Non-competition Updates

1. Thanks for your advocacy on this, Will. Non-competes are bad for innovation, and bad for the high tech work force. Abolishing non-compete agreements is long overdue.

2. Yes, thank you. You probably already have heard the speculation that Silicon Valley’s success was partly to do with the unenforceability of non-compete clauses.

   Another nice law California has (that I believe we don’t) is 2870 in their labor code. It restricts invention assignment agreements to only work done by the employee using his or her employer’s equipment, during their working hours or using their trade secrets. This is one of the factors making me less inclined to change jobs. My current employer is based out of California and worded their invention assignment to reflect that law. If I joined a purely Massachusetts company I fear I’d be asked to agree to the work for hire definition that means they own even the programming I do as a hobby.

   Now I’m told the companies that draft these contracts aren’t so draconian, necessarily, it’s just a principle of corporate law that you word things for maximal advantage should a court case ever come up. This is why a state law would be such a good antidote. The libertarians will say contracts are freely entered, but the power assymetry is obvious if you even glance at the standard contracts (or take a drug test for a desk job). How many programmers will have the confidence to stand up and negotiate all these terms? It seems a good way to set yourself up to look like a trouble maker before you are even able to prove your worth.

   The invention assignment agreements interest me especially since they can make contributing to free and open source software difficult. Any project with careful procedures will have trouble taking your contributions if your company claims the copyright on them. In theory, to the degree programming work is useful to nonprofits and political campaigns, maybe you could even say there’s hampering of citizenship (I’m not a citizen btw, but should I become one you can count on my vote). I wonder if you could make a free speech argument. If money directed to a campaign is now considered speech, should labor directed that way not also be considered speech?

   More on inv. assignment interfering with FOSS here: http://perlmonks.org/?node_id=153046

3. Will, I really appreciate the update on this and your full voice in favor of non-compete abolishment.

   When you join a company, you usually agree to a non-disclosure agreement against disclosures of company proprietary information which is usually information that is not in available to public or has been made available to the public.

   I have no problem with these non-disclosures – and the law is well established in these areas.

   But when you join – you should have no limitations on how you can make a living. In this day and age – people can be very specific in their expertise and if prohibited from exercising those employment opportunities – would effectively be giving up their ability to make a living.

   This is bad for the employee – its bad for the state because people can become employed where non-competes do not exists (ie. California) and Massachusetts looses its talent pool.

   Please continue to fight this one hard and keep us posted.

4. This is so relevant in today’s market. I’m in a very uncomfortable job right now, and I’ve landed a new job, but I’m worried about the non-compete clause. It’s very unfair for companies to pressure you into accepting this clause when you sign up, because a) you have all the best intentions at that point of staying with the company for the long haul and b) you often have very little leverage, it’s take it or leave it.
   The result is that a highly technical employee has to consider leaving his experience behind and doing something he doesn’t specialize in just because his old company doesn’t want his new company to have him.
   When will this be voted on, now that Gov. Patrick is supporting it? I hope it’s soon.

5. JohnPell – hypothetically speaking only….
   You receive a job offer in writing. The job offer does not mentioned the details of any requirement to sign a non disclosure agreement. The interview process also does not mention this. You quit your old job and show up the first day of work at the new job.

   At the sign-in of papers process – you are shown a document which demands that you sign a non-disclosure. This is the firs time you have seen it. This is the first time it was disclosed during the entire interview/offer process.

   Now you sit there and say: “Well I didn’t know that I would going to have to give up my ability to work in my same line of expertise for some period of time if I would to leave this company” – “This is the first time I’ve seen this.” – “But I supposed that if I don’t sign this then I will have no job and no income now that I have already quit my previous job and have made moving arraingements”. “I wish that I would have been given the opportunity to discuss this prior to quitting my other job.” “Given all this – would it be possible to eliminate this clause from this initial sign in paperwork?”

   The company comes back and says “No we cannot do that.”

   You then say: “Well I am signing this now because I really don’t have a viable choice”.

   So what you do is to record this conversation later into your diary or daily log which you have established at the beginning of this interview and job find process.

   Now roll the clock further down the pike… maybe a number of years.
   You quit this job and they remind you that you have signed this agreement.
   At that point you send them something in writing and a scan or picture of your notes from your log book that you signed this agreement under DURESS. DURESS that they created by their hiding of this draconian clause.

   http://www.massbar.org/publications/massachusetts-law-review/2003/v88-n1/employee-noncompetition-agreements-recent-developments/

   See..

