By Sean Rapela
Generally, in Massachusetts, a non-compete agreement is enforceable if: (1) it is reasonable in duration, geographic area, and scope; (2) it is necessary to protect a legitimate business interest; (3) the agreement is consonant with public policy; (4) it contains a “garden leave” clause. Today, employees, in many instances, can work from anywhere, so how does the court enforce a reasonable geographic area? Furthermore, with such rapid advances in technology, scenarios where a non-compete may prove necessary to protect a legitimate business interest upon the signing of the agreement could become obsolete by the time the employer attempts to enforce the agreement. With the rapid pace technology causes many industries to evolve, the non-compete may prove more trouble than it is worth for many employers. Furthermore, especially in the technology industry, some scholars argue that non-compete agreements were “once considered an essential means of protecting trade secrets,” but now they are “increasingly regarded as a threat to innovation and economic growth.”
Many employees today feel that non-competes are a threat as well. Today, the median tenure for an employee that is between the ages of 25 and 34 is just 3.2 years. Therefore, the idea that they may have to sign a non-compete is extremely threatening to their freedom. However, some industry readers have recognized this in years past and abolished the non-compete at their companies. For instance, the CEO of Massachusetts-based software company Acquia, Inc. did away with non-compete agreements, and out of their roughly 500 employees only a handful high level executives were still bound by the agreements.
Many of those still in favor of the non-compete agreement argue that without it, their ability to conduct business will suffer severely. For instance, especially in industries where it is relatively easy to create a startup, non-competes are much more prominent. The hairdressing business is one such example, as roughly 30% of hair dressers sign non-compete agreements. Technology startups also appear to sprout at a very quick rate, and of course a technology company would not want its employee taking valuable technological secrets across the street. This leaves many wondering how Silicon Valley, a hub of technology in California, is able to thrive despite the state’s ban on non-compete agreements. Furthermore, some scholars argue that California’s noncompete ban is the primary reason for Silicon Valley’s success. While non-competes may force a company to invest in their employees more, as they are less likely to leave and training becomes more important, the ability of employees to move freely in the industry could increase innovation and drive up competition. Additionally, non-compete agreements can stifle innovation by preventing employees from working in the industries that they are most skilled in. Also, employees could find themselves forced to stay in a harmful work environment, for if they choose to leave their job, as a result of the non-compete agreement they might not have the ability to find work elsewhere. Moreover, the vast majority of employees, generally aside from very high-level executives, are employed on an at-will basis. This means that an organization can essentially fire an employee without notice or reason, yet employees bound by non-competes may not have the ability to find new work after employment termination. Non-compete agreements give the employer too much power, bind the worker to a great extent, and leave employee with limited options, often working a new a job for a lesser salary in order to conform with the agreement.
What is the solution?
Non-disclosure agreements.
The non-compete agreement is not entirely necessary, as employers can protect many of their intellectual property and trade secrets with non-disclosure agreements. Companies generally have more success enforcing non-compete agreements than non-disclosure agreements, but the non-disclosure agreement does a better job addressing the information that the employer is generally looking to protect. Additionally, while California does not enforce the non-compete agreement, it does enforce the non-disclosure agreement, and Silicon Valley continues to thrive as a place of innovation in technology. Furthermore, with 47 states adopting the Uniform Trade Secrets Act, that prevents employees from taking their employer’s intellectual property to other businesses, companies have even further peace of mind. Therefore, the non-compete agreements, which are generally overly broad and a scare tactic to employees, are becoming obsolete in their use, and employers should look toward non-disclosure agreements that more specifically address the companies concerns while allowing employees to continue to make a living.
Student Bio: Sean Rapela is a second-year law student at Suffolk University Law School and serves as a Staff Member on the Journal of High Technology Law. Sean holds a Bachelor of Arts in both English and Political Science & International Affairs from Wake Forest University.
Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.
