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Lawmakers OK Energy, Economic Bills; Non-Competes Remain Unchanged

Posted by John Regan on Aug 1, 2016 8:40:56 AM

A frenzied conclusion to the 2015-2016 Beacon Hill legislative session produced far-reaching measures on energy and economic-development, but no agreement on restricting the use of non-compete agreements.

statehousedome.jpgA consensus pay-equity bill supported by the business community passed a week earlier and is due to be signed by Governor Charlie Baker today.

Richard C. Lord, President and CEO of AIM, said employers should take encouragement from the fact that the final bills that passed around midnight Sunday largely reflected the moderate approach to business issues taken by the House of Representatives.

“The House and the Baker Administration again showed an understanding of the factors that contribute to business growth and job creation,” Lord said. “We give particular credit to House Speaker Robert DeLeo, who forged meaningful compromises on pay-equity, non-compete agreements and other key issues.”

He also noted that lawmakers and Governor Baker worked responsibly to balance a difficult budget with no tax increases.

The energy bill commits Massachusetts utilities to purchasing up to 30 percent of the state’s electricity from offshore wind generation and hydropower imported from Canada or upstate New York. The final version rejects a troublesome proposal to double the state's minimum requirements for renewable energy and also maintains funding mechanisms for development of natural gas pipelines.

“The bill will raise electricity rates as the commonwealth transitions to non-carbon fuel sources. That said, lawmakers approached the issue in a careful and thoughtful manner that recognizes the need to include a variety of generation sources for electricity,” said Robert Rio, Senior Vice President of Government Affairs at Associated Industries of Massachusetts.

Average electric rates in Massachusetts are the third highest in the nation for industrial ratepayers, and more than twice as high as companies pay in the competitor state of North Carolina. Those costs place employers at a significant disadvantage when competing with businesses located in other areas of the country.

The breakdown of negotiations on non-compete agreements brought a stunning, if temporary, end to a contentious effort by venture capitalists to do away with current law governing non-competes. AIM has waged a protracted battle to defend the vast majority of Massachusetts employers who wish to preserve the use of non-competes, but the association nevertheless negotiated a reasonable compromise measure that passed the House of Representatives.

The House bill would have limited the duration of non-competes to one year and required employers who did not compensate workers at the time they signed a non-compete to pay 50 percent of the worker’s salary during the non-compete period. A separate Senate bill would have limited the term of non-competes to three months and required employers to pay 100 percent of a worker’s salary regardless of existing financial compensation.

The deadlock means that opponents of non-competes will have to return to square one and refile their proposals when the 2017-2018 legislative session begins in January.

“The outcome of negotiations on the use of non-competes is disappointing to the business community, which worked in good faith with the House on a reasonable compromise. AIM continues to believe that non-compete agreements with common-sense limitation protect intellectual property and stimulate investment and innovation in Massachusetts,” said Brad MacDougall, Vice President of Government Affairs at AIM.

The economic development bill includes $500 million in authorized borrowing for the MassWorks infrastructure program, $45 million in capital dollars for brownfields environmental projects and $45 million for equipment for career and technical education, among other measures. The bill also features a new tax deduction intended encourage families to save for college tuition costs.

The pay-equity bill is intended to promote salary transparency, limit upfront questions to job candidates about salary history, and encourage companies to conduct reviews to detect pay disparities. It explicitly recognizes legitimate market forces such as performance and the competitive landscape for certain skills that cause pay differences among employees. 

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Topics: Massachusetts Legislature, Economic Development, Non-Compete Agreements, Energy

A Statesmanlike Approach to Non-Competes

Posted by Rick Lord on Jul 25, 2016 7:54:02 AM

The 19th-century British Prime Minister Benjamin Disraeli defined a statesman as “essentially a practical character” who works “to ascertain the needful, and the beneficial, and the most feasible manner in which affairs are to be carried on. 

DeLeo2016.jpgMassachusetts House Speaker Robert DeLeo displayed admirable statesmanship and determination in forging a consensus wage-equity bill under which workers will be fairly compensated regardless of gender while employers retain the ability to design competitive pay plans to attract and retain skilled employees. The bill won unanimous approval Saturday and is now on Governor Charlie Baker's desk.

