An Act to Prohibit Restrictive Employment Covenants
*NEWS*
The bill to reform laws governing employee noncompete contracts is now formally known as House Bill 4607 and has been referred to the House Committee on Steering, Policy, and Scheduling. For more information, see http://willbrownsberger.com/index.php/archives/tag/stag-non-competes. A recent article on the bill appears in Massachusetts Lawyers Weekly (by Christina Pazzanese, May 3, 2010).
For a description of the how a bill becomes law in MA, see http://www.mass.gov/legis/lawmkng.htm.
If you have any questions, comments, or feedback, please contact Rep. Will Brownsberger (willbrownsberger@gmail.com), Rep. Lori Ehrlich (Rep.LoriEhrlich@Hou.State.MA.US), or email info@ProhibitRestrictiveEmploymentCovenants.net. Rep. Brownsberger also encourages public discussion of the noncompete issue on his blog willbrownsberger.com.
*BACKGROUND*
A bill entitled “An Act to Prohibit Restrictive Employment Covenants,” House Bill Number 1794 (bill text), was filed on January 12, 2009 (186th General Court of the Commonwealth of Massachusetts) to prohibit noncompete contracts between employers and employees. The lead sponsors were Representative William N. Brownsberger and Senator Patricia D. Jehlen.
Rep. Lori A. Ehrlich filed a bill entitled “An Act Relative to Non-Compete Agreements,” House Bill Number 1799 (bill text) in January 2009, which would have restricted but not prohibited noncompetes. After receiving feedback from many perspectives, Rep. Brownsberger and Rep. Ehrlich drafted a compromise together to strike a balance among the interests of the stakeholders. The draft, dated September 28, 2009, can be found on Rep. Brownsberger's blog http://willbrownsberger.com/index.php/archives/2630.
The hearing, formally under the original bill numbers HB 1794 and HB 1799, took place on October 7, 2009, before the Joint Committee on Labor and Workforce Development. The compromise bill was reported favorably out of the Joint Committee on Labor and Workforce Development the week of March 15, 2009. It is now formally known as House Bill 4607, sponsored by Rep. Cheryl Coakley-Rivera.
For an account of the hearing, please see the following:
The following is a compilation of links to information on various aspects of employee noncompete contracts in Massachusetts.
Table of Contents
I. Related Massachusetts legislation in 2009
II. Background information on noncompete contracts
III. Noncompetes can be enforced even if an employee is laid off
IV. Nondisclosure agreements -- different and separate from noncompete contracts
V. Massachusetts prohibits noncompetes for certain professions
VI. Noncompetes in other U.S. states
VII. Noncompetes and the Massachusetts economy
VIII. Recent media coverage of the noncompete issue in Massachusetts
IX. Contact information for legislators
I. Related Massachusetts legislation in 2009
“An Act Making Uniform the Law Regarding Trade Secrets,” House Bill Number 329, lead sponsored by Representative Daniel E. Bosley and Senator John A. Hart, Jr. (bill text)
II. Background information on noncompete contracts (also known as a covenants not to compete or non-competition contracts)
Under a noncompete contract, an employee agrees not to compete with the employer for a period of time after leaving the employer. Examples of competing include working for a competing company or starting a competing company. Typically, the time period is one or two years. The present bill affects only noncompetes between an employer and employee. It does not affect noncompetes in the context of sales of businesses.
Reece III, Laurence H. “Employee Noncompetition Agreements: Recent Developments and Trends,” Massachusetts Law Review, Massachusetts Bar Association, 2003, <http://www.massbar.org/for-attorneys/publications/massachusetts-law-review/2003/v88-n1/employee-noncompetition-agreements-recent-developments>.
Powers, Kevin and Linda Evans. “Non-compete Agreements: A Proposal for Fairness and Predictability,” Rodgers Powers & Schwartz, <http://www.theemploymentlawyers.com/Articles/Noncompetition.htm>.
III. Noncompetes can be enforced even if an employee is laid off
IV. Nondisclosure agreements (also known as confidentiality agreements) -- different and separate from noncompete contracts
Employees are typically required to sign nondisclosure agreements, which bar them from divulging confidential information and trade secrets. Nondisclosure agreements are separate and distinct from noncompete agreements and are enforced separately. The present bill does not affect nondisclosure agreements.
Nonsolicitation agreements, in which the employee agrees not to solicit customers of the former employer, and anti-piracy agreements, in which the employee agrees not to induce former co-workers to join his or her new company, are also not affected by the present bill.
Reece III, Laurence H., “Employee Noncompetition Agreements: Recent Developments and Trends,” Massachusetts Law Review, Massachusetts Bar Association, 2003, <http://www.massbar.org/for-attorneys/publications/massachusetts-law-review/2003/v88-n1/employee-noncompetition-agreements-recent-developments> (see part D., “Other Types of Restrictive Covenants”).
