Did EMC’s sale push noncompete reform?

Industry leaders say change rooted in years of steady lobbying

Tech startups and their investors have spent several years agitating for noncompete reform in Massachusetts, with almost no results. That changed abruptly Wednesday when House Speaker Robert DeLeo put his weight behind a deal to finally limit how the contracts are used.

So what changed? One obvious answer was Dell’s buyout of Hopkinton-based EMC, a longtime supporter of the state’s current noncompete laws.

The data-storage company is the most valuable tech company in Massachusetts, where it employs thousands. But EMC will no longer be publicly traded once the Dell deal closes, and veteran chief executive Joe Tucci will retire. Michael Dell will run the newly combined company from his headquarters in Texas.

All of those factors pointed to the possibility that EMC’s clout had suddenly dwindled, leaving political leaders more open to cultivating a new generation of tech companies that wanted reform.

“EMC was the most vocal and aggressive proponent of noncompetes in Massachusetts, both in terms of lobbying and litigation. There could be less energy after the acquisition,” said Todd Dagres, an investor with Boston venture firm Spark Capital.

Several industry leaders who have worked on the issue said EMC’s pending sale likely played some role in the political thaw. But it wasn’t the single change that made a new approach on noncompetes possible.

“How I wish,” said Ellen Rubin, chief executive of data-storage startup ClearSky Data. “If it were a movie, that’s how it would go.”

Instead, industry leaders said, the political change was rooted in several years of unglamorous, steady lobbying and pressure from fast-growing parts of the tech industry that wanted the ability to hire top talent without the fear of punitive lawsuits.

Jeff Bussgang, an investor with Boston venture firm Flybridge Capital Partners and a veteran reform campaigner, said an overwhelming state Senate vote in favor of limiting noncompetes two years ago “took people by surprise” and signaled that some kind of change was possible.

Continued lobbying by the tech sector eventually convinced DeLeo to take action as well, Bussgang said.

“I think he just heard from a lot of people in the innovation community,” Bussgang said, “over and over again.”

Rubin, a New England Venture Capital Association board member, said EMC’s sale does reflect a major generational change underway in the tech industry.

Old-school computing giants have taken drastic actions to stay relevant, she said, including Dell’s own bid to take itself private in 2013, Hewlett-Packard’s decision last year to split itself into two companies, and EMC’s retreat from the public markets.

“The fact that they are having to rethink whether they can be public companies, whether they can exist in the way they did before — that’s a pretty significant wake-up call to the industry. All the things that used to be the case probably don’t work anymore,” Rubin said. “This is a moment in Boston where we’re kind of saying, ‘How do we help drive the innovation economy forward?’ . . . I happen to believe very strongly that noncompetes are not a part of moving us forward. They’re from the past.”

Support from big employers also helped break the logjam. DeLeo worked on a compromise proposal with the Massachusetts Competitive Partnership, an association populated by many of the state’s top CEOs — including Tucci. (Dell declined to comment on the issue.)

EMC welcomed DeLeo’s compromise plans this week, with general counsel Paul Dacier saying the proposal “protects legitimate business interests while ensuring continued growth of our state’s innovation economy.”

That was an enormous change from the company’s previous stance. When the issue was last in play, EMC supported the state’s existing laws and pointed to other states, including New York, where tech companies have grown despite noncompete agreements. EMC also has said it only uses a limited number of noncompetes to protect its business interests.

Some of the company’s opponents on noncompete reform, however, were wary of the notion that an acquired EMC would be a less formidable opponent. DeLeo’s proposal still allows for one-year terms on noncompete contracts, which Spark Capital investor Bijan Sabet called “punitive.”

“I don’t expect them to change their tune,” Sabet said of EMC. “But we can now see the long-term impact of such an onerous employment policy and culture. They are being swallowed up, instead of thriving as an independent concern.”