Now, the speaker is putting his statesman’s hat back on in an effort to pass a compromise bill governing the use of non-compete agreements in Massachusetts. His efforts deserve the full-throated support of the employer community.

You know the non-compete issue by now. AIM has fought relentlessly for several years on behalf the vast majority of Massachusetts employers who wish to preserve the use of non-compete agreements to protect intellectual property. Efforts to ban the use of non-competes have been driven by a small group of well-heeled venture capitalists who cannot seem to master the idea that if you don’t like non-competes, just don’t use them.

Speaker DeLeo, as he did with wage equity, reached out to AIM and other business organizations to understand the concerns that employers had with a possible ban on non-competes. He wanted to limit the use of non-competes with low-income workers, teen-agers, interns and other categories of workers without harming companies seeking to prevent the loss of trade secrets worth millions of dollars.

The result was a compromise bill endorsed by the employer community that would limit non-competes to one year and give employees the opportunity to consult a lawyer when signing a non-compete, but not require companies that compensate employees at the time they sign non-competes to pay them again during the restricted period. The bill passed 149-0.

But the state Senate ignored the speaker’s carefully crafted compromise and passed its own bill with Draconian restrictions that would effectively end of the use of the documents in the Bay State. The Senate measure would limit non-compete agreements to three months and require employers to pay the full salary of the former employee during the restricted period. The bill would exempt anyone earning $130,000 or less from non-competes.

The issue now rests with a conference committee that will attempt to hammer out the differences between the two versions.

But the compromise and statesmanship on non-competes has already taken place. We urge the Senate to recognize the balanced compromise woven by Speaker DeLeo and to adopt the House version of the non-compete bill.

And we're not alone. Baker on Saturday announced that he supports the House bill "because he believes it better balances workers' abilities to seek new employment while ensuring cutting edge businesses can protect essential intellectual property."

AIM urges all its members to contact the conference committee and urge them to adopt the House version.

  Contact the Conference Commiittee

Topics: Employment Law, Non-Compete Agreements, Intellectual Property

Senate Takes Step Back on Non-Competes

Posted by Brad MacDougall on Jul 15, 2016 11:33:12 AM

The Massachusetts Senate took a dramatic step backward yesterday on non-compete agreements, passing Draconian restrictions that would effectively end of the use of the documents in the Bay State.

ScalesofJusticeVerySmall.jpgThe Senate passed by voice vote a measure that would limit non-compete agreements to three months and require employers to pay the full salary of the former employee during the restricted period. The bill would exempt anyone earning $130,000 or less from non-competes.

The Senate measure stands in marked contrast to a compromise version passed by the House in late June that allows one-year non-competes and not require companies that compensate employees at the time they sign non-competes to pay them again during the restricted period.

Lawmakers will have to reconcile all those differences before the session ends on July 31 if a non-compete bill is to become law. 

“Employers support the House bill, period,” said John Regan, Executive Vice President of Government Affairs at AIM.

“House leaders worked with people on all sides of the issue and came up with a reasonable compromise that protects the rights of both employers and workers. The idea that you would now compromise a compromise makes no sense.”

Employers believe selective use of non-competes protects the significant investments that allow their companies to be global leaders in their industries and to create jobs in the commonwealth.  The compromise legislation begins to recognize that Massachusetts employers need flexibility and legal options to protect intellectual property. 

AIM continues to maintain that there is no evidence that the use of non-compete agreements harms Massachusetts’ position as a globally recognized leader in innovation. In fact, Securities and Exchange Commission (SEC) filings indicate that the well-heeled venture capitalists pushing to limit non-competes use such agreements themselves.

Employers have articulated several provisions that would be required for them to support a bill limiting non-competes:

  • Minimum one-year duration.
  • A “garden leave” provision that requires the employer to pay 50% of the employees’ prorated salary during the restricted period, or other mutually-agreed upon compensation.
  • Maintaining and clarifying the ability of a court to reform or alter non-compete contracts to ensure that both parties are treated fairly.
  • Those subject to non-compete agreements would have to be given prior notice of the need to sign the agreement, as well as the opportunity to consult with legal counsel.
  • The non-compete would extend to a second year should an employee unlawfully take property belonging to the employer, as included in the House version.

