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I’m not high enough in the food chain to be covered by a non compete clause at my job. However, five years ago, we were bought out by a larger company. The execs were bound by the existing non compete clause which prevented them from working for a competitor for two years after leaving, but but paid their salaries while waiting out the two years. Our VP of research was fired after the takeover, but collected a severance and two years salary before getting a new job with one of his former employers. The non compete clause turned out to be a pretty good deal for him.

I wish I had read this piece this time last year. Through my network, I learned about what sounded like a terrific job opportunity. There were many red flags during the interview process, however, including some secrecy that bugged me. The co-managers who interviewed me did not want anyone in their office to know, so we met at a Chick Fil A. One of the managers read a list of benefits to me, including health insurance, but did not mention a 90-day waiting period. (I should have asked.) There were many other unpleasant little surprises once I accepted the job and was handed an “employee manual” — on my third day (a day after the surprise that the title I was hired for had changed) with the caveat that the document was being “reviewed” by a committee. The job was a nightmare, and I was fired a day before my 90-day mark with an explanation that I was a nice person but not meeting expectations. It was a huge relief–and rue the day I did not insist on seeing documents that would help me ask the right questions.

One more thing to look out for:

I suspect most employment agreements and policy manuals have something in common with most software end-user license agreements (EULAs): They also require you to agree to whatever changes in the documents the company might see fit to incorporate in the future.

So the employee in question might not have agreed to the NCA. She might, though, have agreed to comply with all future versions of the employee manual, so when the company decided to add the NCA she was bound by that little gotcha.

Just speculating. I wouldn’t be the least bit surprised by this, though. It isn’t even unethical: Companies have to be able to change their policy manuals from time to time, and it isn’t reasonable to allow employees to opt out of the changes.

Good article. Non-competes were originally made for the CEO-VP level of business as a golden parachute.

Contract law is built upon 3 pillars, one of which is “the meeting of the minds”, whereby both parties believe they are thinking the same thing. In your example, the Company will claim the person read the documents, but that’s not a guaranteed out for them. Much of today’s fine print is unenforceable nonsense, however–what you don’t protest is agreed upon in your silence–unless it contradicts the “spirit” of the deal.

Your best advice is to request the company in writing, say an email, to provide any and all paperwork required to be signed as part of the POSITION. No hidden referred “documents”.

People don’t know the difference between “conversational language” (day to day communication) vs “legal language” (the legal meaning of what is said-written). It’s not that hard to learn, and once you get the hang of it–your eyes open up.

Finally, you have to have the courage to REQUIRE (asking is for those unsure of themselves) all this paperwork from those you get in business with. Any company that won’t give you what you require–isn’t worth working for.

Behind the heart–lies a backbone. Use it.

great blog-ezine! thanks

Isn’t it interesting that professional athletes who earn millions annually routinely change teams and become direct opponents immediately versus their former clubs?

A few weeks ago, a famous Spanish soccer player, Fernando Torres, was sold (traded) from Liverpool to Chelsea for US $80 million. They are serious rivals in the Barclays Premiership in England, and also in other European competitions. Torres played against his former club less than a week later. When asked what he felt about this turn of events, Torres replied, “There is no romance in football. I was loyal to Liverpool for three years.”

Perhaps there should be no romance in Corporate America.

I once worked for a firm that prohibited outside employment of any type. I didn’t learn about it until my first day at the job. Which was strange because I told both hiring authorities that I had another situation that would likely continue on a part-time basis. There were no conflicts of interest, etc.

@John Zabrenski: You brought up an important point that I didn’t discuss in the newsletter. Value should be exchanged for value when dealing with NCAs (or even with NDAs – non-disclosure agreements). If the company wants you to limit your activity in either regard, it should compensate you for the value that activity represents. In other words, any non-compete should include compensation for the period of the restriction, and also for the “geographical” constraints it puts on you.

