In the January 24-31, 2013 “Business View” section of the Boston Business Journal, State Senator William Brownsberger and State Representative Lori Erlich claimed that one reason Massachusetts is losing jobs to Silicon Valley is that California law prohibits non-compete agreements, whereas in Massachusetts they are routinely enforced. The authors then use this conclusion to argue that the Commonwealth should legislate the elimination, or at least curtail the enforceability, of non-compete agreements.
While I have no reason to doubt that Senator Brownsberger and Representative Erlich genuinely believe that eliminating or curtailing the enforceability of non-competes would be beneficial to the Commonwealth, their argument is deeply flawed. As an initial matter, the legislators’ starting point is the “dozens of stories [they have been told] of young workers whose careers were delayed or substantially derailed by overreaching noncompetition agreements.” Even assuming all of these stories are true, if the issue is the impact non-competes are having on the Massachusetts economy, the real starting point should be the number of people who actually left the Commonwealth simply to avoid signing a non-compete agreement. Further, while Senator Brownsberger and Representative Erlich provide no empirical or even anecdotal data with which to make such … Keep reading
In Enforcing Non-Compete Agreements Against California Employees — Part I, I discussed how a Massachusetts company might be able to enforce a non-compete against a California employee by including a Massachusetts choice of law provision in an employment agreement. In this post, I will discuss three scenarios under which an employer may be able to obtain an actual (or the functional equivalent) of a non-compete with respect to California residents/employees even if California law applies.
1. Enforcing a Non-Compete Against the Seller of Goodwill or Equity
Section 16601 of the California Business and Professional Code states:
Any person who sells the goodwill of a business, or any owner of a business entity selling or otherwise disposing of all of his or her ownership interest in the business entity, or any owner of a business entity that sells (a) all or substantially all of its operating assets together with the goodwill of the business entity, (b) all or substantially all of the operating assets of a division or a subsidiary of the business entity together with the goodwill of that division or subsidiary, or (c) all of the ownership interest of any subsidiary, may agree with the buyer to
… Keep reading
In a post this summer, I raised three issues employers may want to consider before even requesting that an employee execute a covenant not to compete. One issue that I did not mention is whether the company’s employee lives and works in California. Although where an employee lives may be relevant, contrary to what many attorneys think, it may be possible for a Massachusetts company to enforce a non-compete against a California resident.… Keep reading