Non-compete agreements are, in a sense, the bread and butter of innovative employers. But to the innovative employee, they can be poisonous. A paradox? Not exactly. In a way, they make sense – as long as employees are fairly compensated. Companies in Massachusetts have used non-compete clauses for years as a way to protect business interests. Companies do not want to lose their best and brightest to the newest company down the street, and so the employees are required to sign a non-compete agreement. The problem is, a lot of times this agreement (which often spans one to two years) does not offer compensation during the time an employee cannot “compete.” But what if an employee wants to go it alone by starting her own company? Or what if she wants to join another’s new start-up?
This is the current state of affairs in Massachusetts – how do we protect employers without stifling innovation? Opponents of non-compete clauses claim that they slow down innovation by preventing bright and talented employees from starting a fresh business venture or investing in another start-up. Companies argue that they cannot afford to have their best employees sell or give away their ideas to the competition. 
Governor Deval Patrick has officially proposed sweeping legislation effectively banning non-compete agreements, much like California. California is one of the few states that has banned non-compete clauses in employment contracts, and the courts have already chosen not to enforce them in disputes. Massachusetts also faces competition from New York’s tech sector, where non-competition clauses are tough to enforce. Some economists believe that this may be why California and New York enjoy more fruitful tech sectors. The main argument here is that non-compete agreements create a barrier to innovation – ambitious employees are unable to leave their current employment to start their own companies or find more lucrative positions. The threat of a lawsuit from a bright employee’s current employer is a major detractor for investment purposes.
In exchange for the elimination of the non-compete, Governor Patrick has proposed a trade-secret protection law that is already in place in 47 other states. This law, the Uniform Trade Secrets Act, will safeguard a company’s trade secrets from being used inappropriately by an employee.
So are non-competes a barrier to innovation in Massachusetts? Maybe. But frankly, it seems that two consenting individuals who enter into a contract should be able to include whatever terms they negotiate with each other. If this includes a non-compete clause in an employment contract, and the employee is in agreement, then it should be enforced. There are also special relationships in which non-compete agreements must be upheld just as a matter of fairness. For example, anyone would be foolish to buy a friendly neighborhood shop-owner’s business without first making sure that owner signs an agreement to refrain from working the counter at a competing business right down the street.
That being said, forcing new employees to sign a non-compete on their first day of work sounds unfair and creates a hindrance in the industry. It is really not “negotiation” at all. But there is no reason for there to be such a barrier. Non-competes, when done fairly and correctly, need not be a problem for innovative thinkers in Massachusetts. For now, non-compete clauses may create a hindrance at a time Massachusetts needs to expand its job growth in certain sectors, but some serious debate – from both employees and employers across all industry sectors – must take place before the Legislature makes such a sweeping change.
Learn more at:
http://lucaslawgroupllc.com
http://bijansabet.com/post/82281605975/lets-get-rid-of-employee-non-compete-agreements-once
http://www.xconomy.com/boston/2014/04/10/non-compete-debate-exposes-political-rift-in-boston-tech-industry/
http://www.bostonglobe.com/business/2014/04/09/gov-patrick-pushes-ban-noncompete-agreements-employment-contracts/kgOq3rkbtQkhYooVIicfOO/story.html
http://www.boston.com/business/technology/innoeco/2013/09/big_shift_governor_patrick_now.html
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Alexa,
I was asking Leah about this and she told me to check out your blog. Very well done. We are trying to deal with this issue at work.
Jim