In a stroke of good fortune for companies that rely on non-competition agreements to protect their intellectual property, the Massachusetts legislature failed to pass a final version of pending legislation that could have gutted such agreements. On Sunday night, the clock ran out on the 2016 legislative session without final passage of the non-compete reform bill (H. 4434) that many observers expected to pass this session. This is good news for companies that want to use non-compete agreements to protect their trade secrets and good will because the Senate version would have almost entirely eliminated the value to companies of employee non-compete agreements. Differences between the House and Senate versions – as discussed here on July 17 – appear to have been too large to overcome in the 17 days between when the Senate passed the bill and the end of the session. According to the Boston Globe the biggest sticking points related to the length of employment restrictions and the amount of the “garden leave” that employers would be required to pay former employees during the non-compete period.
Although the bill is dead for this year, the legislature may take it up again when the 2017 legislative session starts. Bills like this one where there is widespread support in both houses for different versions often pop back up in a new session with an even greater chance of passing. So while companies who rely on non-competes were granted a temporary reprieve, they may need to look to other options in their long-term intellectual-property protection strategies.