https://www.nytimes.com/2017/05/13/business/noncompete-clauses.html
The article has an example non-compete agreement that can be viewed as images. For the caption of the images, they chose only to quote an innocuous part referring to not working at a competitor while employed. The more bothersome parts that can be viewed in the images prohibit the employee from working at a competitor within North America within two years after terminating employment.
My D just turned down a job offer; one reason was because of the non-compete agreement. She works in corporate communication.
I have heard of several non employment lawsuits where people talked and they got a “claw back” . no compete agreements are a valid thing for certain companies to want and should be enforced. even a low level person in some jobs can have access and knowledge of some really valuable information. I would actually have an attorney read the no complete agreement before you sign it. (I am sure most people do not)
And of course, many terms of non compete agreements are invalid anyway, as an employer generally cannot prevent someone from working in their chosen profession.
In states where employee non-competes are generally unenforceable (like California), employers can still have employees sign agreements for non-disclosure and non-use of proprietary information.
As the article notes, they are sometimes sprung on unsuspecting employees on the first day of work or some such, rather than shown along with the job offer for the prospective employee to consider.
New graduates should ask to see any employee agreements that they are expected to sign when offered the job.
Even if the ex-employee ends up winning in court, the ex-employee’s lawyer costs could put the ex-employee into bankruptcy, while the ex-employer probably considers its lawyer costs in this matter trivial. In addition, the new employer of the ex-employee may terminate the job while it is under the cloud of a pending lawsuit.
http://www.beckreedriden.com/50-state-noncompete-chart-2/ has a list of state laws on employee non-compete agreements. Note that, in states where they are generally allowed, there are often not any clear bright lines as to what is legal or illegal, so an employee needs to consider the potential legal costs if s/he wants questionable terms invalidated in court.
For most employees, those types of agreements are in many ways worse than a simple non-compete, especially given how broadly such agreements generally define “proprietary information.”
Except in the case of high-profile employees who are celebrities or something like it, or people who control customer relationships, most employees do not really have the ability to compete with their employer. They employer doesn’t really care if they work for a competitive firm. The employer does really care, however, that the employee not share, divulge, or even use any of the employer’s know-how. And, while it’s usually fairly easy to prove whether or not the employee is violating a non-compete clause, it’s virtually impossible to prove non-use of key information. The non-use clause is really the critical one.
One of the important effects of these agreements is that a new employer will likely be unwilling to risk hiring a new employee and then finding itself and its employee dragged into a lawsuiit, whether it’s about a noncompete clause or about misuse of proprietary information.
Wouldn’t a company that aggressively uses employee non-competes also be aggressive in non-disclosure and related terms?
Seems like non-disclosure / non-use agreements without non-compete agreements are less of a deterrent in this area than if non-compete agreements were added.
That’s probably true, except that there is a lot more judicial history with invalidating noncompete clauses or severely limiting them, and the case law on non-use of proprietary information is much more favorable to the ex-employer. The factual elements of a case from the employee’s side tend to be more difficult to prove, too. So the deterrent effect on the employee and any new employer is very significant.
However, given a choice between:
A. Non-disclosure and non-use.
B. Non-disclosure, non-use, and non-compete.
The existence of A would be less of a deterrent than the existence of B.
Someone I know very well was fired for not signing a non-compete agreement. When he was hired, he didn’t want to sign, and then they kind of forgot about it. But several months later when something in his file needed to be corrected, they noticed he hadn’t signed. They fired him, and said they would give him a good recommendation. However, at some point during the process, they indicated he was being fired for performance related reasons. I’m guessing they pulled that so they wouldn’t have to pay unemployment or something like that, but the last part is just a guess. The person I know considered hiring an attorney, but soon decided it wasn’t worth spending the money. I am somewhat worried about the long term impact of this. Hopefully it won’t be much.
Did you know that non-compete agreements are illegal in California?
This is one of the reasons why my son, a software engineer, likes living and working there.
If there’s an official state sport in California (especially Silicon Valley), it’s probably job hopping.
Low to mid level employees rarely have the leverage to negotiate a non-compete. If you plan to sign no matter what your lawyer tells you, then hiring one in the first place is a waste of money.
Not totally illegal. (They can be enforceable for C-Level execs and top sales folks, depending on the circumstance.)
That being said, we have a California company in Tech (but not SV) and we do have a non-compete in the Employee Handbook. Never had an issue with an employee signing.
It’s not “illegal” to have a noncompete agreement in California. However, California courts (and any other court applying California law) will enforce noncompete agreements via injunctions or damages awards only under limited circumstances and to a limited extent.
It’s not uncommon for a California employee of a national or international company to sign a noncompete agreement that says that New York law or Delaware law governs the agreement. Everyone more or less understands that if the employee resigns and goes to work for a competitor in California, there’s little or no chance the agreement will be enforced unless the employee is very high level, or the agreement is very, very specific and limited in scope. However, if the ex-employee goes to work for a competitor in New York, there’s a good chance that the agreement will be enforceable.
Back in the mid-'90s, my husband signed agreement that he wouldn’t share “proprietary information” if he left the firm that hired him. When he left to start our company in 1999, the owner tried to say that meant we could never work for any of that company’s clients. He compiled a list of hundreds of people/firms that that included. In Maine, that would be the kiss of death for a small firm! We contacted an attorney who laughed and said that was ridiculous. His only suggestion was to throw out DH’s rolodex and look up contact info ourselves.
This shouldn’t be allowed, IMHO. I understand, and agree with the clause about not sharing propriety information, but totally disagree with companies dictating where people can and cannot work. If you don’t want your employees leaving for other companies, perhaps you should find better ways of retaining them.
I totally agree, @fractalmstr.
And IBM is trying to preven one HR person from doing a similar job at Microsoft. Here in WA, noncompetes of one year or less are presumed valid…
https://www.seattletimes.com/business/ibm-sues-microsoft-over-hiring-of-chief-diversity-officer/
I wonder how old “proprietary” diversity strategies could be used nowadays…