 

Topics: Employment Law, Non-Compete Agreements

House Non-Compete Bill Seeks Middle Ground

Posted by Brad MacDougall on Jun 28, 2016 1:20:25 PM

The Massachusetts House of Representatives voted 149-0 Thursday to approve compromise legislation governing the use of non-compete agreements.

ScalesofJusticeVerySmall.jpgAssociated Industries of Massachusetts has opposed efforts to ban or limit the use of non-competes, but has also engaged in productive discussions with House Speaker Robert DeLeo on the issue.

“AIM recognizes and appreciates the approach that Speaker DeLeo has taken in the debate over non-compete agreements,” said John Regan, Executive Vice President of Government Affairs at AIM.

“The speaker recognizes the need to protect business interests at a time when non-competes are a vital part of protecting investments and ideas created by employers of all sizes and from all industries. As the speaker has noted in the past, Massachusetts cannot be an ‘invented here and manufactured elsewhere’ commonwealth.”

The House proposal makes three positive changes from legislation originally advanced by the Legislature’s Joint Committee on Labor & Workforce Development.  The changes address some of the major concerns expressed by AIM and other members of the business community in a June 20 meeting with Speaker DeLeo:

  • Garden Leave: A provision that would have required employers to pay workers half their salary during the restricted period of a non-compete agreement has been modified to recognize “other mutually-agreed upon consideration between the employer and the employee.” That means companies that compensate employees at the time they sign non-competes would not have to pay them again during the restricted period. While AIM would prefer to eliminate the “garden leave” provision entirely, the revision provides some flexibility to employers.
  • Amending contracts:  The compromise legislation would allow courts to reform or alter non-compete contracts to ensure that both parties are treated fairly.  Previous language would have forced a court to invalidate a contract in full. 
  • Effective date: The legislation would provide time for businesses to update contracts by moving the effective date from July 1 to October 1, 2016.  As previously proposed, the law would not apply retroactively to contracts signed as of October 1, 2016.

AIM has expressed support for several provisions of the revised bill that clearly define the conditions under which non-competes may be used:

  • Non-compete agreements could be only one year in duration.
  • Those subject to non-compete agreements would have to be given prior notice of the need to sign the agreement, as well as the opportunity to consult with legal counsel.
  • The non-compete would extend to a second year should an employee unlawfully take property belonging to the employer.

Amid these improvements, concerns remain.  AIM urges the House of Representative to consider several changes:

  • Stock options:  Make stock-option offerings exempt from being directly tied to non-compete agreements since such grants are used for attracting and retaining talent.
  • Exemptions:  Change the criteria under which workers would be exempt from non-competes from the Fair Labor Standards Act to a standard that relies on the minimum wage.
  • Garden Leave: Make technical changes to underscore the fact that non-compete agreements are often part of broader standardized national or international compensation plans.
  • Choice of Law Provision: Strike language that sets arbitrary rules for selecting the court where a claim may be brought.
  • Garden Leave exemption:  Create language to allow a non-compete to remain enforceable when an employee receives a severance payment or other long-term compensation.
  • Independent Contractors: Strike language that defines employee to include independent contractors within the definition of full-time employee. 
  • Damages:  Strike language that would preclude an employer from recouping damages or costs associated with a stolen “sales list” if an employee were to leave voluntarily.

AIM continues to maintain that there is no evidence that the use of non-compete agreements harms Massachusetts’ position as as a globally recognized leader in innovation. In fact, Securities and Exchange Commission (SEC) filings indicate that the well-heeled venture capitalists pushing to limit non-competes use such agreements themselves.

Employers believe selective use of non-competes protects the significant investments that allow their companies to be global leaders in their industries and to create jobs in the commonwealth.  The compromise legislation begins to recognize that Massachusetts employers need flexibility and legal options to protect intellectual property. 

AIM looks forward to working with members of the Legislature to address the changes that remain to be made.

Employers seeking to learn more about the non-compete issue may contact me at bmacdougall@aimnet.org.

