Lawmakers again seek deal on non-competes, trade secrets

By BOB SALSBERG Markets Associated Press

Supporters of bills that would limit the use of non-compete employment clauses in Massachusetts are hoping for a legislative breakthrough after several near misses in recent years.

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Former Democratic Gov. Deval Patrick tried unsuccessfully to abolish non-competes before leaving office in 2014. Last year, proposals restricting the scope and duration of such agreements passed the House and Senate, but negotiations over a compromise broke down in the waning hours of the legislative session.

The issue returned to the forefront this past week as the Labor and Workforce Development Committee heard several new bills on non-competes and the related issue of protecting trade secrets.

Backers are hopeful for passage, but obstacles remain.

Some questions and answers about non-competes in Massachusetts:

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WHAT ARE THEY?

Employers often require employees to enter into agreements that they will not go to work for a potential competitor in the same industry. Non-competes vary in scope and duration and may apply to all or just certain workers within a company.

According to a survey by Beck Reed Riden, a Boston law firm that specializes in non-compete and trade secret litigation, only a handful of U.S. states ban non-competes, most notably California.

WHY ARE THEY CONTROVERSIAL?

Critics say non-competes stifle innovation by restricting the movement of talented professionals who would otherwise be free to build their own companies, grow jobs and develop new products.

This is especially important in Massachusetts, a state that boasts a knowledge-based economy and demands a highly skilled, highly educated workforce.

Yet that same fact is also cited as a defense of non-competes: Without such a tool, companies might find themselves locked in expensive and endless struggles to retain coveted workers and keep control of prized intellectual property — a new drug treatment, for example.

"There is really no evidence that the use of non-compete agreements harms Massachusetts' position as a global leader in innovation," argued Bradley MacDougall, vice president of government affairs for Associated Industries of Massachusetts, at the recent legislative hearing.

WHAT MIGHT CHANGE?

It's unlikely that lawmakers will pass an outright ban on non-competes. But legislation that attempts to strike what sponsors call a reasonable balance between the legal and financial rights of employers and their workers has a better shot.

Sen. William Brownsberger, a Belmont Democrat, and Rep. Lori Ehrlich, a Democrat from Marblehead, are leading the charge on legislation that would limit non-competes to one year or less in duration, with narrow exceptions.

It would also designate certain categories of workers, such as interns and temporary independent contractors, as exempt from non-competes.

"There are too many non-compete agreements that are overreaching," Brownsberger said.

The proposal would require advance notice be given to prospective employees that they will be required to sign a non-compete clause if hired, and 10-day notice for departing workers that a non-compete will be enforced. Employers would be barred from enforcing non-competes against workers who lost their jobs due to corporate downsizing.

COMPENSATION FOR NON-COMPETES?

One sticking point in last year's failed negotiations was whether employers must financially compensate former workers during the duration of non-compete clauses.

Brownsberger and Ehrlich removed the requirement, commonly known as "garden leave," from the current bill as part of an effort to achieve compromise.

Garden leave is generally opposed by business advocacy groups and no other state requires it.

Separate legislation filed by House Republican leader Brad Jones includes a provision that would pay ex-workers up to 50 percent of their salaries for one year.

But Jones' bill also has elements favored by industry, such as allowing judges to modify, rather than simply throw out, a non-compete clause that is legally flawed.