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July 2, 2014

Senate votes for compromise on use of non-competes

On the same day that a legislative committee heard testimony about restricting the use of non-compete employment agreements, the Senate arrived at a compromise during its debate on a jobs bill that would limit the duration of such agreements to six months and prohibit their use for hourly employees.

The Senate voted 32-7 in favor of the compromise offered by Sen. William Brownsberger, after Gov. Deval Patrick earlier this spring proposed banning their use altogether.

Brownsberger, D-Belmont, said it was a difficult issue to address because the impact varies from industry to industry. The amendment does not ban non-compete agreements, he said, but changes are necessary because there is wide-spread "abuse" of the agreements that are used to prevent employees from going to work for a competitor once they leave their jobs.

The House opted against making changes to the use of non-compete agreement in contracts when it debated its version of the economic development bill, meaning the issue could get settled during conference committee negotiations later this month.

Under current law, employers can add a non-compete clause to employment contracts.

Economic Development Secretary Greg Bialecki said during the hearing that the potential compromise proposed by Brownsberger and Rep. Lori Ehrlich was "thoughtful," and he said the administration was willing to listen to ideas short of banning non-competes, as long as the reforms were "substantial."

"Today's hearing demonstrated that non-competes affect all sectors of the economy and stifle job growth and innovation across the Commonwealth. We thank the Senate for taking action on this critical issue," said Matt Sheaff, a spokesman for Bialecki, after the Senate vote.

Business groups have defended the contract clauses as important tools to protect trade secrets and sensitive information about how companies operate, but Sen. Gale Candaras said lawmakers have heard "unconscionable stories of people who have been harmed by these agreements."

"People are begging us for relief," Candaras said. The Senate economic development bill also calls for the adoption of the Uniform Trade Secrets Act to further protect proprietary corporate information.

All four Republicans - Sens. Bruce Tarr, Robert Hedlund, Richard Ross, and Donald Humason - and Sens. Rodrigues, Harriette Chandler and Karen Spilka voted against the amendment.

The amendment also provides some clarity on when the agreements can be executed, dictating they be presented to a potential employee in a timely way, so the worker knows what they are getting involved with before starting a job, Brownsberger said.

The agreement must be presented at least five business days before the employee starts work, or when any formal offer of employment is first made to the employee, according to the amendment.

If the agreement is entered into after the person is already employed, but not in connection with separation from employment, "it must be supported by fair and reasonable consideration in addition to the continuation of employment, and notice of the agreement must be provided at least ten business days before the agreement is to be effective," the amendment states.

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