« Still bailing | Main | What's So Hard About Saying You're Sorry? »

Non-compete non-starter

As Bijan wrote, the Massachusetts House was greatly watered down House Bill 1794 which was written to make Massachuseets law on non-competes similar to the law in California.  The new version, which Bijan describes, restores much of the effect of non-competes.  These stifle innovation and mobility of entrepreneurs in Massachusetts.

When this issue first came up in 2007, my initial reaction was to oppose the change.  As a VC, I saw how non-competes gave us piece of mind that our entrepreneurs and other employees couldn't leave our companies to start a competitor.  As someone who was actually sued under one of these agreements in 1990, I understood this from the entrepreneur's point of view.  So, I always made sure that our non-competes were narrow and targeted.  I initially thought that narrow and targeted non-competes should be allowed.

I was wrong.  When I read all the arguments in favor of eliminating non-competes in Massachusetts, I was convinced.  The most compelling argument is that entreprenurship and successful VC-backed companies abound in California where such agreements are not allowed.  Note that agreements protecting intellectual property and prohibiting people from soliciting employees once they leave are enforceable in California and would be in Massachusetts.  We are just talking about the ability to leave and practice your employment at a different company in your field.  As long as you don't solicity your fellow employees and protect your former employer's intellectual property, I think it is healthy to encourage such movement.

Massachusetts employers who oppose the elimination of non-competes are being disingenuous.  They have significant presences in California where these agreements are not enforceable.  And, they thrive there.  Bijan includes some examples, such as EMC.

If you agree, you should join the list of supoprters.

There are some Boston VCs on the list, but not many.  I'd love to hear the arguments from those who are against making this change.  If you know where some of these arguments are posted, please put a link in the comments.  Otherwise, I think that all Boston VCs should take a stand one way or the other.

TrackBack

TrackBack URL for this entry:
http://thefeinline.com/blog-mt1/mt-tb.fcgi/527


Hosting by Yahoo!

Comments

Thanks for your comment, amrith.

I read through your blog and appreciate how much thought you have put into this subject. I aslo read Richard Tibbetts blog. He seems to agree with me more than with you.

In general, I am in favor of fewer laws unless there is a compelling reason to have a law. Laws can protect us from ourselves and can protect those who can't protect themselves. Laws can also provide services that are in the interest of the common good. I don't see the compelling reason to allow non-competition agreements. They limit the mobility of entrepreneurs. And, the California example shows that you don't need such agreements to build lasting companies and attract capital.

You cite past Massachusetts companies that were feeders for new companies. But, much of that feeding happened as or after those companies were dying. Note that you don't see a lot of spinoffs from EMC in Massachusetts. Maybe that is because of the EMC culture. Maybe people love it there and don't leave. Or, maybe they are worried about being sued under a non-compete. EMC doesn't need this rule to build or buy big businesses, so they have figured out how to hold on to employees and thrive in California. The same practices would work here.

Mike,

I appreciate your point of view. I changed my mind on this issue as well; but in the opposite direction. You write:

>> I'd love to hear the arguments from those who are against making this change. If you know where some of these arguments are posted, please put a link in the comments.

You can read some counter arguments at my blog (http://hypecycles.wordpress.com). It is one of several places that have a variety of points of view that call for something other than outright elimination of the non-compete. I also recommend Richard Tibbetts blog (http://innocuous.org/).

Thanks,

-amrith

Post a comment

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)