Boston’s Spark Capital came out publicly today in favor of Massachusetts House Bill 1794, which would outlaw non-compete agreements in employment contracts in the state. The venture firm has been vocal on the issue for some time—its partners helped found the Alliance for Open Competition and sent Governor Deval Patrick an open letter opposing non-compete clauses in 2007—so it’s no surprise to see Spark backing the new bill, filed by State Representative Will Brownsberger in January.
The bill, which we wrote about on December 16 and January 12, is co-sponsored by State Senator Patricia Jehlen. It would void any part of an employment contract that restricts an employee’s ability to seek work after they’ve left their employer. The bill’s backers—and now Spark—say that such clauses, which are extensively used in the technology industry to keep employees from setting up competing businesses or going to work for competitors, are bad for workers and bad for the state’s overall economy. They argue that in states such as California, where non-compete clauses are unenforceable, there’s more innovation because employees have more freedom to move between companies or start their own.
“As a Boston venture capital firm, we are always looking to propel innovation across the Commonwealth, and to strengthen Massachusetts’ global competitiveness,” Spark general partner Bijan Sabet said in a press announcement today. “Through several discussions and planning sessions with State Representative Brownsberger, it’s clear that employment non-competes are stifling the emergence of promising young companies in our state, forcing some of our most innovative entrepreneurs to leave in favor of more open corporate environments. The success of Silicon Valley, which does not legally enforce non-competes, is a prime example of how emerging startups are allowed to thrive.”
Most opponents of non-compete clauses say other mechanisms such as non-disclosure agreements and trade secrets protections are sufficient to keep employees from using a firm’s own intellectual property against it. The Brownsberger-Jehlen bill wouldn’t affect non-disclosure agreements, and Spark says it still supports them. But Spark stopped requiring its portfolio companies to impose non-compete agreements on their employees back in 2007.
Brownsberger’s bill was filed January 12. A hearing on the bill is expected to be scheduled this spring. A competing bill filed by State Representative Lori Ehrlich, House Bill 1799, would modify state law regarding non-compete clauses, but would not eliminate them; Ehrlich’s bill makes non-compete agreements unenforceable for employees whose yearly salary is below $100,000 and limits the term of the agreements for other employees to two years.
