Discussion is heating up in the State House about legislation to ban agreements not to compete. I filed with Senator Pat Jehlen a complete ban on these agreements and Rep. Lori Ehrlich has filed a bill that would limit them.
The issue is getting increasing coverage:
- lead editorial in this Sunday’s Boston Globe
- recent column by Steve Kisner
- planned symposium at the Boston Bar Association
- website tracking this legislation (created by my advisor and constituent, Caroline Huang)
Many workers are victimized by these agreements, which they often sign without advance opportunity to explore their implications. The agreements prohibit employees from working for other employers and sometimes even apply when the employees have been layed off. Some employees have been unable to work in their field of expertise for months or years, experiencing significant hardship. Some firms use the agreements even for very junior employees. The problem is not limited to high tech fields — the agreements have been used to limit the mobility of hair stylists and phone canvassers.
Venture capitalists feel that the agreements limit the ability of employees to strike out and form new companies. California bans the agreements and some feel that the ban is an important contributor to California’s high rate of new company formation.
Some businesses do have legitimate interests to protect through the use of non-compete agreements — trade secrets, confidential information, clients. Although other legal rules provide some protection, limited non-compete agreements may, in some situations, be the only way to achieve adequate security for costly business assets.
I’m working with Representative Ehrlich to shape a joint draft that will reflect the fair concerns of businesses and employees. We have been in contact with business groups and with attorneys that specialize in representing employees. A new draft should be available soon.