In other words, if the company wants to keep you out of its “business” as a competitor, it should pay you for that. Er, ah, maybe the better way to put that is, if you’re gonna stay out of the company’s way for a year or two, you should demand compensation before you sign up to begin with.

It can indeed be a good deal!

I was asked to sign a nda/non-compete which was so general. It included all competitors, all divisions based on the type of software they made or had ever made.

I asked to speak to the employer’s in-house lawyer and posed 3 hypothetical companies who might be competitors. Question 1 I knew would be a competitor. Question 2 was about what the definition of making software was. Question 3 was about a hypothetical competitor’s nuclear waste division which happened to write software that had some vague relationship to the type of software I was to write. The lawyer confirmed all three cases were covered by the non-compete. I stared at him.

He finally offered to give me a schedule of only the companies who were direct competitors.
I also told him I was to be bound by the non-compete for only 6 months, not 2 years.

My experience with non-competes for IT staff at big companies is that they are extremely one-sided, with the employee agreeing to many ridiculous restrictions and the company to nothing at all. These are probably not enforceable since there is no exchange of value but are used by unscrupulous employers to frighten the employees from doing perfectly legitimate things by threatening legal action that the employee thinks they can’t afford to fight.

I once turned down a job that had a 13-page employment contract listing many obligations for me and nothing, not even salary, for them. It included a fine of $1000 if I left the job in less than a year!! They claimed that no one had ever objected to it before.

This is another reason why you should try to look for a job when you’re not desperate for a paycheck. Not always easy, but it lets you walk away from companies like that.

My former employer required that ALL employees (12,000 employees) sign a NCA. They made 55-gal drums of chemicals which sold for approx $2500 and were at approx 85-90% profit margin. The contents were easy to obtain and mix, assuming one is a chemist. Lots of people started up their own companies in this specific field and a few were very successful. The company sued the former employees and lost. The judge tossed out their NCAs. The deal was unconscionably one-sided. It is ridiculous what modern companies try to intimidate employees into signing!

Great points!

1. In my experience, NCAs are often negotiable. The key is, you must read it before you sign it, then offer a reasonable alternative, and negotiate.

2. Always define a list of competitors to be included. The contracts I do with clients all come with standard NCA provisions, which usually include some blurry definition of what constitutes a competitor to the company. E.g., “All competitors.” That’s insane. Like Lucille, I’m happy to settle on a list of NAMED competitors. Not on a “geography” or an “industry.” NAMED competitors. Then there is no argument or interpretation. (Lucille: I love your tactic!)

3. G says, “They claimed that no one had ever objected to it before.” That line is classic, and many people buckle at it. Don’t. Propose your alternative, and if you can’t negotiate something reasonable, walk away (unless you’re starving and homeless – then it’s another story).

4. Adding a non-compete when you’re already employed is insane, too. Unless something you signed beforehand requires it. Even then, talk to a lawyer. Being restricted from working at all is not a good thing, and I believe the courts strike down contracts that prohibit people from earning a living. I worked for a company once that was acquired, and the new owners told all managers that we had to sign an NCA. All signed, except for me. Each time HR called to remind me, I thanked them and ignored them. I quit over a year later, for other reasons. I never signed it, and they knew they couldn’t force me. Meanwhile, all my cohorts signed themselves up for trouble because they accepted the intimidation.

5. Most NCAs and NDAs (non-disclosure) are boilerplate. HR buys these stock agreements. And counts on people being afraid to say no to them. Most are very easy to pick apart, like Lucille did. And I find that reasonable employers become embarrassed when they realize what they asked you to sign, and they will often negotiate the terms.

“No one’s ever objected to it before.”

Maybe it’s because no one’s ever really read it before…

To continue the story of the 13-page contract: They claimed that no one had ever objected to it before and also said that the clause with the $1000 fine would not apply to me as it was aimed at beginners they would have to train. I of course proposed removing it from my contract but the HR person refused to do that.

Twelve of the 13 pages were about non-compete. They did not list any specific companies but did seem to be saying in all that legal verbiage that I would be agreeing never in my entire future career to work anywhere in any company related to X software (where X is an industry that accounts for 12% of GDP).

