Non-compete argument heats up on Beacon Hill
Gov. Deval Patrick’s inclusion in his economic development package of an end to most non-compete agreements drew the most heat during a Beacon Hill hearing Thursday, but a top House lawmaker pointed to other parts of the $100 million package as potentially higher priorities.
“I won’t speak for the governor as to whether it’s his greatest single priority – but I don’t think it’s the most significant matter before us for our consideration in terms of economic development,” said Rep. Joseph Wagner, the House chairman of the Joint Committee on Economic Development and Emerging Technologies, which heard the bill. Wagner said he has heard mostly opposition to the non-compete provision from businesses and industries that have come to his office.
Wagner favorably cited other parts of the bill, such as $20 million for a middle skills job training grant fund for vocational technical schools and community colleges to provide manufacturing and IT training, and additional funding, to the tune of $10 million, for a brownfields redevelopment fund for environmental site assessments and cleanups in economically distressed areas.
House Speaker Robert DeLeo has talked about putting forward his own economic development package this spring.
“I think you’ll see a bill from committee that in many ways reflects the governor’s priorities, which I think reflect the speaker’s priorities,” Wagner said. “I think the governor has echoed themes that the speaker has been talking about for many months, and so I think the bill from committee will hit on those themes and areas of policy, and we’ll add others that will strengthen the proposal before us.”
As for a timeline for the bill, Wagner said, “Sooner rather than later.” That was the same response he gave Glen Shor, Patrick’s secretary of administration and finance, when Shor appeared before the committee in support of the governor’s version.
The provision ending most non-compete agreements drew support and opposition from members of the Bay State’s business community, and a defense from Shor.
Shor told lawmakers that non-competes can force workers to find jobs outside their fields or stay unemployed for the duration of the agreement.
“In one recent example, a teenage camp counselor signed a non-compete agreement one summer, then was denied a job at another camp the following summer on account of her non-compete,” he said.
Shor said the governor’s proposal does not cover all non-compete agreements or restrictive covenants. Non-disclosure, non-solicitation, no-hire and forfeiture agreements and non-compete agreements in a sale of a business would be unaffected, he said.
The Greater Boston Chamber of Commerce and the Associated Industries of Massachusetts registered their opposition to banning non-competes.
AIM’s executive vice president for government affairs, John Regan, said a recent survey of member companies, including large and small employers, showed they consider keeping non-compete agreements a priority.
“The non-compete issue is really about choice for both individuals and employers, who should be free to negotiate contracts of mutual benefits as long as employees are a part of the process,” Regan said in his testimony.
After Jim Klocke, the Greater Boston chamber’s executive vice president, offered his testimony, Sen. Gale Candaras, the co-chair of the committee asked, “So no reforms needed?”
Klocke responded that there is case law on non-compete agreements, and if reforms are needed, the state must be consistent with court rulings.
The New England Venture Capital Association said it supports banning non-compete agreements, arguing that they stifle innovation and job-creation efforts.
“I … cannot imagine having a conversation with a valued employee that starts out, ‘There is a better job for you and your family elsewhere, but I am going to prevent you from taking it. Now go back and do something amazingly creative for me and the company,’” Joshua Boger, a board director at Vertex Pharmaceuticals, said in his testimony.
Rep. Lori Ehrlich (D-Marblehead) pushed for curbed non-competes, instead of a ban, telling the committee she has filed a bill putting a six-month limit on the agreements. She said they’re becoming overused and being deployed in some pizza parlors and hair salons.
Max Perlman, an attorney at Hirsch Roberts Weinstein LLP who is familiar with non-compete agreements, said he favors reform but is concerned about their abolition. A ban would remove an “important tool” that a business has to prevent the theft of trade secrets.
Patrick’s bill also creates a $15 million “transformational development fund” for Gateway Cities such as Fitchburg, Leominster and Worcester, gives municipalities more control over liquor licenses, and increases financing levels for public-private infrastructure projects within the so-called I-Cubed program. Total financing allowed under I-Cubed would be raised to $600 million from $325 million.
Rep. Antonio Cabral (D-New Bedford) said the governor’s bill didn’t go far enough in certain areas, and referred to its level of funding for programs focused for Gateway Cities as “insufficient.”
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