A noncompete reform bill for the 2011-2012 legislative session has been filed by Rep.s Ehrlich, Brownsberger, Peisch, and others as House Bill 2293 (http://www.malegislature.gov/Bills/187/House/H02293).
The legislators welcome comments on the bill, as it can be revised before filing (and at several points after filing). If you have any questions, comments, or feedback, please contact Rep. Will Brownsberger (firstname.lastname@example.org), or Rep. Lori Ehrlich (Rep.LoriEhrlich@Hou.State.MA.US). Rep. Brownsberger also encourages public discussion of the noncompete issue on his blog willbrownsberger.com.
For more information on the Ehrlich, Brownsberger, and Peisch’s bill, see http://willbrownsberger.com/index.php/category/economic-development/non-competition-agreements. Also see Russell Beck’s (Beck Reed Riden LLP) blog http://faircompetitionlaw.com/category/massachusetts-noncompete-bill/.
In addition, two bills to ban noncompetes have been filed: H2296 ( http://www.malegislature.gov/Bills/187/House/H02296), by Rep. Sheila Harrington and Rep. Denise Provost, and S932 (http://www.malegislature.gov/Bills/187/Senate/S00932), by Sen. Pat Jehlen and Rep. Denise Provost.
For a description of the how a bill becomes law in MA, see http://www.malegislature.gov/engage/howideabecomeslaw.
A bill entitled “An Act to Prohibit Restrictive Employment Covenants,” House Bill 1794, was filed on January 12, 2009 (186th General Court of the Commonwealth of Massachusetts) to prohibit noncompete contracts between employers and employees. The lead sponsors were Representative William N. Brownsberger and Senator Patricia D. Jehlen.
Rep. Lori A. Ehrlich filed a bill entitled “An Act Relative to Non-Compete Agreements,” House Bill 1799 in January 2009, which would have restricted but not prohibited noncompetes. After receiving feedback from many perspectives, Rep. Brownsberger and Rep. Ehrlich drafted a compromise together to strike a balance among the interests of the stakeholders. The draft, dated September 28, 2009, can be found on Rep. Brownsberger’s blog http://willbrownsberger.com/index.php/archives/2630.
The hearing, formally under the original bill numbers HB 1794 and HB 1799, took place on October 7, 2009, before the Joint Committee on Labor and Workforce Development. The compromise bill was reported favorably out of the Joint Committee on Labor and Workforce Development the week of March 15, 2009. It is now formally known as House Bill 4607, sponsored by Rep. Cheryl Coakley-Rivera.
For an account of the hearing, please see the following:
- Guest post by Amrith Kumar (one of the witnesses at the hearing) on Xconomy.com: http://www.xconomy.com/boston/2009/10/08/legislators-hear-testimony-on-non-compete-restrictions/
- House video recording of the hearing: http://masslegislature.tv/elements/video_hse.php?id=535. (Approximately the first 1.5 hours is devoted to another bill, and the last half hour of testimony on noncompetes was not recorded because we went overtime.)
- An article by Debra Glidden in the Daily Item (Lynn): http://www.itemlive.com/articles/2009/10/14/news/news10.txt
- Also, Rep. Ehrlich’s office prepared a press release after the hearing.
House Bill 4607 was referred to the House Committee on Steering, Policy, and Scheduling on April 12, 2010 and to the Joint Committee on the Judiciary on May 24, 2010. It did not proceed further in the 2009-2010 legislative session.
The following is a compilation of links to information on various aspects of employee noncompete contracts in Massachusetts.
- “An Act Making Uniform the Law Regarding Trade Secrets,” House Bill 329, sponsored by Representative Daniel E. Bosley and Senator John A. Hart, Jr.
Under a noncompete contract, an employee agrees not to compete with the employer for a period of time after leaving the employer. Examples of competing include working for a competing company or starting a competing company. Typically, the time period is one or two years. The present bill affects only noncompetes between an employer and employee. It does not affect noncompetes in the context of sales of businesses.
