Need Employee Non Compete

[Nick Griffin]

Steve, Steve, Steve. (Said with a heavy exhale.)

Did you misplace an existing copy of an executed agreement or never have one in the first place?

If it’s the former, best not to do anything other than remind the departing employee that he/she signed it and leave it at that. DON’T LET THEM KNOW YOU LOST IT.

If it’s the latter, most of the advice below is correct. You MUST have serious consideration for the employee to make an exit agreement worth anything whatsoever. Perhaps one thing you could offer is full use of stuff he/she worked on for their portfolio — with the implication that without said permission they are NOT permitted to use your copyrighted materials. But you better also have some cash in it to make the contract hold any water.

And because Tim Kolb is one of the smartest guys in the room, it’s been my observation too that courts tend to side with the little guy. That said, a lot of this stuff comes down to what one has to lose.

If someone is just starting out and they are threatened with a lawsuit, they could easily shrug their shoulders and say, “So… what are you going to get from me? I rent an apartment and still owe 47 months on a car loan.” Yet when they are 40, married with kids, have equity in their house, own a boat, etc. — they’ve got something to lose. The threat of a lawsuit will mean a LOT more to them even if they think they will prevail ultimately but had to spend tens of thousands on their lawyers. In this regard, grownups are a lot easier to scare.

Good luck and let us know how it turns out.

[Joe Murray]

It’s actually not unusual for non-competes to be initiated at the end of a working relationship. Usually the situation is one where the company is letting the employee go, but with a substantial severance package which is conditioned on the employee signing the noncompete. If the employee is leaving of their own accord then this “olive branch” becomes more of a bribe, but it could still work.

Joe Murray
Edit at Joe’s
Charlotte, NC

[Mark Suszko]

I dunno. It’s a good start on a draft document, but I think it needs more work.

To my mom’s eternal regret, IANAL, however, I find that qualifying language on who-what-when-where in the sample document to be less detailed than I’d personally like. I think it still leaves a LOT of wiggle room in the interpretation. Too much so. These things are shot down by a judge all the time for being too broad or restrictive.

Also, in this modern world, it is not impossible to find out after the fact that you’ve done work for a subsidiary of a subsidiary that’s owned by a holding company of the client. Hard to know who owns what in a world of mergers. And small to mid-size agencies are constantly re-combining and changing their names and the principle partners. Plus you have a non-objective measure of how much it takes to be “competing”. A good lawyer could easily bust this paper, I’m thinking.

I don’t think you can successfully enforce this document. Excessively long restriction periods also get shot down in court all the time.

If it said: You promise to do no work of TYPE OF WORK in NAME OF CITY for the corporation known as NAME OF CORP for one year from DATE ON FORM, that’s pretty specific. That’s the direction I’d go in, if this kind of protection was important to me.

But here’s a different take:

Since you don’t know at hiring time which clients the employee will be working for in your coming year, wouldn’t it be easier to have them sign a specific NDA/ Noncompete form for each important client they work on at the beginning of the job? Right on the billing sheet? I can see some advantages to that. What do you think?

On a side note, if many former employees are turning around and poaching all your clients on a regular basis, I’m guessing there are more and broader issues going on than a simple legal memo can fix. I’d like to hear from some of you owners about how big a problem this has actually turned out to be for you: a constant battle, or just one rat fink backstabbing you over the history of the company? Did the fink prosper in the long run?

[Grinner Hester]

there is no such thing. These things are made up on the fly by people who are paid by people who cannot keep their artists happy.
Please don’t have your artists sacrifice their beliefs and your respect by having them sign one of these.

[Jon Agnew]

I have and will always refuse to sign non-competes. I will not allow any employer to have that kind of control over who I can work for and when.

I’m curious, Steve…What kind of production do you do that you feel the need to have an employee sign such a document? The purpose of a non-compete is to ensure that employees cannot run off with valuable trade secrets, not to prevent people from simply being employed by a competitor. What trade secrets could this employee possibly have that cannot be found on any number of websites like the cow?

Good luck getting him to sign it. You’d need a shotgun to convince me.

[Timothy J. allen]

I wouldn’t give someone access to my client list, budget templates or fee calculation spreadsheets unless they sign one.

Don’t get me wrong, it’s not that I don’t want them to make a nice living after our partnership is over. I’ve had former employees hire me on jobs and it’s important to be fair. That said, I’ve worked hard to develop certain processes and tools that help streamline and improve my work flow. Things that (IMHO) help make me “more valuable” to clients than my competition. If someone I hire is going to have access to my company’s proprietary information, I’m going to try to protect it.

I also have them sign it in order to prove due diligence in protecting my client’s proprietary information. This could be knowledge of new inventions or processes, financial data – you name it. When you do work for high-tech companies or the government, you begin to understand the value of information and you owe it to yourself and your clients to protect it.

I don’t care if someone uses knowledge they gained while working with me – as long as it’s things like “how to edit faster”, “how to color grade a sequence” or “how to figure out not to blow a circuit breaker when lighting an office”. I actively encourage people taking that type of knowledge and using it. I do not encourage them to use my “budget proposal” spreadsheets.

See the difference?

[Jon Agnew]

In that case, I believe you should be using a Non-Disclosure Agreement. An NDA protects the information that you entrust to employees without dictating who, when, and where they can work.

See the difference?

[Timothy J. allen]

Jon,
I understand the difference and thank you for pointing out that there is a difference.

In many cases, when hiring new employees, these documents will be presented in the same “package” of documents within the framework of an new employee contract, so I think protecting that type of information is a relevant topic within this thread.

You asked Steve “What trade secrets could this employee possibly have that cannot be found on any number of websites like the cow?”

Technically it’s those kind of things that would typically be covered under NDAs. But while an NDA may prevent an ex-employee from disclosing that information to third parties, it could be difficult and costly to prove to a court that someone is using internal processes and systems you developed for their own work. A non-compete clause in the hire contract removes a bit of the incentive to do that.

Of course, the best case is for employees to always leave on great terms and everyone love and support each other in future endeavors. (No shotguns involved.)

But seriously, one thing that is important is that the “non-compete” portion of a contract is enforceable. That means that you not only need “consideration”, but that it is within the bounds of logical reason. That’s one reason why a non-compete has to have reasonable time and geographic limitations when compared to the “consideration”.

[Timothy J. allen]

I feel compelled to add that I agree with Tim Kolb (as usual) when he said “your personal relationship with this person may afford you more protection than some hastily signed piece of paper”.

True, so true.