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NYT: "They Protect Small Businesses" by SBANE's Former Chairman Andrew Botti

They Protect Small Businesses

Andrew P. Botti

Andrew P. Botti is a lawyer at the McLane Law Firm and the former chairman of the Smaller Business Association of New England.

JUNE 10, 2014
Noncompete agreements are integral legal mechanisms for small businesses, which must protect their intellectual property and confidential information to stay afloat. In Massachusetts, noncompetes have been recognized and enforced for this very reason for over a century. But Gov. Deval Patrick has proposed legislation that would mostly ban them. These recent efforts to reverse long-recognized law – under the assumption that noncompetes hinder start-up activity – are entirely misplaced. For one thing, the greater Boston area has some of the highest-density concentrations of start-ups in America, according to a 2013 report by the Kauffman Foundation. And that success owes a good deal to noncompetes. In Massachusetts, businesses with 19 or fewer employees comprise nearly 86 percent of all companies. These smaller businesses often require their employees to wear many hats. Consequently, employees are by necessity exposed to, and knowledgeable of, a wide variety of trade secrets and other proprietary information. It would be prohibitive for companies to invest in this kind of proprietary information without the ability to protect it from employees that leave, especially in cases where the lifeblood of a whole business consists of one or two products developed at a high cost. Small-business owners are sometimes compelled to mortgage their own assets and provide personal guarantees for the loans they take to cover their start-up costs. Why would they continue to do so if unscrupulous employees could simply walk off and exploit the end result of years of development efforts? The cases are legion where just such attempts have been made by ex-employees either working alone or in concert with new competing employers. This is not to say that employees should be deprived of their individual rights. Under the prevailing law, noncompete agreements receive strict scrutiny. The Massachusetts judiciary retains the power under equity principles to reform such agreements when circumstances indicate that they may be impractical or unfair.  

To read this article on the New York Times, please click here.

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