- Reece III, Laurence H. “Employee Noncompetition Agreements: Recent Developments and Trends,” Massachusetts Law Review, Massachusetts Bar Association, 2003, <http://www.massbar.org/for-attorneys/publications/massachusetts-law-review/2003/v88-n1/employee-noncompetition-agreements-recent-developments>.
- Powers, Kevin and Linda Evans. “Non-compete Agreements: A Proposal for Fairness and Predictability,” Rodgers Powers & Schwartz, <http://www.theemploymentlawyers.com/Articles/Noncompetition.htm>.
- Weiss, Tara. “How to Wrestle with Non-Compete Contracts,” Forbes.com, February 20, 2008, <http://www.forbes.com/2008/02/20/busineness-basics-noncompete-lead-careers-cx_tw_0220bizbasicsnoncompete.html> (an article describing the effect of noncompetes on workers).
- Rosen, Michael. “Layoffs and Noncompetes” (blogpost), Massachusetts Noncompete Law (blog published by Foley Hoag LLP), November 24, 2008. <http://www.massachusettsnoncompetelaw.com/2007/08/articles/noncompetes/>. (This URL cannot be accessed directly; instead, go to the blog’s home page at <http://www.massachusettsnoncompetelaw.com>, look for “Topics” in the menu on the left, click on “Noncompetes,” and search for “layoffs” on the resulting page.)
Employees are typically required to sign nondisclosure agreements, which bar them from divulging confidential information and trade secrets. Nondisclosure agreements are separate and distinct from noncompete agreements and are enforced separately. The present bill does not affect nondisclosure agreements.
Nonsolicitation agreements, in which the employee agrees not to solicit customers of the former employer, and anti-piracy agreements, in which the employee agrees not to induce former co-workers to join his or her new company, are also not affected by the present bill.
- Reece III, Laurence H., “Employee Noncompetition Agreements: Recent Developments and Trends,” Massachusetts Law Review, Massachusetts Bar Association, 2003, <http://www.massbar.org/for-attorneys/publications/massachusetts-law-review/2003/v88-n1/employee-noncompetition-agreements-recent-developments> (see part D., “Other Types of Restrictive Covenants”).
- Manning, Lurleen A. “The employer strikes back: A quick guide to claims against employees” Section Review, Massachusetts Bar Association, 2004, <http://www.massbar.org/for-attorneys/publications/section-review/2004/v6-n1/the-employer-strikes-back-a> (see paragraph entitled “What if we didn’t get our employees to sign noncompete agreements?”).
- Bray, Hiawatha. “IRobot wins injunction against competitor,” The Boston Globe, November 3, 2007, <http://www.boston.com/business/technology/articles/2007/11/03/irobot_wins_injunction_against_competitor/> (describes an example of protection by patent and trade secret law rather than prevention of competition).
- Bray, Hiawatha. “IRobot settles 2 lawsuits on patent infringement,” The Boston Globe, December 22, 2007 < http://www.boston.com/business/globe/articles/2007/12/22/irobot_settles_2_lawsuits_on_patent_infringement/ > (follow-up to previous article, describing penalties).
Massachusetts General Laws prohibit noncompetes for employees in certain professions. In addition, lawyers are forbidden by their code of ethics (Rules of Professional Conduct) from requiring noncompetes in their own profession (except in the case of the sale of a practice).
- Law Firms and Associations (Rules of Professional Conduct, Rule 5.6 <http://www.mass.gov/obcbbo/rpc5.htm#Rule%205.6>)
- Physicians (MGL Chapter 112: Section 12X <http://www.malegislature.gov/Laws/GeneralLaws/PartI/TitleXVI/Chapter112/Section12X>)
- Nurses (MGL Chapter 112: Section 74D <http://www.malegislature.gov/Laws/GeneralLaws/PartI/TitleXVI/Chapter112/Section74D>)
- Social workers (MGL Chapter 112: Section 135C <http://www.malegislature.gov/Laws/GeneralLaws/PartI/TitleXVI/Chapter112/Section135C>)
- Broadcasting industry (MGL Chapter 149: Section 186 <http://www.malegislature.gov/Laws/GeneralLaws/PartI/TitleXXI/Chapter149/Section186>)
States differ in their treatment of competition in an employer-employee relationship. In California, noncompete contracts are illegal by statute, except in certain limited cases (those involving buying or selling businesses or dissolving partnerships). Other states’ statutes vary, as well as the level of enforcement. Massachusetts has no statute addressing noncompete contracts for all professions. Rather, enforcement relies on case law, i.e., precedent in cases tried.