 

Topics: Speaker Robert DeLeo, Employment Law, Massachusetts House of Representatives, Non-Compete Agreements

New Non-Compete Bill: Progress, But Issues Remain

Posted by Brad MacDougall on May 18, 2016 12:04:51 PM

The Massachusetts Legislature’s Joint Committee on Labor and Workforce Development on Monday released a non-compete reform bill containing provisions outlined by House Speaker Robert DeLeo in March.

ScalesofJusticeVerySmall.jpgThe measure is the latest iteration of a years-long battle by venture capitalists to ban or limit the use of non-compete agreements in Massachusetts. AIM has so far opposed changes to the non-compete law, believing the non-compete issue is about choice for both individuals and employers who should be free to negotiate contracts of mutual benefit as long as the employee is a part of the process.

AIM supports the following provisions of the Labor and Workforce Development bill:

  • Non-compete agreements could be only one year in duration.
  • Those subject to non-compete agreements would have to be given prior notice of the need to sign the agreement, as well as the opportunity to consult with legal counsel.
  • Extension of the non-compete to a second year should the employee unlawfully take property belonging to the employer.

AIM opposes the following provisions:

  • Imposition of a so called “garden leave” provision requiring that at least 50 percent compensation for the duration of a non-compete period. As one AIM-member lawyer noted, “This is not a law anywhere in the country. Moreover, most Massachusetts businesses are small and could not afford to protect their investments with this type of provision.”
  • Creation of multiple opportunities for a plaintiff or a court to void a non-compete contract. It is critical for a business to have confidence that their non-competes will be held up in court.
  • Non-competes would become invalid for employees who are terminated or laid off. As one western Massachusetts manufacturer noted, “The risk to employer is still alive and well if the terminated employee takes that information and goes to a direct competitor.”
  • A prohibition against courts reforming a contract, a provision that would make it likely that contracts would be voided. It is a long-standing and common practice for a court to reform an agreement rather than set it aside. As one AIM member noted, “The power and ability to reform a non-compete contract is a bedrock principle in equity. It is the primary way for the courts to make a fair and just ruling on the enforcement of a non-compete agreement. The courts take substantial evidence from the parties on an enforcement action, and thus is in the position to assess same and make a ruling which is ‘customized’ to the situation at hand. This a best practice that has allowed for proper and equitable application of non-compete agreements for over a hundred years”
  • Arbitrary rules for selecting the court where a claim may be brought.
  • Exemptions for certain workers for whom a non-compete would be invalid. AIM is concerned that changes announced today to the federal Fair Labor Standards Act will make these exemptions applicable to a broad swath of the work force. One AIM member from Fall River noted, that “In reality, how someone is paid (and how much) has little or nothing to do with what confidential or proprietary business information they may be exposed to. This has a big impact to small businesses.”

AIM has concerns about other sections of the legislation:

  • The manner in which the proposal captures independent contractors within the definition of full-time employee.
  • The chance that an employer may be precluded from recouping damages or costs associated with a stolen “sales list” if an employee were to voluntarily leave.
  • The requirement that a company reveal certain aspects of a specific trade secret through the court and discovery process. The court process and the manner in which trade and other business interests are protected in court should be given further analysis.
  • The aggressive implementation date of July 1, 2016. Given the significant challenge of changing legal documents, especially given new changes imposed by the defense of trade secret law

“AIM appreciates the approach that Speaker DeLeo has taken in the public policy debate over non-compete agreements,” said John Regan, Executive Vice President of Government Affairs at AIM.

“The Speaker clearly recognizes the need to protect business interests at a time when non-competes are a vital part of protecting investments and ideas created by employers of all sizes and from all industries. As the Speaker has noted in the past, Massachusetts cannot be an ‘invented here and manufactured elsewhere’ commonwealth.”

AIM looks forward to working with members of the Legislature to address these concerns.

AIM members may learn more about the non-compete issue by contacting Brad MacDougall, bmacdougall@aimnet.org.

