November 1, 2017

Non-compete issue resurfaces in Legislature

Flickr/Massachusetts Office of Travel and Tourism
Workers are saying non-compete laws keep them from taking new jobs.

Engineer Geoffrey Cohler said a non-compete clause dissuaded him from taking a job, and recruiter and sales professional Alan Resnic suggested a non-compete may be a reason he has not changed jobs in two decades.

Both men asked lawmakers Tuesday to restrict companies' use of the clauses, which can legally bar employees from going to work for a competitor even after being laid off.

After the House and Senate passed bills to restrict the use of non-competes, negotiations between the branches broke down last year and lawmakers were unable to deliver statutory relief to workers facing employment issues because of the contractual agreements they had entered. The Committee on Labor and Workforce Development, which is considering a raft of bills on the subject this session, has two new co-chairmen this session in Melrose Rep. Paul Brodeur and Winchester Sen. Jason Lewis.

Cohler said he had reached agreement on everything but the non-compete agreement with a company that he declined to name. When he raised his concerns with the hiring manager, she at first told him that she wouldn't agree to such a restriction either and went to check if the non-compete clause could be amended, Cohler said.

"Actually I did sign it and we won't change it," she said in a follow-up conversation, Cohler told the committee.

Resnic said he is currently "bound under a non-compete agreement" that he signed as a condition of his employment 22 years ago.

"Coincidentally I have not made a job change in 22 years, so my non-compete may be working as intended," Resnic said. Declining to identify his employer to the News Service, Resnic said his boss at the time told him, "We all hold our nose and sign it."

Non-competes, which have been banned in some states like California, provide some level of protection for Bay State employers' intellectual property, according to the Associated Industries of Massachusetts (AIM). The business lobbying group is on board with establishing some restrictions on the use of non-competes and supports a bill sponsored by House Minority Leader Brad Jones that would limit non-compete agreements to one year.

The bill (H 2371) would also limit the geographic scope of a non-compete to areas where the employee had job responsibilities over the year prior and limit the type of work covered to services the employee provided in the last two years of employment, according to a summary. Jones's bill would also prohibit enforcement of non-compete agreements with interns, employees eligible for overtime, employees that were laid off, and employees 18 and younger.

"We believe in the selective use and the business purposes of those non-competes and we recognize the need for flexibility and legal options for protecting that intellectual property," Brad MacDougal, AIM's vice president for government affairs, told the committee.

Reps. Lori Ehrlich and Sen. William Browsnberger, who have worked on the issue in prior sessions, cosponsored legislation (H 2366/S 988) that is similar to Jones's bill, while also requiring employers to notify an employee within 10 days of their termination whether the employer intends to enforce the non-compete.

Both of Ehrlich's daughters were asked to sign non-compete agreements as interns and one of them was unpaid, she told lawmakers.

Data on non-compete litigation and entrepreneurship in different jurisdictions suggest that women are disproportionately discouraged from starting businesses because of non-compete clauses, said Matt Marx, a professor at Boston University's Questrom School of Business.

"It's not about lawsuits; it's about the threat of a lawsuit," Marx said. He said, "If we want women not to start companies or we want them to go to California, then we should stick with the status quo."

Lewis sponsored a bill (S 1020) that would make non-compete clauses void and unenforceable with some exceptions. Employers would still be able to prohibit poaching of their customers, could enforce non-disclosure agreements, and could agree to non-competes with someone selling a substantial stake in a company.

Last session, both branches passed bills restricting the use of non-competes and the legislation was sent to conference committee, but a compromise was not reached before the July 31 end of formal sessions. Brodeur hopes to pick up where lawmakers left off last session rather than "re-litigate every issue," he said.

Some non-compete legislation includes provisions to update the state's trade secret laws. Martha Coakley, the former attorney general and 2014 Democratic gubernatorial candidate who is now a lobbyist at Foley Hoag, appeared alongside the CEO of Dicerna Pharmaceuticals asking for lawmakers to support changes to its trade secret laws. The two asked lawmakers to require plaintiffs to make more specific claims when taking a competitor to court over alleged inappropriate taking of intellectual property.

"Under current law, drug discovery companies like Dicerna may be subject to unfounded, competitively motivated trade secret misappropriation suits and a lengthy and expensive discovery process before a specific, fact-supported list of trade secrets is even provided," Dicerna CEO Douglas Fambrough said, according to his testimony as prepared for delivery.

Coakley said Massachusetts and New York are the only two states that have not passed laws to require more specificity in trade secret suits.

"We're saying in this area particularly you need to specify more as to the nature of the trade secret and what actually you are claiming was taken," Coakley told the News Service.

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