- Text of CA statute <http://www.leginfo.ca.gov/cgi-bin/displaycode?section=bpc&group=16001-17000&file=16600-16607>
- Garmaise, Mark J. “Ties that Truly Bind: Non-competition Agreements, ExecutiveCompensation and Firm Investment,” UCLA Anderson, <http://personal.anderson.ucla.edu/mark.garmaise/noncomp7.pdf> (see comparison of enforceability of noncompetes in different U.S. states on p.39, 44).
Recently, other states have passed laws intending to clarify and, in some aspects, restrict of the enforceability of noncompetes.
- Oregon (amendments to ORS 36.620 <http://www.leg.state.or.us/07orlaws/sess0900.dir/0902.htm>)
- Idaho (Title 44, Chapter 27 of the Idaho Statutes <http://www.legislature.idaho.gov/idstat/Title44/T44CH27.htm>)
The following sites and papers present information, research, and opinion on the effect of noncompetes on the Massachusetts economy.
- Kirsner, Scott. “Sunday’s Globe column: How noncompetes make states less competitive” (blogpost), Innovation Economy (Scott Kirsner’s blog), December 31, 2007, <http://www.innoeco.com/labels/Matt%20Marx.html> (includes an interview with Matthew Marx, Harvard Business School Ph.D. candidate researching the effects of noncompetes on employee mobility and the economy).
- Marx, Matthew, Deborah Strumsky, and Lee Fleming. “Noncompetes and Inventor Mobility: Specialists, Stars, and the Michigan Experiment” (working paper 07-042), Harvard Business School, <http://www.hbs.edu/research/pdf/07-042.pdf>. (A version of this paper will appear in Management Science.)
- Garmaise, Mark J. “Ties that Truly Bind: Non-competition Agreements, ExecutiveCompensation and Firm Investment,” UCLA Anderson <http://personal.anderson.ucla.edu/mark.garmaise/noncomp7.pdf>.
- “Employee Non-Compete Agreements: Protecting Innovation or Stifling It?” panel discussion at the Berkman Center for Internet and Society at Harvard University, June 19, 2008, description: <http://cyber.law.harvard.edu/node/4317>, video: <http://cyber.law.harvard.edu/node/4440>. (If the video URL is not directly accessible, go to the Berkman homepage and click on “Interactive” on the menu bar at the top; videos are ordered by date, most recent first.)
- Blog by Bijan Sabet (General Partner, Spark Capital), Alliance for Open Competition <http://opencompetition.wordpress.com/>
Recent coverage in the media has discussed the impact of noncompetes on employees, businesses, and the Massachusetts economy.
- “Clause for Concern,” The Boston Globe, July 12, 2009, <http://www.boston.com/bostonglobe/editorial_opinion/editorials/articles/2009/07/12/clause_for_concern/> (Sunday lead editorial calling for reform of noncompete law in MA).
- Connors, Molly. Cape and Islands Public Radio (WCAI) report, October 9, 2009.
- Frank, David E. “Critics blast bill banning non-compete agreements,” Massachusetts Lawyers Weekly, January 26, 2009, <http://www.belloblack.com/downloads/MALawyersWeekly_090126.pdf>.
- Huang, Gregory. “Non-Competes Could Explain Rise and Fall of Boston’s Route 128 Vs. Silicon Valley, Study Says – But Not Everyone Buys the Argument,” Xconomy.com, August 19, 2008, <http://www.xconomy.com/boston/2008/08/19/non-competes-might-help-early-stage-growth-but-not-everyone-buys-the-argument/>.
- Johnson, Carolyn. “Contract clauses called stifling,” The Boston Globe, December 7, 2007, <http://www.boston.com/business/globe/articles/2007/12/07/contract_clauses_called_stifling/>.
