A last-ditch effort by Massachusetts legislators to fashion compromise on non-compete reform failed late Sunday night as the year’s legislative session ended.
While both the Massachusetts House and Senate had passed their own versions of new legislation, the two groups could not reach a compromise, according to The Boston Globe. Last week, Republican Gov. Charlie Baker indicated that he preferred the House’s version that restricts some aspects of non-competes over the Senate version that would have pretty much eliminated such contracts.
The House bill would have limited non-competes to one-year. And, it outlined a “garden leave” provision that would require the former employer to pay a worker half year’s worth of salary if that worker could not take a new job due to that agreement.
The Senate version would have limited non-compete duration to three months, and required a full-year salary under the garden leave provision.
Non-compete agreements, typically signed by new hires as a condition of employment, typically restrict that employee’s ability to work for a competitive company for one to three years.
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It’s a complex issue. Some older companies support non-competes as a way to protect their investment in training new hires, and many startups argue that they stifle competition, although the breakdown is more complex than that—some startups support non-competes and some bigger, older companies do not. In Massachusetts, however, EMC (EMC), the storage kingpin, for example, has been known to aggressively enforce non-compete agreements.
Non-Competes Are Bad For You and Bad for the Economy
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To be fair, 47 out of 50 states have some form of non-compete provision on the books, but the issue is particularly contentious in Massachusetts. The Bay State sees itself as an incubator of high-tech companies, but over the past few decades California surged ahead of it in terms of venture-capital investment and in the formation of hot new companies.