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Crazy Non-Compete Contracts?
Posted by
Cliff
on Thu Mar 08, 2007 01:55 AM
from the gotta-make-a-living-somehow dept.
from the gotta-make-a-living-somehow dept.
JL-b8 asks: "I've just encountered a (from what I know) strange occurrence. A group of friends who work for a small web design firm are being forced to sign a non-compete agreement with a clause that prohibits the employee from working with a competing company for 12 months, after the date of their leaving. The owners claim it's a standardly practiced clause, but I don't see how the hell a web developer/designer is supposed to find work in a city for a year, without moving to a completely different city. I'd like more input as to how this weighs in to the rest of the companies out there. Is this a common thing? If you've signed something like this, and had to switch jobs, how did it affect you?"
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News: Non-Compete Pacts Called Bad For Tech Innovation 190 comments
carusoj writes in with NetworkWorld reporting from a panel at Harvard last week. It concluded that employee non-compete agreements have stifled tech startup development in Massachusetts, where the pacts are aggressively enforced, but failed to hold back the tech industry boom in states like California, where they are mostly unenforceable. We've discussed non-competes often here in the past; Techdirt made much the same point a year and a half back.
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First hit on a google search (Score:4, Informative)
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The last non compete I had to deal with said I wouldn't go after their current clients or people they have interviewed as clients for two years after my termination. This seems reasonable compared to nothing anywhere close to were you live. And their goal of me not taking their customers with me was satisfied pretty good.
Re:First hit on a google search (Score:4, Interesting)
Here in Ohio we have a law called The Blue Pencil Rule. If a person can show that a non-compete clause is preventing them from finding employment a judge can rewrite the clause as he sees fit. There's probably something similar in many states.
Most of the non-competes I've been asked to sign have a term of about one year. They usually specify that they only apply to working for a competitor, although on one occasion I had to get the contract amended to specify what the comapny's area of business was because the clause was so sloppily (or possibly intentionally) written that taking almost any other job could run afoul of it.
Parent
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True. One place I worked had a badly-worded non-compete that I can only assume had been written by the company owner
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useful tips about what's worth fighting over.
One thing I'd definitely encourage you to fight over: cause of termination of current job.
It may be reasonable to have to honor a non-compete statement in case you quit a job or are fired with cause - it's NOT reasonable to have a non compete if you're layed off because of downsizing or similar motives.
I've personaly been in the position where the company I was employed with decided to close down a branch office and lay off all employees. The non-compete in my contract would have kept me from working i
Re:First hit on a google search (Score:5, Informative)
He's not, that's why you ask for full time income for one year (in addition to the standard severance package) to compensate for the time he won't be employable. You can tell your friend this is the "standard" response for this "standard" clause. Either that, or you can tell your friend to strike out the clause, initial it, and ask the employer to initial it as well. Crossing out clauses, or modifying clauses to make them more reasonable, is another very "standard" practice.
Whatever happens, tell your friend to not let this clause slip by untouched (even if he does live in a State where it's not really enforced). If his boss is going to be uncompromising, your friend needs to find this out now *before* he accepts a job from him. For some good reading on this topic, I recommend he takes a look at http://asktheheadhunter.com [asktheheadhunter.com]. I would also suggest "When I Say No, I Feel Guilty" by Manuel J. Smith -- which is the best book I've read on assertiveness.
Parent
yes... don't sign it depending on which state (Score:3, Informative)
You sound young and inexperienced... welcome to the real world. Don't sign it unless you are completely desperado for money.
Ignore 'em (Score:4, Interesting)
To be a bit more thorough in my answer, I have never flagrantly violated such an agreement. It's usually not that hard to find work for another company that isn't a direct competitor. Plus, (IANAL) I've heard that those sorts of contracts are mostly unenforceable. I could be wrong about that though, which is why I try to avoid flagrant disregard for the non-compete.
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The key phrases you'd want to Google are:
"violates reasonable expectations" or
"is unconscionable" or
"overly broad"
The definition differs from state to state, which is why lawyers get paid.
Anyways, assuming you get sued (you may not be important enough to bother suing), the Judge will most likely strike any clauses that would prevent you from making a living in your industry.
Re:Ignore 'em (Score:4, Interesting)
They never did choose to enforce it.