   In some cases, however, the duress defense has succeeded. In First Eastern Mortgage Corp. v. Gallagher, the court concluded that the noncompetition agreement “was imposed upon the employee under what might be found to be ‘practical duress,'” because the employee was pressured to sign the agreement long after he had commenced employment.67 The court declined to issue a preliminary injunction enforcing the agreement.68 In New Boston Systems, Inc. v. Joffe, the court denied a motion for a preliminary injunction, in part, because of alleged duress.69 The former employee claimed that she was not advised of the need to sign a noncompetition agreement until her first day of employment – after she had moved from St. Louis to Boston and rented an apartment in Boston.70 Similarly, in FLEXcon Company, Inc. v. McSherry, the United States District Court denied a motion for a preliminary injunction, in part, because the noncompetition agreement was not included with the employee’s original offer letter, was presented as “routine paperwork,” and was signed three days after the employee commenced employment.71 This result can easily be avoided by ensuring that the prospective employee is advised of the noncompetition agreement before accepting employment.72

   Good Luck

6. Thanks to all for sharing above.

   To answer the question of when, the answer is I am not sure. I’m working to pull together legislative support. The Governor has given us a lift, but how things are going to sort remains uncertain. There is no scheduled vote, but the session ends in July, so we only have a few months.

7. Last month my business partner and I sold our business we started in 1989. We had no problem with the two of us signing a non-compete agreement, after all the buyer was paying above the asset value because they expected us to remove ourselves from the marketplace.
   BUT, it was extremely unfair when we informed the employees that they were no longer employed by us and that if they wanted a job the next day,they had to sign a non-compete with the new owners.
   How is this a good business practice to force employees to sign a contract or lose their job they worked at for many years?
   It’s time to allow the marketplace to determine where individuals choose to spend their working career.
   John Alcock

8. John Alcock –

   I’ve read your post above and re-read it a number of times.
   I am both shocked and alarmed at what you have described.

   Let me get this straight – you have have 25 year old business which was valued by your buyers at its ‘assets’ plus its non-compete value. As you have described, that non-compete value translates into the experience and knowledge of your former employee’s who are now corralled into having to sign away their ability to work in a similar field (via non-compete) for the consideration of keeping their jobs.

   As one of the former owners of the company, and as you describe, “We had no problem with the two of us signing a non-compete agreement, after all the buyer was paying above the asset value because they expected us to remove ourselves from the marketplace.”

   Translation: ‘We the former owners got a good price, a good deal, we and our families were protected and we did it on the backs of our former employee’s who are now hung out to dry.’

   John, would you say that this is a fair characterization of what you describe?

   It also seems to me that you are now languishing over the fact that you could not put the burden of your decision onto a yet, non-existent law which might have gotten you the same price because you could always have said: “Well its not legal to have them sign a non-compete so the price is the price.”

   What else could you have done?

   You could have protected your employees. How? You could have refused to sell for a lessor price while shielding your employee’s. But then the buyer’s might have walked away from the deal. Good. If you really had a valuable business then you would have found another buyer. Perhaps you could have given your employee’s a reasonable cut of the overage of the assets? But then again, you and your partner would have taken less – right?

   So you must be thinking that its easy for me to be saying this.
   It wasn’t my business which was sold. This is true. But I like to sleep at night and perhaps you still sleep well. I would not sleep well in your shoes.

   Here’s an example of an owner under financial pressure who still took care of their employee’s.

   You might remember the story of Malden Mills and Aaron Feuerstein who decided to continue paying the salaries of all the now-unemployed workers while the factory was being rebuilt. By going against common CEO business practices, especially at a time when most companies were downsizing and moving overseas, he achieved recognition for doing the right thing.

   https://en.wikipedia.org/wiki/Malden_Mills

   I have to believe that Patrick Deval’s bill will NOT be retroactive. This means that no matter what Will Brownsberger achieves or what Patrick Deval is able to push forward. Your former employees will continue to be in (as you put it) in an “extremely unfair” employment situation.

9. Will – my pseudonym was created for the benefit of privacy on the NDAA thread. We already know about the history of government retaliation. Absent that, I have no problem in publicity.

