New Momentum for Noncompete Reform?

This blog has reported on efforts over the past few years to enact legislation that would either prohibit or significantly reform the law of noncompetes in Massachusetts.  During 2009 and 2010, these efforts had stalled, for at least two reasons:  (1) several industry organizations had been vocal in opposing any change to the status quo; and (2) Governor Patrick’s administration had been unenthusiastic about reform.  As described here, back in 2009, Gregory Bialecki, Secretary, Executive Office of Housing and Economic Development (a cabinet level post), had stated the following:

we don’t yet see the case to have been sufficiently proven that a change in our existing laws will be a significant improvement to our innovation ecosystem . . .

On September 15, at a hearing of the legislature’s Joint Committee on Labor and Workforce Development, the Patrick administration changed its position.  Secretary Bialecki testified in favor of  proposed legislation that would significantly restrict and regulate the enforcement of non-competition agreements in the Commonwealth.  His prepared remarks are here.  The reasons for this support echo the arguments that have been made previously (and until now had been unpersuasive to the administration):

  • economic research has shown that enforcement of non-competition can have a “demonstrable negative effect on the mobility of technology workers, especially those with advanced, specialized skills”;
  • this hindrance of employee mobility “can adversely affect our innovation economy”;
  • job creation tends to come in “sudden large bursts” and such explosive hiring is more difficult in a jurisdiction where non-competes are enforced;
  • talented employees interested in starting up new ventures are leaving the Commonwealth because of noncompetes;
  • noncompetes often are unfairly imposed and/or unfairly enforced; and
  • established large employers for which the status quo is advantageous should take a longer view and understand that the current environment is bad for the overall health of the MA economy

The statement ends by stating that there is a “pressing need for serious change.”  The administration is supporting the reform bill being sponsored by Representatives Brownsberger and Ehrlich, but the following statement should send chills down the spines of those who support the status quo:

If the relevant stakeholders are not prepared to [engage in a serious conversation] with a sense of urgency, then we ought to consider whether the outright elimination of enforceability altogether is the best course of action for the Massachusetts economy.

These are strong words, and clearly are intended to make clear that from the administration’s perspective, change is necessary and will happen with or without the involvement of business groups that favor no change at all.  Interestingly, almost all of the arguments made by the administration — if accepted — would justify a ban on noncompetes, rather than the reform approach.

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