Parent
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Yeah, those people who wear costumes can be a real bitch to work with.
it depends. (Score:5, Insightful)
It's probably pretty much bullshit, as non-competes are usually targeted at specific knowledge jobs (CTO, CEO, etc), not skill jobs (web designer/developer). Basically, it comes down to compensation for that commitment. If the firm's paying six and a half figures, go for it. If they're paying market rate, tell them to knob off: There are plenty of other firms that don't require a non-compete for a regular web developer/designer position.
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Too common (Score:3, Insightful)
I'm on such a job currently... (Score:4, Interesting)
I know people who work in an "all purpose IT Company" that offers services ranging from outsourcing programs to supplying servers. They got a 2 yrs non competing period, the funny thing (because it's not me) is that my friend can't find an IT job anywhere since it would violate the agreement. He "had" to work in a non-IT related field, I just bid him good luck.
And yes, such things are crazy.
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2 years is excessively long & the job blackout (all of IT) is overly broad.
No Judge would allow the terms of that non-compete to be enforced.
Have your friend read the non-compete wikipedia entry [wikipedia.org]
Then tell him to find a labor law lawyer.
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I wonder what happens in a job interview if you ask to put an according non-compete clause for your employer in the contract. In the EU most non-compete clauses are nullified anyway, because you have the right of free choice
Strange for SW, not for others (Score:5, Insightful)
Non-competes should only be accepted for this sort of reason, where some person working within the same industry for another company would have either proprietary knowledge or influence not due to their skill, but only to their association with a company. If I'm working as a cashier for -insert megalomaniacal chain store here- then there isn't really any possibility of having such knowledge or influence. If instead I'm working in their procurement department and negotiating deals with (and cultivating relationships with) outside vendors, it makes sense for the company to have a non-compete clause. If I weren't working for them, I wouldn't have had the contact with those vendors, it is only due to my work with the company that I would be as successful at another company.
Whether or not you accept the clause, however, is up to you. Do the benefits of working for this company outweigh the problems that a non-compete may cause you?
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A local radio station had a male and female DJ pair doing a show for several years. One day one of the DJs proposed marriage to the other DJ over the air, and she accepted. The radio station promptly fir
I'm not a lawyer but .. (Score:2)
The clauses are presumed to be invalid unless they are reasonable in terms of the scope of work covered, geographical area and length of time. The burden will be on the employer to prove these three in any litigation. There may be specific state statutes limiting these, otherwise look for cases in your state to get an idea of what courts are finding to be reasonable. These tests may al
Contracting clauses (Score:3, Informative)
About the only things they can enforce is that it would be very very difficult for me to switch to a different agency but still work in the same job at the same company (and its probably 50-50 in switching agency to do a different job at the same company) and it would probably be equally difficult to switch to a permanant rather than contracting role while doing the same job here.
Since as agencies go mine isn't too bad I can live with those limitations - and if they happen to be offering the next job I want then I would have no issue with signing with them again - but it certainly won't stop me signing with other agencies/companies if they have a better offer and I highly doubt they would even attempt to enforce it in court let alone have a snow flakes chance in hell of them winning.
Oh, this reminds me of the ol' Freedom Debate.. (Score:2)
I always said we're both for freedom, the big question is just 'freedom from whom?'.. and this question illustrates it perfectly. In Europe, this is a non-issue. I could sign all the non-compete contracts I'd want to, but they don't hold up in court. We have a 'right to work'.
You have the freedom
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I think you are arong that non-compete contracts do not hold in court in Europe. I am under such a non-compete contract, and before signing it I did a bit of legal research.
In Denmark where I live, the law specifically mentions non-compete clauses in employment contracts. They are legal in some circumstances, but there is also a requirement that if used the former employer has to c
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Illegal in Australia (Score:3, Informative)
Sounds to me like they're just trying it on. Almost every contract I've received has had something really unreasonable in it. Every one is different too, but they're all "just the standard contract". If you do contracting for any amount of time you'll hear those weasel words a *lot*.
My advice is strike it, explain that it's unreasonable and they'll very likely back down. Good luck.
Oracle (Score:2)
I suggest your friends just sign, but strike out the clauses that don't suit them. Put a signature left of the striked-out clauses for good measure, put them in the in-tray and you're done. If they complain, say you've done all you can. If they keep complaining, quietly look for oth
Not worth the paper they're written on (Score:3, Informative)
I'm a web designer/developer in a mostly print design shop, and we actually ran into a situation where one of our designers quit to work in-house with one of our clients. The effect being that she left, and having no more need of us, the client did too.