Manning, Lurleen A. “The employer strikes back: A quick guide to
claims against employees” Section Review, Massachusetts Bar
Association, 2004,
<http://www.massbar.org/for-attorneys/publications/section-review/2004/v6-n1/the-employer-strikes-back-a> (see paragraph entitled “What if we didn’t get our employees to sign noncompete agreements?”).
Bray, Hiawatha. “IRobot wins injunction against competitor,” The Boston Globe, November 3, 2007, <http://www.boston.com/business/technology/articles/2007/11/03/irobot_wins_injunction_against_competitor/> (describes an example of protection by patent and trade secret law rather than prevention of competition).
V. Massachusetts prohibits noncompetes for certain professions
Massachusetts General Laws prohibit noncompetes for employees in certain professions. In addition, lawyers are forbidden by their code of ethics (Rules of Professional Conduct) from requiring noncompetes in their own profession (except in the case of the sale of a practice).
Law Firms and Associations (Rules of Professional Conduct, Rule 5.6 <http://www.mass.gov/obcbbo/rpc5.htm#Rule%205.6>)
Physicians (MGL Chapter 112: Section 12X < http://www.mass.gov/legis/laws/mgl/112-12x.htm>)
Nurses (MGL Chapter 112: Section 74D <http://www.mass.gov/legis/laws/mgl/112-74d.htm>)
Social workers (MGL Chapter 112: Section 135C <http://www.mass.gov/legis/laws/mgl/112-135c.htm>)
Broadcasting industry (MGL Chapter 149: Section 186 < http://www.mass.gov/legis/laws/mgl/149-186.htm>)
VI. Noncompetes in other U.S. states
States differ in their treatment of competition in an employer-employee relationship. In California, noncompete contracts are illegal by statute, except in certain limited cases (those involving buying or selling businesses or dissolving partnerships). Other states’ statutes vary, as well as the level of enforcement. Massachusetts has no statute addressing noncompete contracts for all professions. Rather, enforcement relies on case law, i.e., precedent in cases tried.
Text of CA statute <http://www.leginfo.ca.gov/cgi-bin/displaycode?section=bpc&group=16001-17000&file=16600-16607>
Recently, other states have passed laws intending to clarify and, in some aspects, restrict of the enforceability of noncompetes.
Oregon (amendments to ORS 36.620 <http://www.leg.state.or.us/07orlaws/sess0900.dir/0902.htm>)
VII. Noncompetes and the Massachusetts economy
The following sites and papers present information, research, and opinion on the effect of noncompetes on the Massachusetts economy.
Kirsner, Scott. “Sunday’s Globe column: How noncompetes make states less competitive” (blogpost), Innovation Economy (Scott Kirsner’s blog), December 31, 2007, <http://www.innoeco.com/labels/Matt%20Marx.html> (includes an interview with Matthew Marx, Harvard Business School Ph.D. candidate researching the effects of noncompetes on employee mobility and the economy).
Marx, Matthew, Deborah Strumsky, and Lee Fleming. “Noncompetes and Inventor Mobility: Specialists, Stars, and the Michigan Experiment” (working paper 07-042), Harvard Business School, <http://www.hbs.edu/research/pdf/07-042.pdf>. (A version of this paper will appear in Management Science.)
Garmaise, Mark J. “Ties that Truly Bind: Non-competition Agreements, Executive
Compensation and Firm Investment,” UCLA Anderson <http://personal.anderson.ucla.edu/mark.garmaise/noncomp7.pdf>.
“Employee Non-Compete Agreements: Protecting Innovation or Stifling It?” panel discussion at the Berkman Center for Internet and Society at Harvard University, June 19, 2008, description: <http://cyber.law.harvard.edu/node/4317>, video: <http://cyber.law.harvard.edu/node/4440>. (If the video URL is not directly accessible, go to the Berkman homepage and click on “Interactive” on the menu bar at the top; videos are ordered by date, most recent first.)
Blog by Bijan Sabet (General Partner, Spark Capital), Alliance for Open Competition <http://opencompetition.wordpress.com/>
VIII. Recent media coverage of noncompetes and related issues in Massachusetts
Recent coverage in the media has discussed the impact of noncompetes on employees, businesses, and the Massachusetts economy.
IX. Contact information for legislators
To voice an opinion on the noncompete issue, you may contact your state representative and state senator by letter, telephone, or email. The following website finds a list of legislators by a constituent’s address and presents links to the legislators’ contact information.
If you wish to copy Rep. Brownsberger on the correspondence, this is the mailing address: Rep. Will Brownsberger, Room 276, State House, Boston; email: willbrownsberger@gmail.com.
Page last updated by the Webmaster on May 7, 2010 or later. If there are technical problems with the website, please contact webmaster@ProhibitRestrictiveEmploymentCovenants.net. This website was created by Caroline Huang in consultation with Rep. Will Brownsberger.