Topics: Employment Law, Massachusetts employers, Non-Compete Agreements

Non-Compete, Independent Contractor Issues Define State Approach to New Economy

Posted by Christopher Geehern on Jun 23, 2015 9:10:32 AM

Microsoft Founder Bill Gates once said that “The intersection of law, politics and technology is going to force a lot of good thinking.”

jobsearchcomputer.smallPerhaps, but it is also forcing a lot of muddled thinking as state and federal policymakers struggle to define a rapidly evolving economy with traditional laws and regulations. Associated Industries of Massachusetts will today seek to change some of that thinking on two issues that are critical to the commonwealth’s economic future – the ability of employers to protect intellectual property with non-compete agreements and the ability of entrepreneurs to work as independent contractors.

AIM plans to provide testimony on the two issues at a hearing of the Massachusetts Legislature’s Joint Committee on Labor and Workforce Development. The association opposes efforts to ban or limit the use of non-compete agreements and favors changing the law that prevents virtually any individual in Massachusetts from unambiguously passing the legal test to qualify as an independent contractor.

“The 4,500 member employers of AIM believe that government should encourage the research, innovation and investment that make the Massachusetts economy unique. Maintaining non-competes and broadening the definition of independent contractors will ensure that great ideas continue to generate good jobs here in the commonwealth,” said John Regan, Executive Vice President of Government Affairs.

Massachusetts lawmakers last year rejected efforts by a small group of well-heeled venture capitalists to ban the use of non-compete agreements in the commonwealth. AIM believes the non-compete issue is about choice for both individuals and employers, who should be free to negotiate contracts of mutual benefit as long as the employee is a part of the process.

Employees already enjoy legal protection against overly restrictive non-compete agreements.  Case law dictates that enforcement of agreements occurs only when:

  • they are narrowly tailored to protect legitimate business interests;
  • they are limited in time, geography, and scope;
  • they are consonant with public policy; and
  • the harm to the employer from non-enforcement outweighs the harm to the employee.

“Non-compete agreements may not be used to curtail ordinary, fair competition or to prevent employees from using their general skills. Massachusetts has a long history of case law that strikes the right balance between employee freedom of mobility and financial incentives with employer interests in protecting intellectual property (IP), trade secrets, confidential information, and goodwill,” says Brad MacDougall, Vice President of Government Affairs at AIM.

The association surveyed its members last year and found that non-competes are used widely in every segment of the Massachusetts economy, including manufacturing, life sciences, medical devices, finance, retail, marketing, publishing, construction, energy, professional services, insurance and health care. A manufacturing company with fewer than 50 employees wrote on the survey that eliminating non-competes “could put us out of business.”

The independent contractor issue revolves around an overly restrictive statute that leaves Massachusetts on the sidelines of one of the fastest developing sectors of the economy.

One out of every three American workers, from software engineers and researchers to graphic designers, freelance journalists and nannies, today works independently outside the bounds of traditional 9-to-5 employment. The trend includes the so-called sharing economy that provides apps allowing individuals to exchange goods and services ranging from rides to housecleaning.

But Massachusetts' share of that job growth is threatened by a state law that imposes a confusing and complex three-factor test to determine whether a worker is an employee or independent contractor.

Employees must currently meet three requirements to be considered an independent contractor:

  1. The individual is free from control and direction in connection with the performance of the service, both under his/her contract for the performance of service and in fact; and
  2. The service is performed outside the usual course of the business of the employer; and,
  3. The individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed. 

An advisory from the Massachusetts attorney general in 2004 concluded that “the new law is so broad in its definition of employee that virtually every occupation, individual entrepreneur and every employer, including the public sector, have been affected, putting Massachusetts at odds with every other state in the country.”

Simply replacing the word “and” with “or” after Section 2 would bring Massachusetts into alignment with the 20-factor IRS test for determining employment versus contractor status, and validate normal and accepted employment practices in many sectors of the economy.

It’s a modest change that would help thousands of legitimate Massachusetts independent contractors who choose to manage and operate their own business and earn a living outside a traditional employer-employee relationship.

Both the non-compete and independent contractor issues underscore the fact that Massachusetts must regulate a 21st century economy with 2st century laws.

Topics: Independent Contractor Law, Massachusetts Legislature, Non-Compete Agreements

Governor Signs Jobs Bill; Renews Bid for Non-Compete Restrictions

Posted by John Regan on Aug 13, 2014 3:42:00 PM

Governor Deval Patrick today signed an economic development bill supported by employers, but also filed a last-ditch bill to add restrictions on non-compete agreements.