   In fact, I am looking forward to a retort from John Alcock on my observations of what he wrote about placing his former employees into an “extremely unfair” (his words) employment situation. I would like to understand his reasoning as to why he didn’t throw his employees ‘under the bus’.

   Alan Reiss

10. John, there are so many details that would make a difference in the evaluation of the transaction you just did. Most of those details, although of great importance to those involved, do not bear on the public policy question you are raising. I don’t think you should feel compelled to disclose those details here.

    But you and Alan do raise some interesting policy points. True that the bill will not be retroactive. Also, FYI, most versions of the bill have excepted transactions made in connection with the sale of a business — in that context a non-compete may be very fair. On the other hand, in some versions of the bill, we have prohibited what your buyers did — the exaction of a non-compete agreement from existing employees without new consideration. How these two considerations would interact is an interesting question — I will bounce it off our experts.

    UPDATE: Generally exclusion of business-sales from non-compete reforms has not been intended to apply to employees. Employees are generally protected from duress impositions of non-compete agreements, but that is a fact-specific question for courts to consider.

11. Will, as I read the current non-compete law for Massachusetts employees (which is overly vague in terms of scope and time frame) there are three legal precedents which pop out:

    1. The employee can not be under DURESS when ‘forced’ to sign such an agreement.
    — this can occur when the employee first learns of the non-compete on the first day he/she shows up for work. The employee is in a precarious position at that point in time.
    — duress can occur when an existing employee is ‘forced’ to sign such an agreement without any notice (ie. changing of company ownership and no practical notice given in advance)

    2. The employee must be compensated for signing such an agreement.
    — a bonus? a raise? But both should be substantive with respect to what is being given up. Again, the Mass law is vague and/or silent on this. But courts have been on a case by case basis.

    In the situation that John has described (absent any other details which flesh out the circumstances of this transaction), the reader can only assume that the employee’s were ambushed without notice, without compensation be it substantive or not. “Sign this agreement or be unemployed.” – while the former owners took care of themselves.

    Will, I firmly believe that no carve out of employee non-compete law shall exist for corporate sale. Existing employees shall be grandfathered.

    Employee non-competes are bad for Massachusetts growth and tax-base. This is why California outlawed them. This is why CA venture capital casts a large shadow over MA venture capital. This is why a state with more universities per square mile – sees such an out-flux of highly educated talent.

    This may be good for EMC2 – this may be good for stodgy Mass corporations – but this is NOT good for the future and for our state’s future growth.

    This is why, apparently, Patrick Duval has ‘seen the light’ on this issue.

    Finally, whether that corporate sale; ‘throwing under the bus’ event was legal or not… it wasn’t moral – no it wasn’t.

    This is not my last word on the future of non-compete laws in Massachusetts.
    I am so glad that you have taken up this issue.

    What can we do, as informed citizens, to help move this along?

12. The main thing that citizens can do to help is to tell their personal stories to their legislators. Like everyone else, legislators respond with greatest emotion when they are able to put themselves in the shoes of other people.

13. I spoke with Andrew Bettinelli, who is a legislative aid for Will Brownsberger.
    We kicked around some ideas and I will summarize.

    1. A solid way to affect technology growth in Massachusetts is to conform to non-compete laws which, at least, match those of California.

    2. Ordinary employee’s owning < 10% of a company shall be provided with relief from non-compete clauses when a company is sold.

    3. A 6 month or 3 month limit of non-compete reasonableness will not get the technology growth targets done since many people live paycheck to paycheck or have little or no savings to recover. A 3 month or 6 month can be as oppressive as 12 month moratoriums for non-compete.

    4. A technique to expose the Hypocrisy of having a 3 or 6 month non-compete limit is to ask the employers to pay for the 3 or 6 months in salary and benefits to get the benefit of the non-compete. The employer will say – no way – Then Why one might ask? – Well we don’t have to we can just demand it as we do now and get it for free.

    If having a non-compete for any term is actually valuable to a company then the company would have little argument against paying for it save their reluctance to pay anything. This will expose the hypocrisy.

    Patrick Deval has been waiting for 2 years to have the employer’s and legislators come up with a viable plan employee non-competes. This has not been done and I suspect that the employer’s have been playing hardball with this.

    I think that the time is now for our legislators to demand non-compete relief for ordinary employees. If Massachusetts is to compete for venture capital, or to capture the best and brightest of our university systems or to stop the out-flight of knowledge based employees for sunshine and non-competes then the time is now.