Since it was clear to me that both their HR and legal departments were comprised of people who were either incompetent or vicious or both, I declined the offer. They seemed surprised by this.

Maybe JaneA is right and other applicants had not tried to read the 13 page contract.

Good article. Some very vaild points. READ what you sign. Two points, I would like to bring up. Non-competes are rarely held up by the courts for being unreasonable in that you can not keep someone from earning a living. If they are so worried about you stealing their clients, they should have held onto you. The geographic aspect is often to broad in companies that have offices thru-out the country. A 100 mile radius in Texas or California may be practical. In Connecticut or New England per say it is an unreasonable expectation on a companys part. Watch out! One last point about non-competes. They can also cause serious issues if you bring someone on board who states they do not have a non-compete and find out they do..usually by a nicely worded supoena from an attorney! Be careful..check out an employee who states they DO NOT have a non-compete in a sector that usually considers them common place. Staffing is one, along with union environments with government contracts. Happy contract signing!!

Lynda wrote: “The geographic aspect is often too broad in companies that have offices thru-out the country.”

Lynda, does your research indicate a similar perspective for multinational companies or employees/contractors who contribute their expertise in many countries?

Thank you.

Hi Steve,
I do not profess to have such a broad range of knowledge. One would think laws are very differant internationally and companies are increasingly worried about piracy of their intellectual property. I would not fathom a recruitment or staffing firm really worrying about “John” going to work in England. Where is hte competition? However, if you are working for a US firm with government contracts there assuredly will be non-competes no matter where you seek employment in the world. However, enforcing it may be rather difficult. After all, there have been known to exist those unscupulous companies who will pay top dollar for the competitions secrets. Non-compete or not. Hmmmm? But that is somewhat off topic.

In some situations a new company will buy out the non compete to get a top candidate. Legal Dept of hiring company will contact legal rep/HR rep of last employer, express intent or desire to hire, acknowledge the NCA and attempt to negotiate either a cash payment or some type of agreement that the hiring company will pay the old company a % of any business that follows the employee.

If an employee has been fired for not producing or been caught in a lay off, the old company may be only too glad to take a payment or a % of sales for a year or some other negotiated compensation.

I have many times heard, “Oh don’t worry about it, we don’t enforce those things.” “The only reason we have everyone sign them is so we have legal grounds to take action if someone blatantly steals trade secrets or proprietary information to try and profit from the information.”

Don’t let an NCA keep you from interviewing but do disclose immediately that you have signed a non compete. Many companies will ask you to forward a copy so their legal department can review it. If legal says “it won’t hold water” for any reason. The interview will move forward. Some companies want the employee so badly that they will spend the money to challenge the NCA. Each case is different.

Be sure you have a copy of everything you sign. So many times candidates know they signed one four years ago and can’t put their hands on it.

Another situation that may eliminate an NCA is if your company is bought out. Unless there is a specific clause in the purchase agreement as to NCA’s of employees the NCA may no longer be enforceable. ie; you left in May had a non compete, company sold in July. You never worked for the new company, the old one is gone. Who is going to enforce?

For any contract to be enforceable there has to be something of value exchanged. It could be stock or options or severance pay. Read closely any severance agreement you are asked to sign to understand if you are signing an NCA after the fact in exchange for severance pay.

Good article Nick.

I’ve never been high enough in the food chain of any employer for whom I’ve worked to be asked to sign a NCA.

I would be very suspicious if I were asked to sign one, and when I questioned/pressed HR, if I were told breezily not to worry about it, they never enforce them, that the only reason they require people to sign them is to have leverage in the event of theft of trade secrets.

READ very carefully any document you are asked to sign. If it is in legalese and that isn’t one of your languages, then take your time and still read it carefully….as Lucille noted, these are often vague enough and can be picked apart without having to go to a lawyer (just use some common sense).

