Proposed Legislation Threatens the Future Enforceability of Non-Compete Agreements

April 15, 2014

In the past, Massachusetts legislators have proposed legislation that would ban the enforcement of non-competition agreements in Massachusetts, but no such law has yet passed. Last week, Governor Deval Patrick announced that he would propose similar legislation as part of an economic growth bill, in an effort to remove the barriers that non-compete agreements create for workers in high-tech companies who wish to open their own competing business.

As we have previously discussed, Massachusetts law presently views non-competition agreements as valid and enforceable, if they are reasonable in duration, geographic scope, and restricted activities. These agreements have been essential to many Massachusetts employers to prevent employees from leaving the employer and taking with them the employer's valuable business information and trade secrets.

According to information from a Boston Globe article, Governor Patrick's newly proposed legislation seeks somewhat of a balance between the need to protect the employer's proprietary information and the employee's ability to grow his career by working for a competitor or doing business on his own. The proposal would purportedly prevent employees from stealing their employer's clients and publicly disclosing the employer's proprietary business information, in exchange for the ban on non-compete agreements.

The legislation is expected to be hotly debated. On one hand, by passing the legislation, Massachusetts would join the majority of other states in the country that have adopted the Uniform Trade Secrets Act, which prevents the theft of employer's trade secrets and other intellectual property - two of the objectives generally underlying non-competition agreements - while giving ex-employees greater competitive and innovative freedoms. But the legislation may not effectively address the issue created by the inevitable likelihood that ex-employees will use proprietary information acquired during employment, either directly or indirectly, to compete against their previous employer. Once an employee has knowledge of how an employer's business operates or of a special process an employer uses to gain an advantage over competitors, it is very unlikely that the employee can "unlearn" that information or disregard it while competing in the same industry. Employers have relied upon enforceable non-competition agreements to minimize this risk, but the legislation would bar such protections.

With backing from the Governor, this round of non-compete legislation may have better success among Massachusetts legislators. Until it is voted upon, however, the landscape of Massachusetts non-competition agreement law will remain largely unchanged.