    Remember, legislators have no restrictions on whether they can run for any other public position – they can even run for US Congress while still maintaining their previous legislative position.

    You may say: “Well this is not the same!”
    Well it is. All of us have mortgages, families, expenses of life to deal with… we the people and those who serve us too.

    I call upon Will Brownsberger to back off his ‘compromise’ position because its unworkable, untenable and will not get the economic job done. The goal is NOT to get something passed. The goal is to make a growth friendly business climate and capture all of those venture dollars we can.

    I call upon Will Brownsberger to demand zero time lag non-competes for ordinary employees with relief in company buyout situations.

14. Confidential internal Google and Apple memos, buried within piles of court dockets and reviewed by PandoDaily, clearly show that what began as a secret cartel agreement between Apple’s Steve Jobs and Google’s Eric Schmidt to illegally fix the labor market for hi-tech workers, expanded within a few years to include companies ranging from Dell, IBM, eBay and Microsoft, to Comcast, Clear Channel, Dreamworks, and London-based public relations behemoth WPP. All told, the combined workforces of the companies involved totals well over a million employees.

    http://www.macrumors.com/2014/03/24/google-apple-anti-poaching-agreements/

    National companies conspiring to fix salaries of high tech workers.
    All the more reason why we need the elimination of non-compete laws….

    Any comments?

15. Ironically, the events in California occurred principally in a state where non-competes are banned. This illustrates how challenging it is to preserve the liberties of employees to move around.

    I have long been convinced that our system is too restrictive in Massachusetts and remain entirely committed to real change. I am hopeful that we can make real progress in this session.

16. I support a restricted (12 mos) non-solicitation/restriction on employment with company clients and business associates to protect business. For a full non-compete, perhaps a sale of business or agreed sum could be required for enforcement-perhaps required liquidated damage/buyout requirement.

17. Thirty or more years ago, Peter Drucker pointed out that we would migrate from an industrial, machine oriented economy to a know-ledge based economy. See George Gilder’s recent book “knowledge and Power” as a current expansion of this topic. Abandoning noncompetes serves to dilute the increased value of this new (last fifty years) economic model.

    I have been an entrepreneur since the 1970’s. I think non-compete agreements have an important place in a innovation-centered economy, and they foster innovation rather than stifle it. Company’s can’t and shouldn’t control professional knowledge and practice by employees in total and forever. But in today’s knowledge based economy, companies have several knowledge bases that are extremely expensive to develop, and if they are not somewhat protected by non-competes, eventually the lack of protection will raise investment risk beyond the point where new enterprises can get funded. These include trade secrets (IP – including both technical development and business practices – not protected by patents, but not publicly disclosed), and customer relationships developed over a long time. A given employee might look at a customer relationship as something she developed, but that relationship would never have developed without the company’s PRODUCT or SERVICE, as well as the company’s money financing the relationship’s development. If an employee leaves a company to work for another company selling a closely similar and competing product to the exact same company using the business relationship, in my view that is stealing an asset developed by the first company. If the employee moves to work for a company with a product or service not directly competitive but deals with the original customer then no harm, no foul.

    I wouldn’t take any anti-non-compete views of venture capitalists too seriously, as every one I have ever worked for or with have insisted on non-competes, even as they have often worked to “scoop” employees from competitors.

    Trade secrets, company data bases and documentation, engineering or software code and other objective information should be sacrosanct for an extended period of time. More subjective information should be protected for one-to-three years, and I lean toward the longer side of that term.

    Few things can be more damaging to a company than key employees leaving with the family jewels to work for a competitor. The argument that the reason the employee left is because she wasn’t compensated enough just doesn’t ring true. A company can spend millions of dollars to enter a market, and compensate its employees very well in a general competitive sense. But it can never compensate her enough to offset the amount an unethical competitor can pay the employee to forego the high cost of a market entry.

    In a truly sustainable, growing and innovative economy, there will always be new employment opportunities for productive and energetic workers. Companies that are built on the theft of other company’s resources will tend not to have an internal culture that sustains either growth or innovation. There is a legitimate way for one company to obtain the resources developed by another company and to respect the value developed by the original company: it’s called an acquisition, and is widely and successfully practiced and is at the heart of our market-based economy.

