Non-Compete Agreement gone overboard...

[Shawn McCalip]

So my boss handed me a 5-page packet of paper labeled "Non-Disclosure Agreement" today. On the first page, it points out that anything I do or create for the company belongs to said company, so on and so forth. I'm not allowed to talk about details relating to the business, clients, projects, or anything along those lines. In the event that my employment is terminated, I must return any and all property belonging to the company. I completely understand this section and agree with it. My boss is protecting his rear end and the company's assets and property. All is well.

What I do have a problem with is the content on the next few pages. It states while working for said company, I'm not allowed to take on any work on the side or make money from providing ANY product or service that's offered by the company- for a period of no less than 2 years. I wouldn't be allowed to go into business for myself, I wouldn't be allowed to get a job in my field or do anything related to anything we do here where I work. In the event that I would breach one of these many stipulations, the agreement says I can be "tolled"- which I think means that my employer can seize any profits or a percentage of profits that I make from doing business on my own.

It literally feels like he's putting his hands around my throat, because I would pretty much be forced to leave the industry for 2 solid years unless I decide to move thousands of miles away to the next nearest state. I'm already getting paid in those little orange circus peanuts, so of course I'm trying to get out there and make some extra cash on the side. I respect the fact that my boss has clients and I don't solicit to them or anyone that I know is related to them. While I do live and work in a relatively small market, I know there's MORE than enough business for multiple companies to make a decent profit. So, I understand things like non-compete agreements and all, and I really have no problem with them, but this one seems like it goes WAY overboard in its authority.

I've already made up my mind to not sign this pile of drivel, and frankly, I feel personally insulted that my boss handed this to me after almost a year of being employed there. Has anyone else out there had experience with contracts like this, and if so, what are your opinions on them? Have you ever left a job or turned down a job because of anything like this?

[Rick L. Allen]

Shaun, You're right the first part of the agreement is pretty standard and not really out of line but the last part borders on insanity. It's also more and more common to see this from businesses and corporations attempting to legalize slavery in the workplace. Either negotiate to remove the offending parts, dont' sign it or get another job anywhere else. As you said you aren't getting rich so move on. Idiots who sign cocka like this only make it harder for those that follow.

[Allan Black]

I agree with Rick, sounds like the boss is just introducing this, see what your workmates think. Did they get this and are they jacking up too, you might get consensus.

Also find out if the boss has recently been badly ripped off and this is the backlash. Those details may be important in any negotiations.

And who drafted it, if his lawyers hatched it it may be hard to squash. But is it in fact legal in your state.

Keep abreast of the the local employment scene as back up. Don't do anything in a hurry. Good luck.

Cheers.

[Steve House]

A certain level of non-compete makes sense, something like you can't go to work for any existing clients of the company whom you have met during the course of your employment, doing what you did for them while working for your present employer, for a period of, say, 6 months after you leave. But to require you to eschew working in your field for anyone at all makes no sense. And for 2 years?!?!?!?! That's absurd! Ask him if he thinks it would be fair for you to demand he pay you two years severance pay should he decide to terminate you! After all, what's good for the goose ....

I'll routinely sign a non-disclosure and assignment of rights (but only for things I create on my employer's clock, not on my own outside of company time) but never anything more than a very limited non-compete. I don't think it's unreasonable to expect that you won't jump ship and take clients with you or that you not work independent on the side for clients you met through your employer but it's totally unreasonable to expect you to give up your profession if things don't work out with this employer.

I'm one of the least supportive people of big unions that you'll ever meet but this sort of c**p just sticks in my craw - employers pulling s**t like this are inviting the unions and the hassles that go with them right in the front door.

[Frank Simpson]

I once had a job with a Children's Theatre company, and my contract had a 7 year clause after termination of employment. The reason I had no problem signing this agreement was because it stated specifically that I was not allowed to use any of the proprietary concepts, techniques, forms etc. that were unique to the company. This made a lot of sense to me, as they had worked very hard over many years to formulate and reform their specific ways of doing things. I would still be able to work in Children's Theatre, but I would not be allowed to do any of the things that set the company apart from the rest of the industry.

If they're asking you not to compete within industry-wide standards, I would have a big, big problem with that!

[Dave Blackhurst]

Steve -
Totally agree with you on this one, I used to be a big non-fan of unions, but the more I see of employers taking gross and blatant advantage of their indentured servants... oops, employees... the more I wonder where the balance is.

