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The Argument

Should the state adopt legislation banning non-compete agreements?

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Yes

Brian A. Joyce, Democratic state senator from Milton

Massachusetts is home to an expanding innovation economy and incredibly talented, highly educated employees. We have the responsibility to both foster business growth and to protect the rights of our skilled workforce.

Employees increasingly find themselves bound by non-competition agreements. These clauses, often hidden in fine print, bar employees from working in his or her field for up to two years after leaving their current position. The agreements may even be presented to employees only after they have accepted a position and turned down other opportunities.

While the Senate has heard testimony from employees in many arenas – from teenage camp counselors to hairstylists to personal trainers – non-compete agreements have an impact particularly on our growing technology sector. In a 2011 study conducted through the MIT Sloan School of Management, Professor Matthew Marx determined that half of the tech employees must sign non-compete agreements. (cq)

Non-compete agreements limit the growth of the innovation sector by constricting talent. Entrepreneurial employees are unable to leave and start their own companies. Salaries are stifled because skilled workers must choose between their current job and unemployment. Tech workers, unable to take higher-paying jobs at other Massachusetts companies, leave for California where non-compete agreements are rarely enforced (cq) and tech positions abound. Some tech professors even warn their graduating students against taking jobs in Massachusetts, where non-compete agreements may chain them to a single company. According to Professor Marx’s study, one third of tech workers who sign a non-compete agreement end up leaving their chosen industry altogether when they change jobs. (cq)

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All of these factors restrict the Massachusetts innovation economy. By allowing these non-compete agreements, we are limiting job and salary opportunities for talented workers. We are hindering the creation of inventive new start-ups, and well-paying jobs in these new companies. Worst of all, we are driving these highly desirable employees out of the state or out of the industry.

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If we wish to allow the Massachusetts tech industry to reach its fullest potential, we must end the use of non-competition agreements and join 47 states (cq) that have adopted trade secrets legislation to address employers’ concerns regarding the protection of intellectual property.

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No

Christopher P. Geehern, executive vice president of Associated Industries of Massachusetts, a statewide employer association with a regional office in Bridgewater

Proposals to ban or restrict the use of non-compete agreements in Massachusetts represent a solution in search of a problem.

Current Massachusetts law governing non-competes is that rarest of public policies, enjoying broad support by effectively balancing the needs of employers and their employees in a manner that stimulates innovation and job growth.

But a tiny group of well-heeled venture capitalists now seeks to change the law in a move that would discourage critical business investment.

“We believe that intellectual property created by us could be transferred to our competition and lessen that value of the IP, which required significant investment,” said a small publishing company that responded to a 2014 survey by Associated Industries of Massachusetts.

“Our business would be compromised by allowing employees and former employees to share trade secrets that have been crucial to continuing business,” said the president of a small engineering firm.

A manufacturing company with fewer than 50 employees said eliminating non-competes “could put us out of business.”

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The non-compete issue is really about choice for both individuals and employers, who should be free to negotiate contracts of mutual benefit as long as employees are a part of the process.

Employees in Massachusetts already enjoy legal protection against overly restrictive non-compete agreements. Agreements can be enforced only when they are narrowly tailored to protect legitimate business interests; limited in time, geography, and scope; consonant with public policy; and the harm to the employer from non-enforcement outweighs the harm to the employee.

Non-competes may not be used to curtail ordinary, fair competition or to prevent employees from using their general skills. Massachusetts has a long history of case law that strikes the right balance between employee freedom of mobility and financial incentives with employer interests in protecting intellectual property, trade secrets, confidential information, and goodwill.

Even supporters of the non-compete ban acknowledge that it would unleash a wave of protracted legal action, including litigation. Contrast that with the fact that most non-compete situations now are resolved quickly without litigation, usually based on assurances from the new employer about what the new employee is doing. Hundreds, if not thousands, of non-competes expire per their own terms.

As told to Globe correspondent John Laidler. He can be reached at laidler@globe.com.


As told to Globe correspondent John Laidler. He can be reached at laidler@globe.com.