    It would be a shame to have our State legislators and government encouraging the theft of another organizations assets by scooping employees for the internal knowledge they have of their employers personnel, processes, trade secrets and customer relationships.

18. Reply to Charlie Foskett:
    It is clear from your words that you believe the prohibiting an employee from competing with you after termination (say 12 months) is good for your business model. I can understand that. The person leaving would certainly have a non-positive effect on your business that its certainly more important that you and your business maintain that gain over that employee who is now prevented from pursuing similar employment in order to feed his family and acquire health insurance. As a long time business entrepreneur you would certainly understand that your former employee would (1) have a harder time getting a job; (2) would most probably have to take less; (3) would be out of his field of endeavor and loose important resume continuity.

    But all of this is done so that you and your business can be protected.

    So I have a proposal for you…
    Charlie, suppose that your company, when demanding that 12 month non-compete, agree to pay the employee a full 12 months with all benefits for that period of time that you don’t want him to compete with you. Sounds fair ! He doesn’t compete and you pay him not too and both for the same exact period of time.

    I would appreciate a detailed repose as to (1) do you agree? and (2) details as to why.

19. June Roberts – I believe we are on the same page.
    Here is my take:

    1. A proprietary non-disclosure in in affect for some time period agreed.

    2. Full non-compete’s do not exist for 99+% of all employees

    3. In the case where its an equity partner >=10% then non-competes may be involved legally.

    4. In the case of a sale; all employees are exempt from the non-compete who have <10% equity.

20. The rich discussion above well reflects the complexity of this issue — it is helpful to set them forth here.

    In my view, we have a regulatory policy in place for non-competition agreements, a policy which has designed by the courts. That policy has impacts across a wide range of different cases and does good in some of those cases and harm in others. The challenge in designing a change in policy is to try to think how it will play through across that range of cases.

    I’m convinced there is a lot of overreach with these agreements today and that our current policies encourage that overreach.

21. I don’t think that this subject is rocket science or has to be cast as being any more complicated than it is.

    • Companies have a legitimate interest in protecting their intellectual property.

    • The Uniform Trade Secrets Act has been widely adopted by all states except New York, North Carolina, and Massachusetts.[2] On May 2, 2013, Texas enacted Senate Bill 953,[3] becoming the 47th state to adopted the UTSA.[4] The Texas statute took effect on September 1, 2013.[4] [Ref Wiki https://en.wikipedia.org/wiki/Uniform_Trade_Secrets_Act%5D

    • The UTSA has also been adopted in the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.[2][6] States are not required to pass the act exactly as is, and some have made amendments.[7]

    • On January 2, 2013, the Massachusetts General Court introduced H.B. 27 to enact the UTSA; as of January 2014, it remains pending.

    With the pending adoption of UTSA in Massachusetts (and ultimate adoption) – there exists no legitimate reason to force an ordinary employee (to be defined herein) to be forced under a non-compete for ANY period of time in return for employment.

    • An ordinary employee is a non-equity employee and can be defined numerically as any employee who has < 10% ownership in a given company for which he/she is employed or is to be employed.

    • When an employee is an equity employee >= 10% then its all contractual between the company and employee.

    • Defining this equity break-point will eliminate non-competes for 99.99% of the employees.

    Massachusetts has not fully lived up to its high-technology potential over the past 3 decades. Other areas of the USA over-shadow us and the spurning by venture capitalists in Massachusetts is only a symptom of the problem.

    If we want to hang onto our graduates. If we want Entrepreneurship to be fully realized in our state then we must remove this obstacle and free our workforce from the burden of not being able to earn a living or spin-off new ventures when the time arises.

    Will, this is not rocket science. Lets get this done once and for all in Massachusetts.

22. How do you feel about highly compensated non-equity employees? And how about stock options — do they count towards the numerator in the 10%? . . . As you say, it’s not rocket science, but it does get complicated if you try to draw lines based on ownership or compensation.

23. Here is the noncompete law from California it’s on this website

    http://californianoncompete.com/

    Perhaps I was the one who overcomplicated it by making up rules.

    What makes this simple is that California has such a great law which comprehensively covers all the situations.

    Let’s just take the California law and make it ours.

