In early March, House Speaker Robert DeLeo let the Commonwealth know he had decided to reverse his position on noncompetes and was willing to support reform. The speaker said he would support a 12 month restriction on noncompetes, a requirement of notice for employees and the elimination of noncompetes for low-wage, hourly workers.
Employee noncompetition agreements have long been a target of investors and entrepreneurs in Massachusetts' high tech economy, who point to California, where tech industry growth has outpaced Massachusetts' and where noncompetes are illegal.
On Monday, the House Labor and Workforce Development Committee approved legislation with very similar terms to what DeLeo proposed. They also added a provision known as a “garden leave” policy, in which employers would be required to pay a worker with a noncompete agreement half of his or her salary until the noncompete contract expires.
The bill that's moving forward includes two more provisions that are likely to have more impact than the "garden leave" requirement, which sources say isn't likely to survive final passage.
One is a "no reformation" clause that prohibits judges from making line edits to noncompete agreements: If a noncompete agreement contains anything illegal, the judge must throw the whole thing out.
A second requires employers to compensate employees when they ask for a noncompete agreement during the course of employment. How much consideration will be up to a judge, but sources say the dollar amounts may be significant--deterring employers from putting a noncompete in front of an existing employee.
Several sources close to legislators' discussion about the bill believe the "garden leave" provision isn't destined to last very long, with one source calling it "dead on arrival."
As the Globe noted Tuesday, "garden leave" doesn't elicit enthusiasm among employers. Jim Rooney, Chief Executive of the Chamber of Commerce told the Globe yesterday, “That was unexpected, and I think would be a problem for us. It creates a dynamic in which an employer would have to basically pay someone for not working. . . . This doesn’t feel right.”
John Bauer, a Boston lawyer who writes regularly on noncompetes, notes in a post summarizing the latest version of the bill that no other state requires garden leave as a condition of enforceability.
Jeff Bussgang, General Partner at Flybridge Capital and a supporter of noncompete reform, said without garden leave, the 12-month limit on noncompetes won't benefit Boston's high-tech economy. "If they take out Garden Leave and keep it at 12 months, there's no teeth to the bill and nothing will change in practice." For venture-backed startups, 12 months might as well be forever.
Conversely, State Rep. Lori Ehlrich exudes optimism and hope in her fight against noncompetes that began almost eight years ago. She told BostInno, "The legislative process can be challenging and unpredictable, but I hope to see change." The Commonwealth will receive a decision on noncompetes before the session ends on July 31st.
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