Massachusetts House Speaker Robert DeLeo on Tuesday delivered a powerful blow to Governor Deval Patrick’s bid to end employee noncompete agreements, an issue that has also split the state’s technology sector.
The Winthrop Democrat declined to include the proposed ban on noncompete clauses in an economic development package House leaders unveiled Tuesday. The ban was the star provision of a similar jobs bill the governor had filed in April.
DeLeo’s plan would appear to be a rebuttal to Patrick’s, though the speaker noted he has talked about submitting an economic development package since the beginning of the year. Indeed, DeLeo did not even mention the noncompete issue in his remarks.
“One of the most important aspects that we have to address in the House, especially in these difficult economic times, is the creation of jobs, jobs, and more jobs,” DeLeo said. “That’s what this legislation does.”
Both bills aim to strengthen the state’s high technology sector, with funds earmarked for education and skills training, and efforts to create jobs in gateway cities like Lowell, Fall River, and Lawrence. But a glaring difference is on noncompete agreements.
House leaders said there is too much division over the issue, both within the Legislature and within the state’s business community, to push for banning them. California is the only state that does not allow noncompete agreements, which bar workers who leave their jobs from joining rival firms or starting new businesses in the same industry, often for a year or longer.
A Patrick spokeswoman said despite some significant differences, the similarities between the two bills have set the stage for the governor and Legislature to work toward compromise. “We’re encouraged that so much of the governor’s proposal is included in the speaker’s bill,” said the spokeswoman, Jesse Mermell. “It’s clear that we have a shared commitment to economic growth, and we look forward to collaborating.”
Noncompete provisions are used by companies in many industries, but are particularly prevalent and polarizing in the tech world: larger, more established companies consider them an important tool for retaining talent and protecting intellectual property. Many tech entrepreneurs and venture capitalists, meanwhile, say they unnecessarily shackle employees and hinder innovation by preventing talent from taking jobs at startups.
Prominent tech giants such as EMC Corp. and Covidien opposed the governor’s ban, as did the Greater Boston Chamber of Commerce. Meanwhile, entrepreneurs such as Kayak cofounder Paul English, smaller firms such as Acquia, and the New England Venture Capital Association have backed a ban on noncompetes.
Representative Joseph F. Wagner, a Chicopee Democrat who helped craft DeLeo’s legislation, said he has heard from more companies that want to keep noncompete agreements in place than those that favor eliminating them.
“More importantly, from my perspective, there were many more things that we considered a greater priority than noncompetes,” added Wagner, who is the House chairman of the Joint Committee on Economic Development and Emerging Technologies.
He suggested lawmakers eventually may find middle ground between an all-out ban and open season on noncompete contracts. For instance, Representative Lori Ehrlich, a Marblehead Democrat, filed a bill last year modeled after a law in Oregon that limits the length of noncompete agreements to six months.
“There’s clearly some other place, potentially, but we’re not even close to that,” Wagner said. “I think that’s a dialogue for another day.”
Without the support of House leadership, Patrick’s attempt to ban noncompete agreements could be thwarted.
Senate President Therese Murray, who has not taken a position on noncompete contracts, added through a spokeswoman that the Senate plans to introduce its own economic development package, and did not include the issue on a list of priorities for the rest of the legislative session. Another central component of the governor’s proposal, a new program for foreign entrepreneurs to receive visa sponsorship from Bay State colleges, also is absent from the speaker’s version.
DeLeo’s plan focuses instead on investments in programs such as the Massachusetts Computer Attaining Network, a confederation of industry professionals, educators, and nonprofits, which aims to make computer science instruction available in every public school system. MassCAN, as the group is known, would receive $1.5 million.
MassVentures, a quasipublic venture capital firm that invests in local startups, also would get $1.5 million. Patrick proposed $5 million for the firm.
Under the speaker’s proposal, another $1.5 million would go to the Working Cities Challenge, in which 20 Massachusetts cities with large low-income populations compete for grant money by pitching economic growth projects.