begins to recognize that Massachusetts employers need flexibility and legal options to protect intellectual property,” AIM’s Brad MacDougall wrote in the blog post, but said the group wishes to work with lawmakers to make further changes to allow for more exceptions to the ban.
The other big player in Beacon HIll business dealings, the Greater Boston Chamber of Commerce, also applauded DeLeo for arriving at legislation that “addresses the more egregious uses of noncompete agreements and works to protect both employees and employers,” according to a statement.
“Massachusetts has a unique ecosystem of emerging and established professionals and companies, each with different needs to help them grow their ideas and businesses. This bill is a nice example of compromise legislation that ensures our innovation ecosystem continues to thrive while still moving us forward on the noncompete issue,” the Chamber statement read.
