Image of target via Shutterstock. Michael Morisy and Dennis Keohane contributed to this report.
Earlier this month, top executives from 28 Boston-area tech firms — among them many of the fastest-growing local companies — signed a letter asking Massachusetts lawmakers to ban noncompete agreements.
Opponents say noncompetes stifle innovation and make Massachusetts less competitive compared to states like California, which don’t allow the agreements.
Today, opponents from the local tech community were among those speaking on the issue to the Legislature’s Joint Committee on Economic Development and Emerging Technologies, which is considering a proposal by Gov. Deval Patrick to ban noncompetes.
Noncompetes are widespread among tech companies in Massachusetts, but some firms, including Acquia and RunKeeper, have opted to get rid of the agreements in part or in full.
So, we’ve been looking into whether any of the other executives who’ve stated opposition to noncompetes have been able to resist them.
What we found: Just seven of the 28 companies are confirming that they don’t have noncompetes. Some openly acknowledged they do have noncompetes, but more than half of the companies either wouldn’t say or didn’t respond to our inquiries.
Many local tech companies, it appears, are interested in “unilateral disarmament” on noncompetes but still have the agreements on the books in the mean time, in many cases due to their venture capital agreements (the New England Venture Capital Association is leading the effort to ban noncompetes in Massachusetts, however).
Several of the companies that responded offered good insights on the issue, which we share below. But first, here is the list of what we found out from the 28 companies. We are looking to add to this list, so if you are a company founder or executive please email us at [email protected] and we’ll keep updating this.
And here are the comments we received from several companies on the issue.
Plexxi (chief executive Dave Husak):
Plexxi has non-compete agreements in place for all of our MA employees. We are, in fact, required to have them under the terms of our (Boston-based) VC financing agreements. Non-competes are a relic of an earlier era, and I strongly support eliminating them under MA state law. If that happens, will be a tremendous competitive boost for knowledge workers, innovative startups, and the MA innovation economy.
Cloze (chief executive Dan Foody):
We strongly believe that non-competes are bad for innovation and we’d like to see them go away.
We do, however, have non-competes for our employees because it’s been widespread standard practice in MA (though we’ve never enforced it). Our position has always been (and continues to be) that we would only ever consider enforcing our non-competes against competitors that actively enforce non-competes themselves.
Our reasoning is simple – we believe in a level playing field. We don’t think any company should be allowed to hide behind their non-competes to prevent their people from leaving, while actively recruiting employees from companies that don’t.
The only way to foster innovation while still maintaining a level playing field for all companies is to eliminate non-competes. We think this is the right path for MA.
One Mighty Roar (chief executive Sam Dunn):
We used non-competes in the early days because we didn’t know any better. Today, we’re over the whole non-compete thing. People shouldn’t be held hostage by their employer — I’ve seen some pretty vague ones, which is damaging for the tech community. Companies should be responsible for making the type of place where people want to show up everyday. It should be about building the sort of team that other companies can’t compete with, with no paperwork required.
Philo (chief executive Christopher Thorpe):
I signed the letter as an individual who believes that noncompetes stifle innovation and whose day job is being a startup CEO.
Speaking as an individual to be attributed as such:
My friend Matt Marx did an excellent PhD dissertation at HBS that included research on the effects of noncompetes on innovation. I found his research incredibly compelling — for example, after Michigan made noncompetes enforceable, relatively fewer patents were filed.
In one example from my personal experience in Silicon Valley, friends or acquaintances started companies to solve problems their employers couldn’t or wouldn’t solve. In places where noncompetes are enforceable, employers of such would-be entrepreneurs can and do stifle that kind of innovation.
Anecdotally, I have also seen noncompetes lead unhappy employees who have specialized skill sets (e.g. high performance storage, IP television) to stay longer at their jobs because of fear of triggering a noncompete if they join a different company; their specialized skills make them the most money. Unhappy employees who feel “trapped” are often less productive and not as valuable to their employers or to the Commonwealth.
Kyle Alspach has worked in journalism in Massachusetts since 2005 and was one of the original staff writers at BetaBoston.
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