So what happens? Nothing really. We chose not to pursue the legal route because the client wasn't worth what we would've had to pay in legal fees, and secondly because no legal ruling would repair the situation. Sure, maybe we could bilk a little extra cash out of the client on the way out, but we couldn't seek an injunction against our designer working for them.
Ultimately, after asking a couple of HR people I know, I found out that these things are pretty much only valid if you're getting something in return. ie: If I ask this of a designer, then right there, in the contract there has to be spelled out some level of compensation for the direct act of denying them this revenue source should they leave. Otherwise you'd get laughed out of court for trying to enforce this, at least to my understanding (and ovbiously, IANAL).
Ask them to pay for it (Score:5, Insightful)
If what you know is so important that the company will suffer if you work for a competitor, it makes sense for the company to pay you for it. That's fair.
Where? (Score:2)
Simple: Don't Sign any agreement you do not like (Score:3, Interesting)
As far as non-competes go, you have to first look at what the laws of your State are.
If you are in a Right to Work State such as California, you can safely sign an agreement that says you may not compete or work for a competitor who competes.
This is because Right to work means just that, the State recognizes that you have the right to earn a living by your trade and that no entity save the State itself may revoke that right nor confine or restrict that right in anyway. So even if you do sign that document and you do go to work for or against the client later, there is nothing they can do about it.
Now, if you don't live in a right to work state such as Washington, the State will allow a contracts terms to restrict you from plying your trade.
In essence, they see you as the clients little bitch for signing such an agreement and your ability to be employed is now bound by those terms.
Here, you will need to negotiate through those terms. Simply inform the client that while you would like to assist them, you are unable to sign the contract as it is currently written because it would effectively prohibit you from practicing your trade as a means of livelyhood and cause you significant harm.
What do you do if they refuse? Then walk away. Personally, I've never had a client refuse to revise the contract to my liking.
I've sometimes had a few days of ping pong and negotiations, but in the end I've always gotten exactly what I ask for.
But there are other things to look out for as well.
Ownership and Assignment are the first things I look out for, and the areas I read most closely.
Look out for crap like this:
"Subject to the terms of this Agreement, Consultant hereby assigns and transfer to the Client its entire right, title and interest, including without limitation all copyrights, patents, inventions, trade secrets, trademarks, trade names, service marks, trade dress, and all other intellectual property rights, in and to the Deliverables. To the extent that such assignment and transfer may not, by operation of law or otherwise, fully convey to the Client the foregoing rights, Consultant hereby grants to the Client a worldwide, irrevocable, exclusive, fully transferable, unrestricted right and license to use, execute, display, reproduce, distribute, modify, publicly perform, publicly display, sell, lease, license, sublicense, and otherwise transfer, and to authorize one or more third Parties to do some or all of the foregoing, with respect to the Deliverables in any form or medium, whether now known or later developed."
Just a little one sided don't ya think?
What the bolded bit means is that any pre-existing code I may allow to enter the code that comprises the deliverable is now theirs as if they had written it themselves. Additionally, anything I may generate while working on that project, I would never be able to again utilize. Now, enforcing that is a different matter... but I prefer to sign all of my contracts in good faith.
So here is the language I provide as my alternative language if they are to engage my services:
"Subject to the terms of this Agreement, Consultant hereby grants to the Client a worldwide, irrevocable, exclusive, fully transferable, unrestricted right and license to use, execute, display, reproduce, distribute, modify, publicly perform, publicly display, sell, lease, license, sublicense, and otherwise transfer, and to authorize one or more third Parties to do some or all of the foregoing, with respect to the Deliverables in any form or medium, whether now known or later developed."
Essentially, it's theirs to use and abuse with my own interests and entitlements maintained.
Not at all as strong as the GPL, but that's the point, they get the unfettered usage they want, but I maintain my ownersip of my existing code and any new knowl
Give and take (Score:3, Insightful)
Just go to work for a California company (Score:3, Insightful)
I've turned down a job because we could not reach agreement over a non-compete clause; it was very broad, and unreasonable-looking, and they insisted on the annoying language. I took this as a sign that they might make trouble if I ever did want to leave (and if I have to hire a lawyer to assert my rights, that's trouble, even if I eventually win). I've signed others that were not so insane, but I generally hate them, and wish that other states would follow California's lead.
