Mass. should not ban non-competes, but allow for sensible restrictions
For decades, Massachusetts has prided itself on being a state where innovative businesses are born, then grow and evolve into companies that can impact the regional or even the global economy. The list of those businesses includes Central Massachusetts-based IT giants of past and present, such as Digital Equipment, Data General and EMC.
Those companies and others have thrived on the technological knowhow and creativity of many of their productive workers. To ensure that any proprietary knowledge does not go elsewhere, companies have used non-compete agreements that are designed to prevent employees from jumping to rivals.
Two months ago, Gov. Deval Patrick introduced legislation that would make it easier for workers to take their skills elsewhere — even to start their own companies — by banning non-compete agreements. His proposal, however, is being met with fierce resistance not only from technology companies, but business groups such as Associated Industries of Massachusetts.
We buy into the governor's notion that workers should not be legally handcuffed in their attempts to make a living, but we also see the position of established firms that have significant intellectual property stored in the heads and laptops of many of their workers. The governor prefers to have Bay State law line up with that of California, where, since the 19th century, non-compete agreements have been ruled to be in violation of state law. For a state that is seen as a cradle of business innovation, especially information technology, it may inspire others to believe that whatever works there can work elsewhere.
While an outright ban on non-compete agreements in Massachusetts does not seem prudent, there are changes that ought to be made to the law. The central issue for employers and employees remains: How far should a company go in limiting future employment options of a valued staffer, and does current law allow restrictions that run dangerously close to an “indentured servitude” relationship? In the 1970s, professional baseball players succeeded in getting the courts to toss out the “reserve clause,” which bound a player to a team even beyond the term of his contract, restricting his ability to take his skills elsewhere. That, for better or worse, ushered in the era of free agency. We've all seen what that freedom has done to professional sports, and while it has helped pump up player salaries, it certainly has not been all good.
To be sure, standards for non-compete agreements are necessary to protect the employer's interests while also ensuring that employees have the freedom to earn a living — and be happier — elsewhere.
So what changes should be made to the law? For starters, there should be a reasonable time limit on non-compete agreements, such as six months. Longer periods can inflict unnecessary hardship on employees while delivering little in meaningful defenses for a company. In addition, employers should still be able to prevent a departing employee from soliciting or hiring fellow employees to defect to the same company they're heading to. The same should apply about soliciting or transacting business with customers the employee previously had contact with. With the web full of readily available information about an employer's practices, the bad publicity that can come from overly punitive non-competes can prevent an employer from landing the talented staffers they're trying to recruit.
Finally, any employee whose job is eliminated and thus becomes unemployed should be exempt from a non-compete agreement. Anyone who is being “set free” should truly be free to find work elsewhere, and not be limited in his or her efforts to leave the unemployment line.
There's no doubt that Massachusetts' non-compete law could use some changes. Yet many employers have also abused the law and used the courts, or the threat of legal action, to extract what many would deem unreasonable concessions from ex-employees. Our country's history of entrepreneurial vigor and independence supports a loosening, not a tightening, of the legislation, and while we may not follow California in removing all non-compete shackles, we can certainly find a prudent middle ground.
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