To ask for a 2 year non-compete without offering SOMETHING in return other than "you can work for us until we don't feel like it anymore" (generally defined as "at-will" employment) is just plain greedy and one sided.

I'd say open engotiations, preferably with all the other employees on board, cross out the offending parts of the contract and hand it back, or plan on a new job. "Bosses" are often so arrogant as to believe they will just replace you if you don't take their "terms" - let them get what they deserve... no employees=no business=out of business pretty fast...

Obviously businesses are different and have different considerations and "proprietary" trade secrets and whatnot, so perhaps the boss "borrowed" a contract from an entirely DIFFERENT business where these terms might be "normal"?? Seems rather extreme for most industries.

Also, if you can't work for anyone in the same field, I think that constitutes restraint of trade and an unreasonable restriction on your right to go to work for a competitor or yourself - probably not even enforceable, making the "contract" questionable. Depending on how your relationship with your boss is, maybe it's time to whip out the ol' pencil and start "fixing" a contract that clearly is creating "badwill" in the workplace...

[Josh Laronge]

I had come across a similar situation a few years ago. The best thing to do is to speak with an attorney before signing it. One thing that my attorney told me about clauses like this is that unless it can be proven that you directly developed customers while working for your employer, most courts will not allow a non-compete agreement to restrict ones ability to earn a living in the field in which they are trained.

[Richard Alvarez]

Employment laws vary from state to state, but IN GENERAL a non-compete clause cannot prevent you from employing your skills to get a job. They can prevent you from working for a rival company, taking proprietary information/procedures, starting your own business based on their model - but they can't prevent you from working.

Say they are a wedding videography company - they might prevent you from working for a rival company, setting up your own company, or using their special approach (all of these for a limited time) - but they CAN'T prevent you from working as a videographer, say at a news station.

Again, check with your state employment office for more specifics.

[Steve House]

Originally Posted by Richard Alvarez

Employment laws vary from state to state, but IN GENERAL a non-compete clause cannot prevent you from employing your skills to get a job. They can prevent you from working for a rival company, taking proprietary information/procedures, starting your own business based on their model - but they can't prevent you from working.

Say they are a wedding videography company - they might prevent you from working for a rival company, setting up your own company, or using their special approach (all of these for a limited time) - but they CAN'T prevent you from working as a videographer, say at a news station.

Again, check with your state employment office for more specifics.

But for a wedding videographer wouldn't "prevent you from working for a rival company ... [or] starting your own business ..." constructively mean "if you leave our employ you can't be a wedding videographer" for the period of time defined in the non-compete? Unless you move far away, every company shooting weddings would be a rival company and starting your own certainly would be as well. So that provision effectively says "you'll never work in this town again." I agree that it's fair to constrain you against taking client lists, proprietary information, etc, but to expect you to stop being a wedding videographer is unreasonable.

As an aside I find it truly bizarre that so many businesses big and small extole the virtues of free markets and competition until someone comes along who does a better job of marketing and is a better competitor. Then the last thing they want is free competition.

[Richard Alvarez]

Employment laws vary from state to state.

So my answer was only in general terms.

If you don't like a contract, don't sign it.

Contracts are generally interpreted AGAINST the person who wrote it, if it comes to litigation.

Non-compete clauses can be too restrictive, don't sign them if they seem so.

[Chris Medico]

Check your state laws and if your state is a "Right to work" state then most clauses restricting your employment are very hard to enforce. I was involved in such a case here in NC early in my career. I had to sign one but talked to a lawyer before signing it and he told me they were totally unenforceable. When I quit to start my own business the previous employer tried to stop me but found out himself that he could not.

Where I could have gotten in trouble is if I had used my knowledge of the previous company to intentionally injure their business but that wasn't my interest. There was more than enough work to go around at that time.

[Dave Blackhurst]

The main grey area you have to watch out for would be proprietary business info - client lists, "trade secrets", "trade dress", that sort of thing.

Shooting wedding video - you hope to only work for the same client a couple of times at most <wink>! Client lists there would have virtually no value for example... shooting specific angles probably wouldn't be a protectable "secret"...

If a company is known for a certain "look", you'd be looking for trouble if you took the specific CC and other formulas or copied other parts of the "look" directly.

