Noncompete agreements work, but not for everyone

By Patrick Anderson
PBN Staff Writer

A star salesman’s or software developer’s defection from one company to a rival can trigger rumor and intrigue worthy of a spy novel. More

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Noncompete agreements work, but not for everyone

STRONG COMPETITION: Michael Gamboli, attorney with Partridge Snow & Hahn LLP, says disputes over noncompete agreements are becoming more common with the rise in worker mobility and lower barriers to starting companies.

By Patrick Anderson
PBN Staff Writer

Posted 12/16/13

A star salesman’s or software developer’s defection from one company to a rival can trigger rumor and intrigue worthy of a spy novel.

Will the defector use his relationships with key clients to poach them for his new employer?

Will he divulge the game-changing innovation his old boss was working on, opening the door for it to be stolen?

For these scenarios of corporate espionage, a number of industries rely on noncompete agreements in employee contracts to prevent workers from using what they’ve learned on the job with one company to take business from another.

Some clauses are narrow – simply barring the worker from contacting current clients – while others are broad – exiling former employees from the industry for years.

In either case, noncompete agreements have generated debate and controversy in every industry where they’ve become common.

For employees, agreements they may have casually signed in the excitement of a new job can over time become burdensome barriers to leaving a company they’ve outgrown, pursuing a better opportunity or fulfilling the dream of starting out on their own.

And in some places industry and political leaders see them as stifling growth and innovation, especially as the tech sector and startup environments become larger parts of the national economy.

Lawmakers in Massachusetts have debated bills that would either ban noncompete agreements or limit them in several recent legislative sessions, although none of them have won approval.

This year Mass. Gov. Deval L. Patrick’s administration for the first time endorsed making noncompete clauses unenforceable as long as the state also adopts the Uniform Trade Secrets Act, which protects proprietary corporate information. Massachusetts, New York and North Carolina are the only states that have not adopted the act.

“Noncompetes stifle movement and inhibit competition,” said Mass. Secretary of Housing and Economic Development Gregory Bialecki in written testimony on a proposed noncompete bill this fall. “Providing the talent needed to support the kind of explosive growth we want in the innovation economy is considerably more difficult if employees are legally unable to move between jobs in the innovation economy.”

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