- Kirsner, Scott. “Why noncompete means don’t thrive,” The Boston Globe, December 30, 2007, <http://www.boston.com/business/articles/2007/12/30/why_noncompete_means_dont_thrive_/>.
- Kirsner, Scott. “Non-compete clauses may be making us non-competitive,” The Boston Globe, January 19, 2009, <http://www.boston.com/business/technology/articles/2009/01/19/non_compete_clauses_may_be_making_us_non_competitive/>.
- Kirsner, Scott. “Start-ups stifled by noncompetes,” The Boston Globe, June 21, 2009, <http://www.boston.com/business/articles/2009/06/21/start_ups_stifled_by_noncompetes/>.
- Kirsner, Scott. “Latest on the Non-Compete Bill in Massachusetts,” Innovation Economy (blog), July17, 2009, <http://www.innoeco.com/2009/07/latest-on-non-compete-bill-in.html>.
- Kirsner, Scott. “Dear Captains of Industry: Where is the Data to Support Your Position on Noncompetes?” Innovation Economy (blog), August 4, 2009, <http://www.boston.com/business/technology/innoeco/2009/08/dear_captains_of_industry_wher.html>.
- “Massachusetts Noncompete Culture,” NECN.com, http://www.necn.com/Boston/SciTech/2009/10/09/Mass-noncompete-culture-to/1255130326.html# (video clip).
- McConville, Christine. “Non-compete pacts nixed,” The Boston Herald, December 7, 2007, <http://news.bostonherald.com/business/general/view.bg?articleid=1049286>.
- Pazzanese, Christina. “Bill in Mass. House renews attempt to rein in non-competes,” Massachusetts Lawyers Weekly, May 3, 2010, <http://www.dolanmedia.com/view.cfm?recID=589656>.
- Pratt, Mary. “Economy likely to force changes to noncompete pacts,” Boston Business Journal, March 6, 2009, <http://boston.bizjournals.com/boston/stories/2009/03/09/focus3.html>.
- Roush, Wade. “Legislator Drafting Bill to Outlaw Non-Compete Agreements in Massachusetts,” Xconomy.com, December 16, 2008, <http://www.xconomy.com/boston/2008/12/16/legislator-drafting-bill-to-outlaw-non-compete-agreements-in-massachusetts/>.
- Roush, Wade. “Bill to End Non-Compete Agreements Filed on Beacon Hill,” Xconomy.com, January 12, 2009, <http://www.xconomy.com/boston/2009/01/12/bill-to-end-non-compete-agreements-filed-on-beacon-hill/>.
- Roush, Wade. “Spark Capital Endorses Brownsberger’s Bill to Ban Non-Competes,” Xconomy.com, April 8, 2009, <http://www.xconomy.com/boston/2009/04/08/spark-capital-backs-brownsbergers-bill-to-ban-non-competes/>.
- Roush, Wade. “Compromise Bill Would Allow but Scale Back Noncompete Agreements in Massachusetts,” Xconomy.com, July 20, 2009, <http://www.xconomy.com/boston/2009/07/20/compromise-bill-would-allow-but-scale-back-noncompete-agreements-in-massachusetts>.
- Weisman, Robert. “Wanted: A new identity,” The Boston Globe, February 9, 2009, <http://www.boston.com/business/articles/2009/02/19/wanted_a_new_identity/>.
- Weiss, Tara. “How to Wrestle with Non-Compete Contracts,” Forbes.com, February 20, 2008, <http://www.forbes.com/2008/02/20/busineness-basics-noncompete-lead-careers-cx_tw_0220bizbasicsnoncompete.html>.
To voice an opinion on the noncompete issue, you may contact your state representative and state senator by letter, telephone, or email. The following website finds a list of legislators by a constituent’s address and presents links to the legislators’ contact information.
- To find a legislator: <http://www.wheredoivotema.com/bal/myelectioninfo.php>
If you wish to copy Rep. Brownsberger on the correspondence, please send to Rep. Will Brownsberger, Room 276, State House, Boston; email: email@example.com.
For a description of the how a bill becomes law in MA, see http://www.malegislature.gov/engage/howideabecomeslaw.