Patrick2014The governor’s bill, which would prohibit employers from using non-compete agreements with hourly employees and limit the length of those agreements to six months, has virtually no chance of passage this year. Beacon Hill lawmakers previously declined to include any non-compete restrictions in the original economic development measure and are unlikely to do so now that informal legislative sessions mean that a single legislator may stop passage of a bill.

The economic development law signed by the governor would expand the research-and-development tax credit and create multiple initiatives to accelerate job growth. Governor Patrick vetoed sections creating an angel investor tax credit and a "live theater tax credit" designed to encourage more productions of pre-Broadway and pre-Off Broadway theater in Massachusetts

“We commend Governor Patrick for signing the economic development bill, but remain puzzled with the effort to push non-compete restrictions opposed by large segments of the business community. Legal protection for intellectual property is a priority for small and large firms alike, and the governor’s proposal on non-competes cuts right at the heart of what drives our national and global competitiveness,” said Brad MacDougall, Vice President of Government Affairs at AIM.

“The Legislature had good reason to leave non-compete restrictions out of the economic development bill and they have good reason not to pass this new bill.”

The Legislature’s decision to maintain the current non-compete law came after hundreds of AIM member employers contacted members of the Legislature to underscore the importance of protecting the innovations that drive the Massachusetts economy. AIM members from every sector of the economy, from technology to manufacturing, expressed overwhelming support for keeping the law as is.

The Patrick administration and a coalition of venture capitalists have sought for more than a year to ban non-competes altogether, arguing that they inhibit the growth of new companies in the innovation economy.

The research-and-development tax provision in the economic development bill creates an Alternative Simplified Credit (ASC) as an alternative to the traditional tax credit. ASC allows employers the option to claim a credit equal to 10 percent of any research expenses that exceed a base amount calculated over a period of three years.

Current law allows credits only for incremental R&D spending over a set base period in the 1980s.

AIM believes the changes are necessary to reverse a troubling 19.3 percent decline in R&D spending among Massachusetts employers between 2007 and 2011. The vast majority of research and development in Massachusetts takes place not in urban innovation districts, but in advanced manufacturing, medical device, defense and biopharma companies salted throughout the commonwealth.

“The updated R&D credit represents a substantive step toward stimulating the kind of innovation that drives economic growth in Massachusetts,” MacDougall said.

 

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Topics: Economic Development, Non-Compete Agreements, Taxes

Beacon Hill Charts Moderate Course

Posted by Christopher Geehern on Aug 1, 2014 2:28:00 PM

On a day when the Boston Globe reported that Massachusetts is “more liberal than you thought,” the Legislature ended its 2013-2014 session by steering a notably moderate course on business and economic issues.

Senate_ChamberLawmakers preserved the ability of employers to protect their intellectual property through the use of non-compete agreements; rejected a proposed version of the Uniform Trade Secrets Act that would have made defense of IP and trade secrets nearly impossible; and expanded the research and development tax credit in an effort to reverse a troubling 19.3 percent decline in R&D spending among Massachusetts employers between 2007 and 2011.

And though they extended a troubling solar-energy subsidy program, legislators also created a task force to study the long-term feasibility of such subsidies in Massachusetts. Associated Industries of Massachusetts will represent commercial and industrial ratepayers on that task force.

The flurry of last-minute activity capped a session that earlier saw long-term reform of the Unemployment Insurance system and an increase in the state minimum wage from $8 per hour to $11 per hour over three years. Taken together, the record reflects a Legislature seeking a prudent middle path to nurture an economy that remains fragile despite having recovered faster than the rest of the nation.

“Beacon Hill has developed a pretty sophisticated understanding of the need to create a predictable economic climate for the employers who create jobs and prosperity in Massachusetts,” said John Regan, Executive Vice President of Government Affairs.

“Employers did not get everything they wanted during this session – most, for example, opposed increasing the minimum wage – but lawmakers by and large shared the belief that only a vibrant, private-sector economy creates opportunity that binds the social, governmental, and economic foundations of our commonwealth.”

