Governor Patrick’s Proposed Ban on Noncompetition Agreements Maintains Business Protections

Governor Deval Patrick has entered the fray surrounding the enforcement of noncompetition agreements in Massachusetts. Apparently concerned about the effects the commonly used contracts have on growth and productivity in the Commonwealth, the Governor this month submitted a bill that would ban their enforcement. While that may sound drastic, the terms of the Governor’s plan seem more an attempt to strike a fair balance between competing interests than to effectuate free movement of employees among competitors in the same industry.

Mr. Patrick proposes that contract terms that restrain a former employee or independent contractor from working be considered void. In defining what this means, however, the Governor is careful to exclude from the proposed ban restrictions against soliciting or entering into contracts with employees or customers of a former employer. He also exempts from the ban nondisclosure agreements and noncompetition agreements connected with the sale of a business, as well as any non-compete “outside of an employment relationship.” In addition, Mr. Patrick seeks to allay the concerns businesses may have over illicit uses of their private business data by asking the Legislature to enact the Uniform Trade Secrets Act. It is already in effect in most states and provides remedies such as injunctions, damages, penalties and legal fee awards for the for the misappropriation of trade secrets.

The Governor’s proposal was submitted on April 14 and referred to a legislative committee. It is part of a bill that includes other proposals under the caption, “An Act to Promote Growth and Opportunity.” His noncompetition proposal may be workable for employers, many of whom already seek to protect their customers/trade secrets without unduly restricting former employees from working. Mr. Patrick’s plan joins other noncompetition bills already pending in the current legislative session, including one that would impose presumptions in favor of enforcing restrictions for less than 6 months and denying those that last longer. It is unclear what if any action may be taken on any of the proposals.