Noncompete agreements in Massachusetts, originally designed to protect the intellectual property and competitive position at a firm after an employee departs, have since proven to serve a second, more harmful purpose. In aiming to protect the drain of resources and knowledge that belong to the organization, companies have been permitted to write and enforce agreements that are increasingly broad-based and ambiguous, and that now serve to stymie innovation. Confidentiality or non-disclosure agreements protect a company’s intellectual property and know-how; noncompetes simply prevent employees from working in their field of expertise.
CommonAngels Ventures has, since inception, seen many founding teams unable to pursue their own, differentiated ideas and independently-developed technologies after having left their key positions in larger organizations where they were subject to loosely-outlined noncompete agreements. These entrepreneurs have spent years cultivating a craft – a set of highly differentiated skills – and find themselves unable to utilize those skills due to the parameters of a noncompete agreement.
Investors view these entrepreneurs as potential “risks,” because any form of success could cause the separated employer to wage a legal battle over the noncompete agreement. This fear affects investment decisions, and thus many entrepreneurs with strong, viable, differentiated offerings that would have otherwise turned into sustainable businesses and job-creation, never get funded and cease to exist.
It is worth noting that litigation arising over noncompete agreements has increased more than 60% since 2002, which both burdens the legal system with costly and time-consuming cases, and saps the already-limited financial resources of a budding entrepreneur. This trend toward noncompete agreement litigation also increases the legitimacy of threats employers make regarding noncompete agreement lawsuits, and forces entrepreneurs out of fear of financial ramifications and retaliation.
Separately, a trend is taking form among tech companies recruiting MBA students for internships and full time positions in the Boston-area. Students are often asked to sign a noncompete agreement when taking post-MBA level positions in tech firms, along with their standard nondisclosure agreement. The addition of this noncompete agreement, imposed on recent MBA grads now embarking on new careers in management at tech firms, often results in the firm losing their candidate, as students begin to think more long-term. As a result, firms are losing their best-choice employee candidates to their out-of-state competitors.
Employers who rely on noncompete agreements are losing out on the best talent. Capable entrepreneurs with ideas that will create technological innovation and jobs in Massachusetts are being forced or scared into abandoning their ideas. Noncompete agreements stem innovation, stifle creativity, and discourage new entrepreneurs.
It is time for Massachusetts to defend its place at the forefront of global innovation by dissolving the legal enforcement of noncompete agreements. Let’s enable entrepreneurs to start new companies, advance technology, and create jobs in this state.