Proposed Noncompete Compromise Not Retroactive

epa03471285 Cars pass by the Massachusetts State House illuminated in blue light in observance of World Diabetes Day in Boston, Massachusetts, USA 14 November 2012. EPA/CJ GUNTHER /// UNKNOWN CATEGORY\\\
The state legislature continues to consider noncompete clauses as the legislative session comes to an end.
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The proposed Massachusetts Senate legislation addressing noncompete clauses would not apply retroactively.

An amendment to the Senate’s economic development bill, added before the bill was passed last week, would put limits on noncompete clauses without outright banning them. Those limits would include banning them for hourly employees, and limiting them to six months. But the amendment would not change any existing noncompete clauses.

Governor Deval Patrick had previously proposed doing away with noncompetes altogether, while a House version of the bill does not address the controversial clauses. The House and Senate will now look to iron out the differences between the two bills—like whether to adopt something like the Senate’s take on noncompetes—in conference committee before the legislative session closes at the end of this month.

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Should the Senate amendment represent what the Massachusetts startup community gets in its struggle to do away with noncompetes for now, it would mean those limits would go into effect for all contracts signed after January 1, 2015. They would not apply retroactively, not as the legislation is currently written.

Sen. William Brownsberger (D-Belmont), who filed the amendment, says putting limits on existing noncompetes could be unconstitutional because it would alter a contract between private parties. That could violate the Contract Clause of the First Amendment, which puts a pretty big burden on the state to prove it has good reason to do so.

Patrick’s proposed ban would have made any noncompete clause, new or existing, unlawful. That’s also the case for a House bill put forth by the Joint Committee on Labor and Workforce Development that was the subject of a hearing last week and was based on Patrick’s proposal.