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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

Video Blog | Speaker DeLeo Talks Energy, Economic Development

Posted by Christopher Geehern on May 23, 2016 7:30:00 AM

House Speaker Robert DeLeo touched on energy costs, work force training and economic development during his keynote address to the AIM annual meeting on May 13.  DeLeo said that the House of Representatives shares with AIM a commitment to ensure that the economic growth buoying the Boston area spreads through the commonwealth.

Here is a video of the speaker's full address:

Topics: Speaker Robert DeLeo, AIM Annual Meeting, Massachusetts House of Representatives

Employers Encouraged as DeLeo Narrows Revenue Debate

Posted by Rick Lord on Mar 7, 2013 9:25:00 AM

House Speaker Robert A. DeLeo today proposed an encouraging and well-considered framework for modernizing the state’s transportation system without massive increases to income and business taxes.

Speaker DeLeoIn a speech to the Greater Boston Chamber of Commerce, DeLeo said he is committed to finding new revenue to support transportation needs, but will call for a revenue package “of a significantly smaller size” than the proposal offered by Gov. Deval Patrick. He said that the House will develop a new source of transportation revenue “that is commensurate with job creation, job retention and economic growth.”

“I'm worried that the administration’s proposal places too heavy a burden on working families and businesses struggling to survive. We want to minimize the pressure on Massachusetts citizens as we find ways to meet our goals. If we are to pass a new revenue package, I believe it should be far more narrow in scope and of a significantly smaller size,” DeLeo said.

The speaker stressed that the transportation system must continue to cut costs and improve efficiency. He praised the reforms that have taken place as the result of merging several agencies into the current Department of Transportation in 2009, but noted that the department still borrows money to pay salaries and other operational expenses.

Associated Industries of Massachusetts views DeLeo’s approach as a formula for success. AIM will of course wait to review the House’s actual transportation proposal before making a final judgment, but the association believes the speaker has framed the issue in a manner that can generate widespread support.

DeLeo’s comments came two months after Governor Patrick proposed a complex $1.9 billion-per-year tax plan that would increase individual income tax rates from 5.25 to 6.25 percent, double the personal exemption, lower the sales tax rate from 6.25 to 4.5 percent, eliminate 44 personal income tax deductions and boost corporate taxes by $500 million. The governor’s plan, intended to increase funding for both transportation and education, has met with a lukewarm response among legislators.

AIM and its 5,000 members understand that the commonwealth must improve the condition of its roads, bridges and public transportation system to pave the way for future job growth.  The best way to accomplish the goal is for the state to “finish the job” on uncompleted efficiency reforms and identify the revenue it needs to meet its current operational needs.

 “Employers look forward to working with lawmakers to understand the current operational issues facing the transportation system, to institute meaningful reform and to identify appropriate sources of revenue to fund the system we have in place now,” said John Regan, Executive Vice President of Government Affairs at AIM.

“Only after we return the system to financial stability can we reasonably review some of the longer-term capital spending plans proposed by the administration.”

DeLeo also used his speech this morning to unveil a proposal to enhance the ability of community colleges to provide the science, technology, engineering and math skills increasingly demanded by employers. AIM commends the speaker for proposing the STEM STARTER ACADEMY and again looks forward to reviewing the details.

Topics: Speaker Robert DeLeo, Issues, Taxes

Speaker Backs Unemployment Rate Freeze, Reforms

Posted by John Regan on Jan 2, 2013 2:15:00 PM

Massachusetts House Speaker Robert A. DeLeo today called for freezing Unemployment Insurance rates for 2013 and examining structural changes to one of the most expensive UI systems in the nation.

Robert DeLeoUnemployment Insurance rates in Massachusetts rose automatically by 25 percent on January 1, boosting the cost paid by employers from $745 per employee to $929 per employee. Legislators may still freeze rates at the current schedule E before first-quarter UI bills go to employers, a step that lawmakers have taken in each of the past three years.

AIM believes that the current trust fund balance of approximately $400 million in the fund used to pay jobless benefits is enough to justify another freeze.

“I continue to hear from the business community about increasing unemployment insurance rates. The schedule can lead to sudden and additional burdens on employers and cost jobs. Sensitive to these concerns, I will ask that the House once again freeze the UI increase,” DeLeo said after winning election to a third term as speaker.

“Because this appears to have become a semi-permanent condition, I will ask the appropriate committees to study ways in which we can reform our UI system to deal with our long-term liabilities while mitigating the burden on employers.”

AIM supports long-term structural reforms that would bring Massachusetts into line with Unemployment Insurance practices in a majority of other states by limiting the duration of benefits to 26 weeks, increasing work and wage requirements for benefit eligibility, and updating rate tables to create equity in employer UI payments. Massachusetts currently has some of the highest Unemployment Insurance rates in the nation.

DeLeo pledged to focus on economic development and job creation. He noted that Massachusetts has already begun to cultivate the type of environment conducive to economic growth and innovation, proving to be an attractive place for new businesses, such as Japanese stem cell company ReproCELL that has just announced a decision to open an office in Boston.

Both DeLeo and Senate President Therese Murray used their inaugural speeches to address transportation issues in advance of a long-term transportation financing plan expected from Governor Deval Patrick next week. The two legislative leaders emphasized the need to create efficiency through reform as lawmakers grapple with operational deficits at the MBTA and long-term highway and bridge construction needs.

“In 2009, we completely overhauled the state’s transportation system, dissolving the Turnpike Authority and consolidating multiple agencies into a unified, independent agency.  We recognized that we were dealing with a broken system, and we insisted on reform before revenue,” Murray said in remarks to the Senate.

“In the upcoming session, we will continue to look for opportunities to help the Department (of Transportation) continuously improve its services, redouble its commitment to reform, and come closer to fulfilling its new potential.”

Topics: Speaker Robert DeLeo, Unemployment insurance, Issues, Senate President Therese Murray

AIM Members: Urge Legislators to Fix Treble Damage Law

Posted by John Regan on Apr 21, 2011 9:37:00 AM

Senate ways and means, treble damages law, budgetNext week, members of the Massachusetts House of Representatives will debate and vote on the Fiscal Year 2012 budget which includes language limiting the current punitive treble-damages law to “willful” violations of the wage and hour statute only.  This change has been sought by AIM since the original law passed in 2008.

AIM urges you to contact House members asking them to support this language and to oppose any amendment preventing the fixing of the treble damages law.

The current law penalizes companies that have done nothing outrageous, have not acted with an evil motive, and have not acted with reckless indifference to employees' rights.  The same would be true in the case of a good-faith dispute over whether an employer owes commissions.

This House proposal mirrors Governor Deval Patrick’s language to fix a 2008 law that imposed punitive treble damages even in cases where an inexperienced employee of a Massachusetts business makes a clerical or other honest error. 

Massachusetts is rated poorly by the US Chamber of Commerce because of this onerous law that mandates treble damages for any Wage Act violation.  The House Ways and Means Committee proposal would bring fairness and equity to a law which is now unduly punitive. 

AIM thanks Speaker Robert DeLeo and House Ways and Means Chairman Brian Dempsey for a fiscally sound House budget which benefits the Massachusetts Economy.  AIM also recognizes the work of Ways and Means Committee Vice Chair Steven Kulik and Assistant Vice Chair Martha Walz on the proposed House budget and for addressing the treble damages issue.

Click here to contact your elected officials and urge them to fix the treble damage law.

Topics: Speaker Robert DeLeo, AIM, House Speaker Robert DeLeo, Legislative Scorecard, Treble Damages Law, Govenor Patrick

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