24. I am an employment law attorney and have a fair amount of experience with non-compete agreements. Although there are instances in which non-competes legitimately protect an employer’s good will and trade secrets, there are many instances in which they don’t. Even worse are the instances in which the employer fires the employee and leaves him or her without the ability to get a job in the industry. But the fact that many companies overreach is not a reason to completely abolish noncompetes. In the past few years, I have seen companies move away from the typical non-competes and move towards a “pay to not compete” model. In these cases, the company asks the employee to sign a non-compete that narrowly defines the competition that is not allowed, states that upon termination (for any reason) of the employee’s job the company will let the employee know whether or not it intends to enforce the non-compete, and provides for payment to the employee of his or her base pay for the amount of time that the employee is not able to compete, to be reduced by any amount that the employee earns in his or her new job (in a non-competing field). I believe that this compromise strikes the right balance and should be the basis for a new law. If a company wants to prevent an employee from competing, it should pay them for the time period they cannot compete.

25. Hi Alexandra thank you for continuing the discussion.

    California has the proper non-compete legislation which reinforces competition, entrepreneurship and investment. The longer Massachusetts delays adopting this formula – the longer it will be behind the growth curve.

    Although your suggested compromise seems to want to create a balance of fairness, lets take your example and apply it to the real world.

    An employee of company X decides to leave and join company (competitor) Y. Company Y offers the employee 50% more money and a large quantity of RSU’s – perhaps even a cash sign-on bonus.

    Under your scenario – all company has to do is to provide the previous salary to the employee for a period of time to not-compete.

    Would you agree the company X should provide a matching salary and RSU’s (vested and equalized to stock price) and equivalent cash?

    You can see how complicated this gets and besides it wholly unfair to the employee NOT to be able to grow and enhance his/her position.

    Lets say that this employee decides to leave and form his/her own company which competes. Now the value becomes unlimited – Google could buy this new company for $3Billion (this has been done recently). I’ll bet company Y would match that !

    We should understand that employee growth and new company growth is much more fertile in California.

    As you said, you are a lawyer. Lawyers have an exclusion to non-competes… so do doctors and newscasters. Why not chemical engineers, software engineers, bio-engineers, sales engineers – why should lawyers get this exclusion and not any other group?

    The days of non-competes are coming to an end in Massachusetts.
    I’m very sure of this.

26. I agree with Alan Reiss — no compromise here, we should just do (for both non-competes and UTSA) what California does. It works very well for them, why wouldn’t it work for us? We’ve (ahem) signed no non-compete clause with California, we should take what works for them and use it directly here.

    What’s the point of compromise? Don’t business people here ever wonder about how California businesses grew so much faster? Don’t they ever wonder about the employees that they aren’t hiring, either because they’re intimidated by non-competes here, or because they only talk to companies based in California? (For example, EMC is at the very bottom of my list of places I would ever look to work; not only do they use non-competes, they also have a reputation for attempting to enforce them.)

27. Thanks, David.

    I do lean towards your framing of the issue and I do hope we can make real progress. I do, however, think we have to recognize that are lots of differences between California and Massachusetts and also differences between one business era and another and also between one decade and another. So, the conversation is not a simple one and not one that legislators can easily reach agreement on.

28. I had a conversation with a UMass Lowell EE 4th year student who was working part-time at a home improvement center – this past weekend.

    I asked him if he knew about the non-compete laws in Mass.
    He said absolutely.

    I asked him if he intended to work after graduating in Mass and if this non-compete legal framework affected his decision.
    He said absolutely.

    He said that he was looking for EE work in California and was prepared to work there and leave Mass.

    He said he wasn’t going to sell his future employment prospects for short term gain if he didn’t have to.

    So much for having a great Mass educational system which churns out EE students – if we can’t even keep them.

    Will, lets move on and get this done and stop looking for this decade and that decade and this thing and that thing that we think are different and matter.

    I’ll tell you what’s different.
    People won’t sell out their futures if they don’t have to.

    If the state legislators want to bring in high tech growth and a larger high tech tax base then they know what they have to do.

    Question is; will their campaign contributions get in the way or will they finally do the right thing for the state and its professional employee’s.

29. Hi Will – I know this is something you’re in favor of, good to see it getting some press in the local bizjournal
    re
    -rich

    http://www.bizjournals.com/boston/blog/techflash/2014/05/tech-community-to-take-center-stage-on-beacon-hill.html?ana=e_bost_tf&s=newsletter&ed=2014-05-29&u=pFSEoNXyU9CEgUwatLScA+vDZ+&t=1401376710

    Tech community to take center stage on Beacon Hill in non-compete fight
    ca webb nevca
    Enlarge Photo

    New England Venture Capital Association executive director C.A. Webb says Massachusetts will lose if non-competes don’t go away.

