The dispute over whether to abolish employee noncompete contracts in Massachusetts yielded signs of a possible compromise Tuesday at the State House, with Governor Deval Patrick’s administration signaling a willingness to accept a middle ground and the Senate voting in favor of placing limits on the covenants but not banning them outright.
On the same day that a legislative committee held a hearing on the issue that included discussion of a compromise, the Senate voted to limit the duration of noncompete agreements to six months and prohibit their use for hourly employees.
The Senate voted 32-7 in favor of the compromise offered by Senator William Brownsberger. The vote came after Patrick’s proposal this spring to ban noncompete agreements, which prevent workers who leave jobs from joining rival firms or launching new companies in the same industry, often for a year or longer.
The House previously opted against making changes to the use of noncompete clauses, meaning the issue could get settled during negotiations over the different versions of the economic development bill later this month. Some top lawmakers including House Speaker Robert DeLeo have said they are not convinced a total ban is appropriate.
Earlier on Wednesday, the Joint Committee on Economic Development and Emerging Technologies held the second State House hearing on noncompete agreements, and like at the initial hearing, a number of speakers argued that noncompete agreements stifle innovation and hurt small companies in Massachusetts. Others advocated for the status quo — an outcome favored by some larger companies for retaining talent and protecting intellectual property.
Patrick’s economic development chief, Gregory Bialecki, testified that while he still believes banning noncompete clauses is the best course for the state, he would prefer to see a middle-ground reform over nothing at all.
Representative Joseph F. Wagner, a Chicopee Democrat and House chairman of the committee, said he was glad to see Bialecki’s willingness to compromise. Wagner had begun the hearing by saying he believes a middle ground will be the final outcome.
Meanwhile, Representative Lori Ehrlich, a Marblehead Democrat who has filed a series of bills to ban noncompetes in Massachusetts since 2009, called a compromise “a reasonable place for the Commonwealth to land.”
Ehrlich proposed changes including limiting the duration of noncompete accords to six months and exempting hourly workers, who often are among the lowest paid in the labor force, from noncompete clauses. Among those who testified Tuesday was Colette Buser, who said she signed a noncompete agreement at age 16 to become a counselor at a summer camp in Wellesley, LINX, and since she left has been barred from working at a different camp.
Those who testified from the local technology industry — whose startups and venture capitalists have been among the most vocal opponents of noncompetes — showed little interest in a compromise, however. Andy Palmer, who has invested in and founded numerous local startups including current Cambridge company Tamr, told committee members: “Please pass this bill without compromise.”
California, which has a far larger technology industry than Massachusetts, is also positioned to lure the state’s tech startups and employees because it does not allow noncompete agreements in any form, Palmer said.
“Please do not make me and folks like me move to California,” he said.
At least one business group that has supported keeping noncompete agreements, Associated Industries of Massachusetts, also showed a lack of enthusiasm about a compromise, saying after the hearing that it sees no need to change the current law.
But following the Senate vote, the group said it is “carefully studying the Senate measure with an eye toward maintaining adequate protections for the intellectual property of employers.”