Non-Compete Clauses

Question

Do you agree with / have you ever signed a non-compete clause? What advice do you have, if I wanted to hire someone, about Non Competes? Not non-disclosures, mind you. Non-Competes..

Answer 1

Be very careful. In many states non-competes are overturned if the case goes to court. I've seen it happen before, and the courts tend to rule in favor of the employee. I can't remember the exact legal reasoning and I am not a lawyer, but something about it being unconstitutional for an employer to prohibit an employee from making a living.

Answer 2

Non-Compete clauses are generally silly and unenforceable. At most of my jobs where I've received them, I've quietly stuffed them (unsigned) in a drawer and they've never bothered to follow up.

Answer 3

If you're in California, keep in mind that a court recently found that non-competes are essentially unenforceable here.

Answer 4

I've signed a non-compete for every industry job I've had. Its fairly standard. I've also never had anyone raise an eyebrow when leaving to a different job anyways.

However, most of them are not that limiting, for example, I currently work for a telecom, and the no-compete prevents me from going directly to another telecom, but not someone else in the IT industry.

Answer 5

From my limited experience, they don't usually hold up. It's nice to put it in there anyways because the person may not be inclined to 'test' it's validity, but it shouldn't be something you're counting on. If you're worried about him going to the competition the non-disclosure is more important, I would think.

Answer 6

It depends on what kind of organization you are running. If the kind of work you are doing has a lot of proprietary knowledge that they could take to a competitor then you definately want a non-compete in that business area. If you are doing consulting work or something like that you may do a non-compete to discourage jumping between other consulting companies for higher salaries. Although that kind of thing is hard to enforce in thriving tech cities where it can be hard to track.

Answer 7

If you are worried about your employees going to work for your competitors, you should make sure you pay them at a competitive rate, and provide good working conditions for them.

Answer 8

Non-compete clauses are often times not enforceable in certain states. Check your state legislature for specifics on the subject. Often times these types of things can be thrown out in a court situation assuming you are not in "direct competition" with a former employer.

The spirit of the common law does in most cases tend to favor the employee as agreements of this nature can not put the employee in an unreasonable position where they can not find a means of work. Ultimately if you're hiring someone because they come from a specific company and you want to garner that knowledge then know your legal risks.

Answer 9

Whatever you decide to do, and I'm not a lawyer, if you're going to go with a non-compete clause make sure you execute it as part of the employment contract. That is, get their agreement BEFORE they start working for you.

Non-competes are voidable if you make an employee sign one during their employment since the implication is that you're telling the employee they're going to be fired if they don't sign one. Requiring the employee to take on new duties without also granting them new rights is an agreement made without "consideration".

For best results, you should spell out in the employment agreement that "in CONSIDERATION for the valuable compensation and benefits provided to employee, employee agrees to abide by non-compete agreement (in addition to all of their other duties)."

Answer 10

I've signed a non-compete before but I generally negotiate with the employer as follows:

If they're going to limit my future possible employment chances, they need to compensate me, either as an increased rate while I'm working for them or a leaving bonus upon completion (no bonus means non-compete is unenforcable - I get that written into the employment contract).

Usually they drop the whole matter at that point - one company did do it however and I got an extra bonus every hour I worked for them (on a 4-year contract so it was a nice little earner). Then they folded and the noncompete was unenforcable anyway.

Answer 11

My company makes you sign one before you get the keys/codes to the building on your first day. It has a lifetime of 2 years from the date of your termination. There was no way around it, although an attorney friend of mine said they're pretty much useless. Not many courts favor them when it comes to feeding your family. Just make sure you're not doing anything downright harmful to the former employer. Simply going to work for a 'competitor' should not pose a problem.

Answer 12

I was just asked to sign a non-compete. It is awful! It states that anything I invent in the 2 years after my employment, all inventions are automatically thiers and I have to pay to have it properly copyrighted and trademarked, in thier name at my expense. If I refuse, They automatically can assume power of attorney of my person. If I die, the burden of executing the contract falls to my children or executor (I have kids).

I am horrified that after 3 years of service, that this document is placed in front of me and I am asked to sign it by the end of the day! I may be looking for other employment. What a horrible time to end up in that boat.

Answer 13

Non-competes are a help and a hindrance at the same time. I can honestly say, I despise blanket non-competes. I worked at a small development company where I had to sign a 14 page agreement that stated, in layman's terms, anything I coded during my time with them was theirs and that I could not write anything like their products for the year following my leaving the company. That last part is funny, because the business was web development. Not a specific genre or niche, just flat out everything to do with the web.

I agree with conflict of interest clauses that state you cannot interfere or try to take business away from the company. Those make perfect sense, but a blanket non-compete stifles innovation and rarely holds up in court. Protecting the company is something the employee should be able to take stake in, and know that it is meant to protect them too.

Personally, if I see a blanket non-compete I'd think twice about taking the job. Now, a conflict of interest agreement I'd sign any day of the week. :)

Answer 14

I knew someone once who had a non-compete handed to him that stated not only could he not work for competitors, but also he could not work for any current or potential customers of the company. It then listed out a full list of their current customers, and then listed out several hundred potential customers - even ones they had no ongoing leads with - and said that he couldn't work for any in this list. And I think it was a 5 year term.

In my opinion, unless the job is 100% wonderful, it's better to walk away than sign something like that.

Answer 15

I've signed a similar document when I worked for a tech recruiting company that acted as if they were a tech consulting company. I was truly their employee and did subcontracting for another employer on a 6 month contract to hire basis.

They had provisions called "restricted covenant" clauses which basically said if I went to work for any company I subcontracted for through them that they would be owed 400 hours worth of my salaried rate. For the other employer to hire me they had agreed to pay that as part of the condition for a contract-to-hire placement.

Honestly I've almost never heard of a bigger scam, unsurprisingly I will never work with that firm again unless I have absolutely no choice. This goes with the comment from @Sam Schutte that working with this company for a few contracts you could effectively bar yourself from working in your local region.