Don't worry if you didn't make it to Fenway this summer — Boston's hottest rivalry is off the field. Massachusetts is in direct competition with California's Silicon Valley for top tech industry talent, and many are calling on the state to take action.
In April of this year, Gov. Deval Patrick proposed sweeping legislation based on existing law in California that would ban non-compete agreements and adopt the Uniform Trade Secrets Act, which would prohibit employees from misappropriating their employers' trade secrets, but would allow them to leave for competitors at any time. Some in the business community balked, concerned that the proposed legislation did not provide sufficient protection for their investments in both their technology and their employees, and the legislation stalled.
But things in California may not be as fabulous as they seem. Earlier this month, a federal judge in San Jose rejected a proposed $324 million settlement in a class-action antitrust case, finding "ample evidence" that Google, Apple, and other tech giants engaged in an "overarching conspiracy" to keep compensation low by not pursuing each other's employees. Essentially, these companies entered into a number of bilateral agreements to avoid "cold calling" each other's employees, limiting the ability of these employees to move between companies.
It is worth considering whether these companies would have felt compelled to engage in this "overarching conspiracy" if there had been stronger legal means available to retain employees--like non-competes. A system which strips away all but the bare minimum protections incentivizes risky back door deals, encouraging companies to find other ways to protect their valuable information, inventions, and employees. These activities, in the aggregate, erode the perceived fairness of the industry,undercutting any competitive advantage that might be gained from removing "barriers to innovation."
On Aug. 14, Patrick made a last-chance effort to revive non-compete reform, reintroducing a compromise bill that would restrict non-competes to six months and a limited geographic area, as well as adopting the Uniform Trade Secrets Act. Even though this bill does not go as far as California's, it's not at all clear that Massachusetts needs these changes to encourage its tech industry. Massachusetts already has a well-developed body of law in place that prohibits non-competes that are unreasonable in either duration or scope. Leaving the status quo in place gives companies clear, reliable guidelines for creating enforceable agreements. As always, employees are entitled to try to negotiate a better deal for themselves, or seek opportunities elsewhere. By leaving companies with established legal options for protecting their investments, Massachusetts can encourage the growth of a truly competitive tech sector.
Originally published by the Boston Business Journal.
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