Legislators certainly listened on the issue of non-compete agreements.

The Patrick administration and a small group of well-heeled venture capitalists worked for more than a year to ban non-competes altogether, arguing that they inhibit the growth of new companies in the innovation economy. But the initiative created a backlash among the larger business community as hundreds of employers in sectors ranging from technology to manufacturing contacted members of the Legislature to underscore the importance of protecting the innovations that drive the Massachusetts economy.

Unlike last year’s repeal of the technology tax, when a unified coalition of employers persuaded legislators to change course, there was nothing approaching a consensus within the business community on non-competes.

“Speaker Robert DeLeo, Senate President Therese Murray and the Legislature deserve tremendous credit for recognizing that the current law governing non-compete agreements in Massachusetts is working just fine,” said Richard C. Lord, President and Chief Executive Officer of AIM.

There were other examples of economic prudence as well.

The Legislature declined to pass a workplace bullying bill that would have left employers open to litigation for taking corrective action against employees. Also left in the “no” pile was a bill that would have prevented employers from accessing the social-media logins of job candidates or employees. Legislators did pass a compromise worked out between AIM and domestic violence prevention advocates that would provide up to 15 days of leave to domestic violence victims who work for companies with 50 or more employees.

The future direction of the Legislature remains uncertain with the impending departures of several key lawmakers, including Senate President Murray, Senate Ways and Means Committee Chairman Stephen Brewer and Assistant House Minority Leader George Peterson Jr. Regan from AIM says all three exemplified the rare ability to reach consensus on thorny issues such as health care reform and gun control.

“AIM and the employer community will miss their determination to make Massachusetts a place where people with different opinions reach common ground on the best way forward. We look forward to their successors continuing that legacy and the moderate course the Legislature has charted,” Regan said.

Topics: Massachusetts Legislature, Non-Compete Agreements, Senate President Therese Murray

Compromise Bill Preserves Non-Compete Agreements

Posted by John Regan on Jul 31, 2014 10:13:00 AM

Massachusetts employers would retain the ability to protect their intellectual property through the use of non-compete agreements and would gain access to an expanded research and development tax credit under an economic development bill approved by the Legislature early today.

intellectualpropertysmallLawmakers approved the measure on the final day of formal sessions for the 2013-2014 legislative session. Associated Industries of Massachusetts called upon Governor Deval Patrick to sign the bill.

The Senate bill had included restrictions on the use of non-competes in an earlier versio nof the bill, but a conference committee ultimately adopted the approach of the House and made no changes in the law governing the agreements.

Legislators also declined to adopt a Senate version of the Uniform Trade Secrets Act that would make defense of intellectual property and trade secrets nearly impossible.

The bill would expand research and development tax credit by allowing employers the option to claim a credit equal to 10 percent of any research expenses that exceed a base amount calculated over a period of three years. Associated Industries of Massachusetts continues to study the specifics of the proposal in advance of today’s debate.

“Speaker DeLeo, Senate President Murray and the Legislature deserve tremendous credit for recognizing that the current law governing non-compete agreements in Massachusetts is working just fine,” said Richard C. Lord, President and Chief Executive Officer of AIM.

“The 4,500 member employers of AIM urge Governor Patrick to sign this prudent approach.”

The decision to maintain the current non-compete law came after hundreds of AIM member employers contacted members of the Legislature to underscore the importance of protecting the innovations that drive the Massachusetts economy. AIM members from every sector of the economy, from technology to manufacturing, expressed overwhelming support for keeping the law as is.

The Patrick administration and a coalition of venture capitalists have sought for more than a year to ban non-competes altogether, arguing that they inhibit the growth of new companies in the innovation economy. The Senate economic development bill that passed on July 1 contained a provision that would have prohibited employers from using non-compete agreements with hourly employees and limited the length of non-competes to six months.

The compromise economic development bill also includes a $15 million middle skills jobs training grant fund, $10 million for brownfields redevelopment, efforts to boost jobs in so-called Gateway Cities and a Big Data Innovation and Workforce Fund. A sales tax holiday is authorized for August 16 and 17.