In order to have a contract, you need to have an offer, an acceptance, and consideration. It is also true that you have to have the “meeting of the minds” (i.e., both parties are on the same page), and what many people forget is that contracts are negotiable. Of course, if one of the parties decides to not to negotiate (take it or leave it), that’s fine too…you (the other party) can decide what you want to do.

I’m always amazed by the number of people who don’t read documents, legal or otherwise, that they are asked to sign. If they don’t read it, then for all they know they are signing away their rights and their first-born!

Mary Beth,
Sorry I did not make it clear about the “we never enforce them comment. ” You would never be told that prior to signing. That is a comment that has been made to people who after leaving a company go to HR to find out after the fact if there would be a problem going to work in the same industry or a company that might be closely related but not a direct competitor.

I think sometimes we are conditioned that nobody understand the fine print so we rely too much on others telling us not to worry about it. I think that’s why God created attorneys and CPAs. All of us should read the fine print. If it’s confusing ask an attorney to clarify.

Sandra,

Thank you for the clarification. You are absolutely correct, and that is why it is so important to take the time to read that fine print. And, to emphasize what you wrote, if you don’t understand it, contact an attorney!

I really enjoyed your article about the NCA forms some companies compel new employees to sign as a means of accepting their offer. It’s truly coersion – sign it or lose the job offer. Without seeming to offer legal advice, you should suggest to readers to ask the employer if they can take some time to review the NCA with their attorneys. An attorney told me once that an employer cannot prevent an employee from earning a living within their respective fields upon termination of employment with that employer (for any termination reason).
The wording in the NCAs is critical to the validity and enforceability of such agreements in a court, if it should be challenged by the employer at some point. I honestly don’t know how some companies think they can get away with using these NCs knowing that their respective state courts would not enforce any action if it means taking away the livlihood capability of a former employee. I haven’t checked out our own state’s legislation on this, but would hope that the courts would stand in favor of the employee. Some NCAs only limits the employee from disclosing confidential company information, which is fine, but some companies truly stand in the way of the employee moving on to self-employment or going to a competitor, especially with some higher profile sales positions.

Really enjoy your updates, Nick!
Ms Mary

From a European point of view, this is simply flabbergasting! You would never imagine working anywhere in Europe without a formal contract. What is more, an “at-will” clause would indeed be void here, as employees’ rights are probably taken more seriously than in the US.

But even with an at-will clause, I can only underline the need for a written contract that can be enforced (even if it does not include any notice period).

From the New Zealand Department of Labour website:

Every employee must have a written employment agreement. It can be either an individual agreement or a collective agreement.

http://www.ers.dol.govt.nz/relationships/

Of course, there are a few employers who attempt to fly under the radar and don’t follow the rules. I know that things don’t usually turn out well for them if they are found out.

interesting discussion.
I worked in Hi Tech most of my life
I worked in Texas some part of my life and am here now.
TX is an at will state, and also generally true that non competes aren’t worth much more than the paper they’re written on. But a company can put anything in a document & ask you to sign it. Nevertheless this doesn’t negate all the good advise to read what you sign. Sometimes non compete clauses are invoked, but the ones that have hit my radar screen have been heavy shooter, seemingly worth the legal $ and risk.
In Hi Tech it’s all about Non disclosure, and that’s the part that’s taken seriously. Protection of Intellectual property (IP)is serious because it’s misuse by present or ex-employees can seriously hurt a company & it’s employees.
But it’s in the grey area of professional experience and one’s obligation not to tamper with IP. In my experience, it’s so embedded in the high tech arena and ethical behavior it doesn’t cause as much angst as you’d think. It’s self disciplined mostly and you have a pretty good sense of where the line lies between a former company’s IP and your new companies explorations and developments and you don’t cross it. And your employer top down to your boss and colleagues don’t push you to. And you usually don’t need to because no matter how smart company A thinks it is, like art, there’s little original thought and singular ways of approach. So you either find another way around a sensitive area, likely via a wealth of info in the public domain, or excuse your self noting you can’t go into it. That should be enough to be respected. If someone(s) tries to dredge info out of you covered by a NCP you’re not in a nice place.

somewhat related, and I may have missed it, no one’s mentioned that in my world applicants will be asked to sign non disclosures. and again if hired.