    David Harris
    Tech Editor-Boston Business Journal
    Email | Twitter

    The fight to eliminate non-compete agreements is set to take center stage on Beacon Hill Thursday afternoon.

    Those set to testify at the first hearing on Gov. Deval Patrick’s bill to eliminate the agreements include Lighthouse Capital Partners co-founder and managing directorGwill York; Spark Capital general partner and early Twitter investor Bijan Sabet; PayPal Media Network COO David Chang; and New England Venture Capital Association executive director C.A. Webb. Non-competition agreements temporarily restrict former employees of a company from working for a competitor.

    For more than a decade, some companies have been advocating for the elimination of the agreements. But last month, Patrick unveiled a comprehensive economic development package that included a bill that would eliminate non-compete agreements.

    “We believe it’s a key way to keep Massachusetts competitive,” said C.A. Webb, New England Venture Capital Association executive director. Webb said if the bill passes, the Bay State would be more competitive with states like California, which has eliminated the non-compete agreement.

    In one letter that will be entered into testimony today, Paul Maeder, founding partner of Highland Capital Partners, said the Bay State is losing when it comes to attracting talent.

    “MIT and HBS kids go to California in droves every year,” said Maeder in the letter. “Almost all the good ones leave. Massachusetts is losing, has already lost, the technology of tomorrow. I am not making a prediction, I am stating a fact. We completely lost out on the last three waves of technology companies. Of the 36 billion-dollar tech companies founded in the last decade, 32 are in California. Zero are in Massachusetts. And as for the big tech companies here, the ones you all know the names of, they are already dying. You won’t realize it until they begin laying off employees in a few years, but it’s already over. There is always a time lag. They each have 20 to 30 California startups outrunning them. And Massachusetts has few to none. This is because of non-competes. The next generation has been born already, and it is not here.”

    The hearing is set to take place at 1 p.m. Thursday.

30. Charlie, you mention that IP like software, etc should be protected. These are already protected by IP law such as copyright and potentially patents. This is not the main purpose of a non-compete agreement.

    Also, it was mentioned by Alan that a non-compete agreement should carry consideration for both parties and not signed under duress. I can attest that the very situations he highlighted absolutely happen and no consideration is given to the employee signing (other than getting to keep the job).

31. Strong support Will – I hope you all can bring this over the finish line.

    As a person in my 7th startup, I think I have a good perspective on what works and what doesn’t in adding high-tech jobs. The only time non-compete jobs are enforced these days is when there is personal bitterness. They’re not tools of industry, they are tools of revenge. Let’s cut this drop this impediment and move faster.

32. Hi Dan,

    I agree with your assessment that non-competes can be used as tools of revenge. I am aware of at least one case (within my industry) where it was very clear – it was revenge.

    However, when non-competes are incorporated into the hiring process or even the ‘staying’ process then they become tools of power. Large, asymmetric power which forces compliance under duress. Hence, the out-flight of talent to California (as has been mentioned in this thread multiple times).

    If a company wants to keep their employees then don’t do it with a cage around them. Keep them with competitive benefits, interesting work and a future growth path.

33. The company that I worked for decided to have all employees sign a non-compete agreement, which said that an employee who went to work for another engineering concern could not use anything learned at the company. There was a lot of grumbling because how was an employee to prove that the matter had not been learned at the company? Very few persons signed up. The company let the requirement quietly fade away.

    Today specially, a person working at a company will surely learn new things. This is part of growing professionally.

    A company which wants to protect processes or techniques must patent or copyright them. Then, there is a legal reason to prevent others from using these processes or techniques.

34. Jim,

    This is an important story but it leaves me with some questions.

    1. You said “another engineering concern” – that is a very broad brush. Was it really that broad or was it really an “engineering concern” who directly competes with them?

    2. Was any additional financial compensation provided with the demand to sign such an agreement?

    3. Did your employer attempt to afix a time-limit on this non-sharing or non-competing agreement?

    4. When people refused to sign – was anybody fired or punished?

    5. For the people who did sign – after the company let it go – did the company also recind the forced letter for those people?

    6. Did the company encounter any direct attrition due to this draconian maneuver?

    Thanks for answering any or all of these.

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