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Crazy Non-Compete Contracts?
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?"
I'm a PHP/MySQL developer, and I get asked to sign those on a regular basis. I sign them, and then forget about them.
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.
Matthew Walker
http://www.tweeterdiet.com/ - My Diet Tracking Tool
In my case, it's 6 months but it's a little forgiving since a specific industry was clearly stated. (my case: bpo) Although that still limits my options since our competitors are also one of the better places to go in case I would like to find another job.
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.
My non-compete didn't even have a time limit. I was forced to sign it after my company was acquired; previously I had no non-compete. I have a family to support and would have been terminated if I didn't sign, so I did.
Fortunately, non-competes are generally unenforceable in California, and after I was later laid off, I went to work at a direct competitor.
Who had me sign that draconian non-compete? A big software company that is not terribly popular on Slashdot.
Having 10 years experience providing development and architecture services to startups, I've seen plenty of conntracts, so I might have a couple useful tips for you.
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
It might be pretty standard, but it's a stupid thing to sign.
My advice (and no, IANAL, but I have done this before) is simply to strike out the offending clause, put your initials against the deletion and leave it at that.
More likely than not, they won't argue, but be prepared to tough it out if they do. All it really needs is to be handled with confidence. If they argue that the clause isn't intended to be enforced to your disadvantage, all you have to do is ask "in that case, why is it there, and in that form?". If they really do insist on the clause being left there unamended, you probably don't want the job anyway.
In other words, if you behave like a doormat, don't be too surprised if someone walks all over you.
I have heard of some non-competes being tossed out because the basicly left the person without employment opertunities in their profesional market.
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.
True. One place I worked had a badly-worded non-compete that I can only assume had been written by the company owner and never been seen by a solicitor. It was that poorly phrased that, although it looked like it was restricting you to not working for competitors for a year, it actually barred you from working for competitors forever. Although things like that would never stand up in court, it saves a lot of hassle to be attentive so that you don't need to go to court. In my case, I grumbled about the very thought of a non-compete as soon as I heard about it, and they "forgot" to present me with it to sign, even though it was company policy and all the other developers on my team hired before and since signed it.
Bogtha Bogtha Bogtha
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?
Why go fast when you can go anywhere? O|||||||O
Non-Compete agreements are fairly common, that being said, I was at a company in Ohio who tried to enforce one. It flushed, the judge ruled that you can't deny a person the right to make a living in their field of expertise. The non-compete in question was "you can't work for another isp in the state of ohio for 12 months." (we were all sys admins)
Shadus
IIRC, an NDA/IP signed after an offer of employment has been accepted is void. If this wasn't the case, companies would go round offering mega salaries to relocate and then slash benefits and add onerous conditions once a new employee has gone through the expense of moving and leaving their old job. In those circumstances, any contract becomes null and void, and immediate reductions in salary often end up with a lawsuit.