Topics: Massachusetts Legislature, Non-Compete Agreements, Intellectual Property

Senate Bill Would Expand R&D Credit; Restrict Non-Compete Agreements

Posted by Christopher Geehern on Jul 2, 2014 2:56:00 PM

The Massachusetts Senate approved an economic development bill yesterday that would restrict the use of non-compete agreements and broaden existing tax incentives for companies to conduct research and development.

IntellectualProspertyA legislative conference committee will now hammer out differences between the Senate bill and a similar measure passed several weeks ago by the House of Representatives. The House bill includes neither the non-compete nor the R&D tax provisions.

AIM supports the updated R&D tax credit. The association continues to study the Senate non-compete measure with an eye toward maintaining adequate protections for the intellectual property of employers.

The non-compete compromise would prohibit employers from using the agreements with hourly employees and limit the length of those agreements to six months.

Non-competes would have to be presented at least five business days before the employee starts work, or when any formal offer of employment is first made to the employee. If the agreement is entered into after the person is already employed, but not in connection with separation from employment, it must be supported by fair and reasonable consideration in addition to the continuation of employment, and notice of the agreement must be provided at least 10 business days before the agreement is to be effective.

The Patrick administration and a coalition of venture capitalists have been seeking to ban non-competes altogether, arguing that they inhibit the growth of new companies in the innovation economy. AIM has led the effort to preserve the current law governing the use of non-competes.

Brad MacDougall, Vice President of Government at AIM, says the non-compete issue is really about choice for both individuals and employers, who should be free to negotiate contracts of mutual benefit as long as the employee is a part of the process.

Employees already enjoy legal protection against overly restrictive non-compete agreements, according to MacDougall.  Case law dictates that enforcement of agreements occurs only when they:

  • are narrowly tailored to protect legitimate business interests;
  • are limited in time, geography, and scope;
  • are consonant with public policy; and
  • the harm to the employer from non-enforcement outweighs the harm to the employee.

The Senate bill seeks to reassure employers about protection of intellectual property by adopting a version of the federal Uniform Trade Secrets Act. But the Massachusetts version contains a major problem – it forbids court injunctions with respect to trade secrets “unless the trade secret is specified with sufficient particularity so as to reasonably enable the respondent to prepare a reasonable defense under the circumstances.” 

So an employer would have to specify with “particularity” the trade secrets at issue before obtaining an injunction.  It would be nearly impossible for a company to secure an injunction before a competitor or former employee carries away vital company information.

Massachusetts Secretary and Housing and Economic Development Gregory Bialecki signaled yesterday that the administration is open to compromise on non-competes.

Sen. Michael Rodrigues, a Westport Democrat, disagreed with the provision preventing hourly workers from being subjected to non-compete agreements. Rodrigues argued that in the building trades employers often pay for training and licensing for their workers, and need protection that non-compete agreements offer.

All four Republicans – Sens. Bruce Tarr, Robert Hedlund, Richard Ross, and Donald Humason - and Sens. Rodrigues, Harriette Chandler and Karen Spilka voted against the amendment. 

The R&D tax credit amendment filed by Rodrigues, Tarr and Senator Barry Feingold, would allow employers the option to claim a credit equal to 10 of any research expenses that exceed a base amount calculated over a period of three years. Current law allows credits only for incremental R&D spending over a set base period in the 1980s.

AIM believes the changes are necessary to reverse a troubling 19.3 percent decline in R&D spending among Massachusetts employers between 2007 and 2011. The vast majority of research and development in Massachusetts takes place not in urban innovation districts, but in advanced manufacturing, defense and biopharma companies salted throughout the commonwealth

“And we know that R&D credits work. Massachusetts enacted a set of research and development tax incentives in 1991 that were among the most advantageous in the nation. Over the next five years, R&D spending in the commonwealth increased by more than 50 percent,” said John Regan, Executive Vice President of Government Affairs for AIM.

A recent report from The Pioneer Institute found that overall R&D spending in Massachusetts fell 10.3 percent in the four years ending in 2011. Massachusetts fell further behind chief R&D rival California, which significantly increased its R&D market share on the strength of one of the strongest R&D credits in the nation – 15 percent.

Topics: Massachusetts senate, Non-Compete Agreements, Taxes

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