No big deal? Here’s a real story. “Joe” is antsy at company A his employer. He interviews at company B a competitor. In order to have a meaningful interview they give him a good backgrounder with applicable specifics about the possible job, project, product under development. They being ethical don’t ask probing questions about his specific work at Company A. He doesn’t get an offer. Goes back to his routine at Company A where per usual he gets into a techie project meeting, kicking around development ideas. Again there’s no original thought so they move right into an area he was briefed in detail at Company B. He squirms and instead of offering two cents offering some alternatives he says he can’t discuss it because he is privy to IP info from company B “When he interviewed with them”. They walked him right out the door.

These companies take their IP very seriously. I was in an intelligence billet in the military and have worked for computer companies that would put military security to shame.

So if you’re a heavy technical shooter, or executive carrying around trade secrets and want to make a move, to a competitor, there is a good chance they will try and throw a body block on you. And if you’ve done something really stupid like make copies of stuff and that comes to light, your new employer to be is very likely to drop you like a rock. Never mind legal…they won’t want you around

Here’s a charming story about the demand for non-competes from people who have not even been offered a job: http://www.chicagoreader.com/chicago/groupon-noncompete-clause-prospective-writers/Content?oid=3184622 Somehow I don’t think they would be willing to negotiate anything in those agreements. (I was going to say contract but the document described can’t be a contract since there is no exchange of anything at all.)

Wow, and this: http://www.startribune.com/local/117858059.html

A two year noncompete for a 19-year-old dog-sitter! For ‘compensation’ of 10 cents an hour.

I was wondering, and this may be a silly question, if NCA’s are enforceable, in any incarnation, when an employee leaves inside of 90 days after joining a company?

I took a position and was asked to sign an NCA. It was very broad and precluded just about every single possibility for any future employment outside of shoeshine professional in Argentina, that I could ever consider. A victim of the current job market, things had been bleak and were becoming more so, and I signed it and began working.

40 days or so into my new employment, the company changed it’s strategic direction, and I was no longer doing the job I had been hired to do. I left, with a full notice and gave no indication as to what I would pursue. Am I bound by that NCA?

@Jim: That’s a good question and one I’ve never encountered. I think it would depend on other terms in the hiring agreement. This is one for a lawyer. What I’d look at: Does the company have a probationary period for all new hires? It’s usually around 90 days. It’s designed to protect them. I wonder if it protects the new hire?

Well Nick, I live in Pennsylvania, also an “At Will” state, therefore protection for the company I don’t believe is that great of an issue. My background is HR…I know I know…booohhhh hisssss…Aaaannnyway, I’ve abandoned that (a long time ago) and am currently a recruiter for a medical consulting firm!!! Yes, I saw the light (truth be told I knew I was being bamboozeled halfway through graduate school, but what could I do?). What I’ve always informally been told that the 90 day period in most any company is a kind of “grace” period. More plainly, if an employee leaves or is let go during that first 90 days, extempt or non-exempt, it’s like they were never there. How much truth there is to that, well, is the nature of my question I suppose.

p.s. Thanks for getting back to me. It’s an honor. I’ve been following your exploits for about 10 years now having stumbled upon you during a very frustrating 7 month job search after I left Active Duty as a Healthcare Administrator in the Navy. I literally was hired 20 days after landing on your website. Thank you Thank you Thank you.

@Jim: I’ve asked a lawyer buddy of mine to comment on this. If he responds, I’ll post his comments.

The other day, while I was at work, my cousin stole my iPad and tested to see if
it can survive a forty foot drop, just so she can be a
youtube sensation. My iPad is now destroyed and she has 83
views. I know this is totally off topic but I had to share it
with someone!