Non-Competition Agreements - Hurting Business Development?

So suggests Spark Capital’s Bijan Sabet Says Cross Out Those Non-Compete Clauses—An Xconomy Interview.

Which gives us a chance to talk about policy. Those wanting to know the technical aspects of Indiana's law on non-competition agreements might want to click on the link below next to the word "Label" that reads "Non-compete agreements."

Is this just a Massachusetts problem or one that affects Indiana, too? I wrote an earlier article touching on this subject in Legislating against non-compete agreements?.

I think this is the second article I have read where Massachusetts blames its non-competition agreement law. Everyone living in Indiana knows that we have a struggling economy, one without the high tech start ups in Silicon Valley. I can think of many reasons for this but I would not put our law on non-competition agreements on the list. If anyone cares to correct me, I will be happy to listen. Please feel free to use the "Post a Comment" button below.

Meanwhile, let me explain my opinion. Indiana law does not favor non-compete agreements in employment contracts. Our laws favors their use in the sale of a business a bit more. I noticed that the person interviewed in the original article muddles the use of non-competition agreements employees and for the sale of a business. I have a hard time imagining where I would not counsel a client buying a business to include a non-compete agreement covering the seller. Likewise, I would counsel the seller to get the most narrowly drawn non-competition agreement possible. Does this stifle competition or does it prevent unfair competition?

Indiana law disfavors non-compete agreements by construing them to the narrowest time and area for protecting the employer or the buyer of a business. I have heard complaints that a non-competition agreement was worthless. I assume that the agreement was too broad. That it was too broad comes from poor drafting. Succeeding in court on a non-competition agreement starts a well drafted agreement. No making a silk purse out of a sow's ear in these kind of cases.

Which brings me back to the original question. When the law requires rigid compliance with the rules regarding time and place so not to stifle competition, does this in fact stifle competition as it seems to have done in Massachusetts? Or are the complete lack of non-compete agreements all that makes California such a haven for high-tech companies?