State changes to noncompete agreements fall flat, despite tech community support

The House and Senate failed to reach a compromise on a bill that would restrict noncompete contracts in Massachusetts.

Massachusetts state legislators met for a rare Sunday session on July 31, 2016, the final day of their two-year legislative period.
Massachusetts state legislators met for a rare Sunday session on July 31, 2016, the final day of their two-year legislative period. –Dina Rudick/Globe Staff.

In a blow to many in the local tech and startup scene, the Massachusetts House and Senate failed to reach a compromise this weekend on a bill that would restrict noncompete contracts in the state.

“Noncompetes” are contract agreements in which an employee agrees not to do similar work for a competitor, or start a competing business, for a certain period of time after leaving the hiring company.

Mostly banned in places like California, noncompetes have been a source of contention between Boston tech workers and small startups on one hand, and big employers like EMC Corp on the other, which argue that noncompetes are necessary to protect intellectual property and keep valuable employees in the company.

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While the Senate and House each passed a noncompete reform bill earlier this summer, The Boston Globe reports that the two sides were unable to come to agreement in time for the end of the legislature’s formal session.

The state’s technology startups have said that noncompetes hurt innovation by restricting the flow of talent and blocking entrepreneurs from launching companies.

Boston was recently recognized as the U.S. tech market experiencing the largest “brain drain” of tech workers over the past five years, losing about 17,225 workers to places like the San Francisco Bay Area, Washington, D.C., and Seattle.

The Globe writes that the House and Senate’s disagreement revolved around a “garden leave” clause, which would require companies to pay former workers to stay out of the job market. While the House’s version would have limited the noncompete period to one year and required employers to pay half the worker’s salary, the Senate version would have limited leaves to three months and required employers to pay a full salary.

Read the full Globe story here.

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