The following letter was sent to Governor Patrick tonight.
December 6, 2007
Gov. Deval Patrick Office of the Governor
Massachusetts State House
Boston, MA 02133
Dear Governor Patrick:
We are writing you to ask for your support in eliminating a major barrier to entrepreneurialism and commerce in Massachusetts: the use of non-competition agreements mandated by employers that force employees to sign away their rights to engage in any business of a competitive nature when they leave their present jobs.
As a venture capital firm based in Boston, we are in the business of fostering innovation and building valuable companies that employ highly skilled workers, pay significant taxes, and allow the Commonwealth to thrive in the increasingly competitive national and global economic environment. We have a unique vantage point into the factors enabling entrepreneurialism in Massachusetts.
From this view point we have seen that employment non-competes are increasingly stifling the emergence of start-up companies in our State, forcing some of Massachusetts’ most innovative entrepreneurs to take on tremendous risks, and hampering Massachusetts’ ability to meet its fullest economic potential as a Commonwealth.
We respectfully request that Massachusetts legislate the elimination of the general enforceability of these non-competes in order to restore balance to Massachusetts’ labor markets and to enable Massachusetts to compete better in the national and global marketplace.
Due to the enforceability of employment non-competes in the Commonwealth, entrepreneurs must be willing to take on tremendous legal and financial risks as employers building new ventures. As a point of comparison, the State of California has largely done away with non-competes and has reaped the benefits. Just look at the vibrancy and success of Silicon Valley, which is home to more new company formations than any other location in the country. Why shouldn’t Massachusetts’ entrepreneurs have the same rights and opportunity as their counterparts in Silicon Valley?
While big companies claim to force non-competes upon employees as a way to protect their intellectual property, these companies often use these non-competes to intimidate individuals and start-ups that cannot afford to defend themselves against the greater financial resources, and legal onslaught, of big companies.
In addition, the value of non-competes is dubious at best. These agreements are mandated by many employers in Massachusetts as a condition of hiring, but non-competes are not necessary as a protection for employers if customary non-disclosures are in place protecting their trade secrets and intellectual property. Despite this customary non-disclosure protection, many employers have also utilized overly general non-competes that prevent employees from taking positions that in their view are the most rewarding and satisfying. Any impediment to the free flow of labor to the best ideas in Massachusetts stifles economic growth in our Commonwealth. Moreover, non-competes are selectively enforced, often due to personal issues rather than reasonable business factors.
Most non-compete restrictions tend to be at least one year in duration and often impose hardship by prohibiting employees from leaving unsatisfying jobs and receiving compensation in their chosen field for the duration of the non-compete. As long as an employee agrees not to disclose proprietary information, there is no reasonable benefit to non-competes.
We firmly believe that Massachusetts should eliminate non-competes in order to continue to be able to foster an entrepreneurial environment that can compete both nationally and globally. Our innovative and talented employees should be free to chase the best ideas in the Commonwealth without the artificial constraint of non-competes. The result will be more start-ups originating in the Commonwealth, a reduction in the exodus of talented people, and the ability for Massachusetts to better compete nationally and globally as a hub of innovation.
For our part, Spark Capital will work to eliminate non-competes in our portfolio companies. We will not include non-compete language in agreements with our portfolio companies. Furthermore, we will seek practical legal remedies to the non-competes currently in force in Massachusetts.
We thank you in advance for your thoughtful consideration of this proposal. We would welcome the opportunity to discuss this initiative in more detail.
Bijan Sabet, Todd Dagres, Santo Politi, Dennis Miller, Paul Conway
The Partners of Spark Capital