Tech industry split on merits on noncompete agreements

One of the threads we’ve been following in this blog is the status of noncompete agreements in Massachusetts.

This issue has been in the news since last April, when Governor Deval Patrick proposed a ban on such agreements.

As we noted in our April 18 post, many people believe that noncompete contracts have become overused in today’s workplace. Others believe, however, that such covenants are needed for legitimate protection of employers’ internally sensitive and commercially useful information.

In today’s post, we will update you on how the noncompete issue affects the tech industry.

To be sure, the question of noncompete agreements can include many complicating factors. We discussed some of those in our March 27 post. Our basic point in that post was that the law generally requires noncompete agreements to be reasonably drawn in order to be enforceable.

The Boston Globe recently reported that an important subset of the business community – the tech community – is very much split on the question of noncompetes.

For some in the tech industry, noncompete agreements are almost by definition a damper on the open style of work necessary for genuine innovation. For others, noncompetes are a key part of the tech company toolkit, needed to retain top talent and protect a company’s valuable intellectual property.

In general, it is larger, more established companies such as Boston Scientific that are more committed to the use of noncompete agreements. In the startup world, however, venture capitalists and others are more skeptical about them.

The governor’s proposal is aimed at undercutting the enforceability of noncompete clauses in employment contracts. Such clauses often block employees from moving to competitor firms or starting their own businesses.

A law to limit the enforceability of noncompete agreements would not be unprecedented. California, home to the tech industry’s vaunted Silicon Valley, does not allow noncompete clauses in the context of employment contracts.

Source: The Boston Globe, “Tactics put the spotlight on noncompete clauses,” Callum Borchers, May 29, 2014