Current non-compete lawsuit (Score:5, Informative)
http://www.desmoinesregister.com/apps/pbcs.dll/ar
The Important Thing (Score:5, Informative)
Read the contract. Take it to a lawyer. If you are in california, tell them straight up it's unenforceable and tell them you want it out of the contract because it could be damaging to the rest of the agreement should legal actions arise. Elsewhere, if you absolutely cannot find a lawyer, agree to the non-compete if you can get one of the following:
1) Specific mention of area of effect of the clause. Overly large areas are unenforceable. Look around your area and see if there are other places you could go to more than X miles from the employer.
2) Specific mention of specific competitors in the contract that you could not work for. If the contract has a completeness clause ("this agreement is the complete and final agreement between the parties," if I remember the wording close enough, which bars extrinsic evidence, such as a list), make sure it is in the contract itself, and not just an oral agreement or a typed-up list. Remember that what is said during negotiations likely will not have any effect upon how the contract is interpreted by any court at some (unfortunate) later date. The contract must be ambiguous for that, and non-specific does not mean ambiguous.
The larger the area/more employers, the more money you can ask for in severance during your noncompetitive period. If they try to get you to sign away longer than a year and a half or a couple counties of area, tell them up front that you can't agree to that and it is likely unenforceable. If they disagree, grab a lawyer for an hour and have him call them to tell them that it probably is. Generally, however, these clauses are allowed, and you have to be careful what you sign. Do not agree to a bad covenant not to compete in exchange for a lengthy period of "gauranteed" employment, because the gaurantee is... well... not a gaurantee. Even with a contract, unless it is worded extremely carefully, you are still an employee at will (to forestall questions: contractors are different, as they are not employees).
DO NOT, EVER, just cross out parts of a contract. That will not modify the contract unless the other party specifically agrees to the modification. The physical appearance of the paper is meaningless, as the contract itself is metaphysical. At best, you don't have a contract. At worst, you have a counteroffer that was not accepted by the employer, which may revert to the employer's version. Feel free to cross things out, add things, or whatever on your copy, but you ABSOLUTELY MUST go and specifically bring your concerns to the person you are negotiating with, draft a NEW copy of the contract for you to both review and sign. That is the only right way to do it.
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Which begs the question: why have you sign it? Good thing you held out for more money, at least.
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I currently have one that states that I can't work for a competitor or start my own company OR even talk to other current employees about starting a company for 1 year.
Interesting thing is, we all sign it, then we all break it.
It's all about how far you bend the rules. If you piss off management on one side, they might zap you in the butt on the other side - I've seen it happen.
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Just realize, the non-competes are not to keep you from working, they are to keep you from taking stuff from your current job to your new job. Your company has to enforce them, and in most cases they won't. But in a few cases they might.
RonB
Re: (Score:2, Funny)
Monthly?
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Um, just to ask a (seemingly) dumb question:
Isn't *EVERY* company on the web a competitor??
Not to mention this applies to any internet based job. Seriously, this isn't a job locked down geographically...every design firm on the net is a competitor, or an I missing something here?
Re:Pretty standard (Score:4, Insightful)
In fact I can't understand how can US workers comply and go away with such a draconian practice like a "non compete" clause. What do they think you are supposed to do for a year? Washing cars?
I can understand not copying your previous employer IP property to paste it in your new workplace. But if, for example, I'm a software engineer that worked on PageRank at Google, I understand not re-implementing PageRank at my new workplace, but why should I stop working in search engine technology? Why should I restart from (almost) scratch, doing something I'm not expert in, having probably lesser opportunities and wages, etc.?
What I find more amazing is the "oh well it's pretty standard" attitude. Do you really think such clauses are fair clauses?
Parent
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I believe many US jurisdictions will hold non-competes unenforceable if it prevents you from being able to effectively work at all.
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Of course I could adapt, but why should I ? Adapting to a different job where my "special" expertise is worthless generally means making less money.
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OR, as an alternative, take the job, but factor the crazy non-compete into the compensation negotiations. Tell them "What you're
trying to do goes beyond simply hiring me as an employee for X duration. In return for the extra consideration I'll be granting
you, I expect commensurate consideration." If you can't reach an agreement that both sides find equitable, don't take the job.
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IANAL, but I can spot a bum deal. Your attourney advised you poorly.
Anticompete agreements, whether enforceable or not (usually not), amount to a two-way exchange of services - You get a job, and they get your signature.
Now, if enforceable, you mig