Hot Topics > Non-compete agreements

An Act relative to Noncompetition Agreements, HB2993

Non-compete cartoonSincere thanks to Rep. Will Brownsberger and Atty. Russell Beck of Beck, Reed & Riden for their partnership, hard work, and persistence on this important topic.

A noncompete reform bill for the 2011-2012 legislative session has been filed by Rep.s Ehrlich, Brownsberger, Peisch, and others as House Bill 2293. The legislators welcome comments on the bill.  If you have any questions, comments, or feedback, please contact Rep. Will Brownsberger (willbrownsberger@gmail.com), or Rep. Lori Ehrlich (lori.ehrlich@mahouse.gov).

I. Recent Media Coverage 


Letter: Non-compete agreements must go Swampscott Report

Marblehead State Rep eyes Non-compete agreements Marblehead Reporter

Patrick threatens enforcement ban on Non-Competes Boston Business Journal

Non-compete bill step in right direction Mass Lawyers Weekly, Nov 22, 2011

Massachusetts should ease up protecting ‘noncompete’ clauses Boston Globe Editorial, October 30, 2011

Some common sense on noncompete clauses Boston Globe

For more information on the Ehrlich, Brownsberger, and Peisch’s bill, .  Also see Russell Beck’s (Beck Reed Riden LLP) blog

In addition, two bills to ban noncompetes have been filed: H2296 by Rep. Sheila Harrington and Rep. Denise Provost,  and S932 by Sen. Pat Jehlen and Rep. Denise Provost.

For a description of the how a bill becomes law in MA.

2. Background information on noncompetes (also known as a covenants not to compete or non-competition contracts)

A bill entitled “An Act to Prohibit Restrictive Employment Covenants,” House Bill 1794, 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 1799 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.

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:

House Bill 4607 was referred to the House Committee on Steering, Policy, and Scheduling on April 12, 2010 and to the Joint Committee on the Judiciary on May 24, 2010. It did not proceed further in the 2009-2010 legislative session.

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.

3. Related Massachusetts legislation in 2009

  • “An Act Making Uniform the Law Regarding Trade Secrets,” House Bill 329, sponsored by Representative Daniel E. Bosley and Senator John A. Hart, Jr.


4. Noncompetes can be enforced even if an employee is laid off

  • Rosen, Michael. “Layoffs and Noncompetes” (blogpost), Massachusetts Noncompete Law (blog published by Foley Hoag LLP), November 24, 2008. . (This URL cannot be accessed directly; instead, go to the blog’s home page look for “Topics” in the menu on the left, click on “Noncompetes,” and search for “layoffs” on the resulting page.)

5. 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.

6. 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).

7. 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.

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)

  • Idaho (Title 44, Chapter 27 of the Idaho Statutes)

8. Noncompetes and the Massachusetts economy

The following sites and papers present information, research, and opinion on the effect of noncompetes on the Massachusetts economy.


9. 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 and Rep. Ehrlich on the correspondence, lori.ehrlich@mahouse.gov and willbrownsberger@gmail.com

 

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© 2012 Lori Ehrlich for State Rep. All rights reserved.