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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 not a lawyer, but these guys are. Hope that gives you some useful tips about what's worth fighting over.
Degaussing scares the bad magnetism out of the monitor and fills it with good karma.
non-compete clauses are very common and yes, some companies will use them against you. Some states prohibit non-compete clauses, like CA. If you live in CA, you can sign a non-compete clause but it is unenforceable. Other states, like WA, TX and I think FL allow non-compete clauses, so I would be careful about what you sign.
You sound young and inexperienced... welcome to the real world. Don't sign it unless you are completely desperado for money.
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
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I'd like more input as to how this weighs in to the rest of the companies out there. Is this a common thing?
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.
The theory of relativity doesn't work right in Arkansas.
I have found such non-competes very common, and I've signed a few of them myself. The scope of the agreement is generally proscribed by the state in which it's signed: length of time after employment that other employment is barred, definition of the region, how close the work can be. etc. A 12 month period is a pretty common period. It's never stopped me from looking for work, though, as the burden on them is to prove that I've broken it, and if I don't return their calls, what will they do? Get employment records from my now-current employer? For real advice, consult a lawyer.
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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.
I've seen non-competes like this in things like news media, but not often in software development. If someone is a news anchor at station A, when they switch over to station B they generally get a 6-month to 1-year paid "vacation" so the marketing that station A did to promote this person to their viewers would not give an advantage to station B.
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?
There are a few similar cluases in my contract - most are completely unenforcable under EU and Dutch law - to follow them to the letter would force all my future work to go through the same agency, and not be able to work elsewhere without their permission - obviously nonsense.
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.
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It is pretty standard.
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.
Here we (still) have quite strong "restraint of trade" laws which prevent the vast majority of non-compete clauses. I have had legal advice on it. Hasn't stopped a good number of companies asking me to agree to them though.
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.
One of these days I'm moving to Theory - everything works there
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).
Add a clause in the agreement that said the company will pay your full salary for the duration of the non-compete agreement, or until you landed another job, whichever is earlier. Tell them that is also "a standard clause for non-compete agreements".
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.
Oliver.
And this is an industry where people change companies as often as their pants.
Monthly?
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.
If the company wants them to do something (i.e., use their knowledge and time), they have to pay for it. Likewise, if the company wants them not to do something (i.e., work for someone else), they should have to pay for it. I'd say, if you don't want me to work for someone else, give me a severance package that covers the exclusion period. For instance, ask for 6 months severance for a 12 month exclusion (half pay). Or argue that the non-compete is unreasonable. Or work for someone else.
This post expresses my opinion, not that of my employer. And yes, IAAL.
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.
http://www.desmoinesregister.com/apps/pbcs.dll/ar
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?
-- Patent no.123456: A way to personalize
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
Remember, I am not your lawyer.
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.
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.
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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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.
If you don't like the non-compete, don't take the job. Nobody is holding a gun to your head, presumably.
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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