Mass. Non-Competes Are Not The Issue
People who support banning non-compete agreements on Massachusetts workers often point to California as a state that has unleashed a flood of entrepreneurial energy by doing away with non-competes.
But California can afford to eliminate non-competes because the state is far better equipped than Massachusetts to protect the intellectual property of employers. The land of sunshine on the West Coast is one of 46 states that have adopted a Uniform Trade Secrets Act to help employers protect their technology and ideas from walking out the door with departing employees, while Massachusetts is one of the four that have not.
How important is the Uniform Trade Secrets Act to employers? Two lawyers at Boston law firm Holland & Knight — Paul Lannon and James Michalski — argue that such laws are essential.
The July 2011 U.S. District Court ruling of Richmond Technologies Inc. v. Aumtech Business Solutions affirms the right of employers to protect their trade secrets under the California Uniform Trade Secrets Act as a means of preventing unfair competition by a departing employee. The ruling is proof that an employer can enforce restrictive covenants in California, provided that the enforcement results from the need to protect its trade secrets. The case also demonstrates to California employers the importance of writing employment contracts that link limits on competition by departing employees to protect the trade secrets.
In particular, this case highlights a key message for public policy makers, that a strong trade secrets law in California can protect intellectual property rights in a way Massachusetts law does not provide.
For Massachusetts employers, the Richmond Technologies decision demonstrates the critical use of “trade secret” protections. The egregious facts of that case detail how an employee stole trade secrets from his employer, then leveraged that information to obtain a new job with a direct competitor. The employee and the direct competitor even schemed to steal the trade secrets.
Richmond Technologies ultimately prevailed against the rogue employee because the court construed the employment agreement as being consistent with the California Uniform Trade Secrets Act, which defines “trade secrets” to include programs, methods, and techniques that derive independent economic value from not being generally known to the public, provided they are subject to reasonable efforts to maintain their secrecy.
Protecting employers’ intellectual property is critical to the knowledge-based Massachusetts economy, with its heavy concentration of technology, biosciences and manufacturing companies. Associated Industries of Massachusetts recently testified against legislation that would significantly alter the commonwealth’s non-compete laws, and backs a second bill that would establish a Uniform Trade Secrets Law.
Massachusetts must join the large majority of states that have uniform trade secret laws before even considering changes to non-compete agreements. The intellectual vibrancy of the Massachusetts economy is at stake.
Brad MacDougall is associate vice president for government affairs with Associated Industries of Massachusetts (AIM).
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