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Summary:

Boston is worried that employment contracts that limit workers’ mobility is leading young entrepreneurs to move to California. In a “big shift,” it’s planning to change the law.

Fed up with watching young tech savants like Mark Zuckerberg leave for the west coast, the Massachusetts government suggested it is ready to take a major step to level the playing field: banning so-called non-compete agreements that restrict employees’ ability to leave a job.

In a labor hearing on Tuesday, a government official indicated that Governor Deval Patrick’s administration is now fully beyond a plan to forbid job clauses that restrict worker mobility. According to the Boston Globe, which reported the story, the move represents a “big shift” in state policy.

The official’s testimony makes clear that the proposed policy shift is a result of its young talent pool decamping for California:

We do an excellent job of educating talented people here in the Commonwealth. [..] If Massachusetts is not able to create an environment that gives entrepreneurial talent a chance to thrive, then the most effective job creating companies may be pushed to grow to scale in states like California. In fact, we have heard examples of entrepreneurs at MIT who were advised to start their businesses outside of Massachusetts as a result of non-compete agreements laws.

The enforceability of non-compete agreements varies from state-by-state, but California stands out because it explicitly bans them on public policy grounds — making it easy for companies to poach each others’ talent. Stanford law professor Mark Lemley noted on Twitter that Massachusetts could shake up the start-up market:

Despite the research and tech prowess of Massachusetts universities, Boston has in recent years fallen behind New York as America’s second place tech hub after Silicon Valley. In response, venture capitalists in the state are partnering with Harvard and other schools to encourage future Facebook founders to stay put.

Update: In the process of looking at how to end non-competes, Massachusetts is also looking at how to pass a law consistent with federal laws that protect employers’ trade secrets.

  1. Huh. Would it do me any good if my job that potentially will have that contract is in CT but my other is in MA? I’m guessing not, because it sounds like they’re just stopping businesses from having that contract.

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  2. If Taxachusetts really wants to encourage startups, then it should eliminate its ill-conceived tax on software services…Until then…journalists should ignore spin from Gov. Deval Patrick, the Statehouse, et al.

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    1. Tim, can you elaborate, what tax on software services, the double taxation of sole proprietorships/LLCs?

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  3. The turnout of this law might change how entrepreneurs conduct business. Thank you for sharing.

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