Employment Law Alert
Patrick Administration Seeks to Ban Non-Compete AgreementsApril 1, 2014
During the past several years, there have been various legislative initiatives in Massachusetts which, if successful, would have regulated and/or curtailed the use by employers of non-competition agreements. On September 10, 2013, in testimony before the Massachusetts Legislature’s Joint Committee on Labor and Workforce Development, Gregory Bialecki, Governor Patrick’s Secretary of Housing and Workforce Development, testified that the Patrick Administration supports the “outright elimination of enforceability” of all non-compete agreements in Massachusetts, regardless of duration or geographic scope. Secretary Bialecki’s testimony finally confirmed publicly what many assumed was the Patrick Administration’s position on this controversial subject.
Last Thursday, the Patrick Administration took a bigger step towards its goal of eliminating non-compete agreements. Buried towards the end of a $100 million, 61 page long, economic stimulus bill introduced by the Patrick Administration (the “Patrick Bill”), is a proposed new Chapter 93K. New Chapter 93K would enact the Uniform Trade Secrets Act (“UTSA”) in Massachusetts, making Massachusetts the 47th state (including the District of Columbia) to enact the UTSA. The proposed Chapter also includes a provision which would render “void and unenforceable” any non-compete agreement with an employee or independent contractor. The ban on non-compete agreements exempts from is provisions the following: (i) non-solicitation agreements, (ii) non-disclosure agreements, (iii) non-compete agreements made in connection with the sale of a business, (iv) non-compete agreements outside of the employment relationship, (v) forfeiture agreements, and (vi) agreements under which an individual agrees to not reapply for employment with a former employer.
The Patrick Bill is the fourth bill introduced into the current legislative session that would regulate the use of non-compete agreements in Massachusetts. Of the other three bills, two bills, one introduced by Representative Harrington (the “Harrington Bill”) and one introduced by Representatives Bradley and Carter (the “Bradley/Carter Bill’), would also enact a complete ban on non-compete agreements in Massachusetts. In fact, the Harrington Bill, on its face, would apply to non-solicitation agreements (but would permit non-disclosure agreements). The Bradley/Carter Bill ostensibly introduces the UTSA, but includes a provision that is not actually in the UTSA which (much as the Harrington Bill) prohibits non-compete agreements. As such, the Patrick, Harrington and Bradley/Carter Bills would create in Massachusetts a statutory scheme similar to what exists in California, where non-compete agreements (and non-solicitation agreements) are banned by statute. The fourth bill, introduced by Senator Brownsberger and Representative Ehrlich, is a compromise bill which would place certain durational restrictions on non-compete agreements (but would not ban them), and would exempt the agreements identified in (i) through (vi), above. Some observers also believe that Representative Conroy, Chairman of the Joint Committee on Labor and Workforce Development, may also introduce legislation to regulate non-compete agreements.
Curiously, both the Patrick Bill and the Bradley/Carter bills state that they “shall apply to all contracts and agreements, including those executed before the effective date of this act.” This provision would presumably be subject to challenge under the Contracts Clause of the United States Constitution.
The fate of any of these legislative initiatives is uncertain to say the least. Legislation in the non-competition area has been introduced to the Massachusetts legislature for the past five years, and no bill has made its way out of the Joint Committee on Labor and Workplace Development. Business groups, such as Associated Industries of Massachusetts and the Boston Chamber of Commerce, and certain corporations headquartered in Massachusetts, have consistently opposed (and lobbied against) any type of legislation which would restrict the use of non-compete agreements in the Commonwealth. And, since non-compete agreements are not used in unionized workforces, organized labor has little incentive to lobby for any type of legislation in the area. However, this also marks the first occasion on which the Patrick Administration has advocated in favor of legislation in this area.
We will endeavor to send out additional updates in this area as developments arise. In the meantime, if you have any questions please contact any member of Morse’s Employment Law Group.