Massachusetts May Go Boldly...Where Only California and North Dakota Have Gone Before
Taking the position that noncompetition prohibitions in employment agreements stifle innovation, Governor Deval Patrick of Massachusetts has introduced legislation, titled “The Growth and Opportunity Act of 2014,” that would eliminate restrictions against post-employment competition. Specifically, the language of the proposed legislation provides:
Any written or oral contract or agreement arising out of an employment or independent contractor relationship that . . . places any condition on, a person's ability to seek, engage in or accept any type of employment or independent contractor work, for any period of time after an employment or independent contractor relationship has ended, shall be void and unenforceable with respect to that restriction.
Supporters of the legislation maintain that non-competes benefit established companies, to the detriment of the encouragement of new business growth in the state. Debate on the proposed legislation appears to pit older, larger and more established companies against leaner start-ups. For instance, the New England Venture Capital Association is actively lobbying in support of the Governor’s proposal, while the Associated Industries of Massachusetts has announced its opposition to the proposed legislation. This face off comes at a time when the use of noncompete agreements seems to be generally on the rise, as recognized in the New York Times article http://nyti.ms/1qdOj4y.
If the novel legislation is passed, Massachusetts would become the third state, along with California and North Dakota, to prohibit noncompetes in the employment context. (Notably, neither the proposed Massachusetts law nor California or North Dakota law are unfriendly to properly constructed non-solicitation restrictions). The law, which would apply to contracts entered into on or after the effective date of the legislation, could provide a petri dish on the eastern seaboard to observe whether a more fluid environment for employee migration stimulates economic development or encourages more established entities to seek environments friendlier to restrictions on competition.
