Noncompete debate flares up in tech sector again

Massachusetts State House

The debate about employee noncompete agreements, which has divided the Massachusetts technology sector largely along generational lines, is heating up again.

Many entrepreneurs and the venture capitalists who fund them want to outlaw the employment covenants, which prevent workers from leaving companies to join rivals or launch startups in the same industry without a waiting period — sometimes a year or longer. Hampering employee mobility stifles innovation, they argue.

Other tech companies — many of them older and larger — insist that noncompete agreements are vital tools for retaining talent and safeguarding knowledge of their inventions and corporate strategies. Influential business groups like Associated Industries of Massachusetts and the Greater Boston Chamber of Commerce have been staunch defenders of noncompetes.

The two sides will get a chance to square off Tuesday, when the Legislature’s Joint Committee on Labor and Workforce Development is set to hear testimony on five bills that would place strict limitations on noncompete agreements while prohibiting workers from taking a former employer’s trade secrets to another job.

Business leaders on both sides presented dueling cases at a similar hearing last year, after then-governor Deval Patrick thrust the long-simmering issue onto the front burner with his late-term push to eradicate noncompetes, which are enforced by many types of businesses but are especially common in high tech.

“We will be there again, and we will again oppose efforts to ban or restrict the use of noncompete agreements in Massachusetts,” said Chris Geehern, an AIM spokesman. “Noncompetes are a matter of choice for employees and companies, and we believe they should be free to make that choice.”

The New England Venture Capital Association plans to announce the formation of a business coalition opposed to noncompete agreements Tuesday morning. Members of the new Fair Employment Alliance will include the Techstars startup accelerator program; Vertex Pharmaceuticals Inc.; and FitnessKeeper Inc., maker of the workout tracking app RunKeeper, said C.A. Webb, the venture group’s executive director.

Most other states allow noncompete agreements in some form, but opponents want Massachusetts to emulate California, a tech mecca where courts have consistently ruled against their legitimacy, allowing workers to jump freely from one company to the next.

Bay State lawmakers ultimately stripped noncompete restrictions from an economic development bill last summer, setting up a rematch this year.

Governor Charlie Baker has not taken a position on noncompete agreements but will consider any measure that makes it through the Legislature, spokeswoman Lizzy Guyton said.

“The governor is open to reviewing changes to the current noncompete laws and looks forward to reviewing a proposal should one reach his desk,” Guyton said.

Webb, of the venture capital association, said she believes the odds are better this time because the issue is more high-profile. This month, Democratic Senator Elizabeth Warren cosponsored a federal bill that would ban noncompete agreements for workers earning less than $15 per hour and require all others to be notified prior to hiring if they will be expected to sign one.

A common complaint of workers bound by noncompete agreements is that they did not learn of the restrictions until their first day on the job, by which time they felt they had no choice but to consent.

“I’m pretty bullish,” Webb said. “The conversation has really changed and given us an opportunity in Massachusetts. You have people in this fast-growing tech sector saying, ‘This is really slowing us down.’”

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Cal Borchers is a business reporter for the Boston Globe. Reach him at [email protected].
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