If you go out on your own, don't try to "borrow" the vibe of a competitor - just saw something on the news where a CUPCAKE bakery is going around suing anyone that has a similar name or look or feel to their semi-famous bakery... a CUPCAKE place!!!! We've come to a time when attorneys are just sitting around looking for someone to sue (and collect $$$$ from the victim or the client or BOTH), best to avoid them at all costs (appologies to the honest ones who try to make things better and protect the innocently accused...).

Again, I suspect the OP employer (or their atty) "borrowed" what is euphemistically called "boilerplate" or stock language that may not be either enforceable or even remotely appropriate to the industry the OP is in... a little research online (or a consult with an honest attorney) should yield definitive answers. Try some case law research using some of the key terms noted (findlaw.com is a good reference site, if a bit convoluted to get to the state and federal cases...), probably get some guidance there.

[Chris Davis]

Originally Posted by Shawn McCalip

It literally feels like he's putting his hands around my throat

You have the right (and the responsibility) to negotiate any contract you're asked to sign. Tell your boss you want to discuss this and that you'll either need that part taken out, more clearly define it, or they'll need to offer some protection for you (I like the "two year severance" suggestion.)

[Gabe Strong]

Originally Posted by Shawn McCalip

So my boss handed me a 5-page packet of paper labeled "Non-Disclosure Agreement" today. On the first page, it points out that anything I do or create for the company belongs to said company, so on and so forth. I'm not allowed to talk about details relating to the business, clients, projects, or anything along those lines. In the event that my employment is terminated, I must return any and all property belonging to the company. I completely understand this section and agree with it. My boss is protecting his rear end and the company's assets and property. All is well.

What I do have a problem with is the content on the next few pages. It states while working for said company, I'm not allowed to take on any work on the side or make money from providing ANY product or service that's offered by the company- for a period of no less than 2 years. I wouldn't be allowed to go into business for myself, I wouldn't be allowed to get a job in my field or do anything related to anything we do here where I work. In the event that I would breach one of these many stipulations, the agreement says I can be "tolled"- which I think means that my employer can seize any profits or a percentage of profits that I make from doing business on my own.

It literally feels like he's putting his hands around my throat, because I would pretty much be forced to leave the industry for 2 solid years unless I decide to move thousands of miles away to the next nearest state. I'm already getting paid in those little orange circus peanuts, so of course I'm trying to get out there and make some extra cash on the side. I respect the fact that my boss has clients and I don't solicit to them or anyone that I know is related to them. While I do live and work in a relatively small market, I know there's MORE than enough business for multiple companies to make a decent profit. So, I understand things like non-compete agreements and all, and I really have no problem with them, but this one seems like it goes WAY overboard in its authority.

I've already made up my mind to not sign this pile of drivel, and frankly, I feel personally insulted that my boss handed this to me after almost a year of being employed there. Has anyone else out there had experience with contracts like this, and if so, what are your opinions on them? Have you ever left a job or turned down a job because of anything like this?

Dude, Shawn you KNOW that there is NO FREAKIN WAY you should sign this steaming
pile. What I'd do, is come back at the boss and tell him that if he wants you to sign this
he is going to have to give you a raise....I know what kind of money those guys pay
(it's not much better than local TV money) and I don't know HOW they think you can live on it. Tell him if he pays you $70-80 grand and agrees to pay you two years severance pay if he ever fires you, that you will agree to it.

I may have told you my story. I was working for the Superstation down here, doing
news shooting mostly, but I also shot the video for the few spots they could ever sell
down here (they have a really bad rep among big Juneau businesses because they ran afoul of a few 'bigwigs' down here in previous dealings). That in itself was a conflict as we had some 'clients' wanting coverage of their 'new store opening' on the news and felt that they were owed that. I was paid by the news department but was routinely pulled off assignment to shoot commercials which had the news and production department fighting.
News felt that my salary should then come at least partially out of productions pot of mony too. Anyways, I also owned my own gear and would do spots on the weekends and nights to suppliment the measly salary they pay. I even got some of them to air on the Superstation, but they were not happy with me for 'competing' with them. I had a couple other spots I did that ended up running on CBS (who didn't have a local producer) NOT on ABC and ABC Superstation blew up. They figured they would have got the spots and airtime if I wouldn't have done them for the businesses. They wouldn't have, the businesses SPECIFICALLY told me they wanted to avoid the Superstation (as many have told me). I was told by my boss that I couldn't 'compete' with their production arm. I emailed him a polite response in which I pointed out that I had NOT signed any no compete and that they didn't control what I did on my time with my own gear. I was promptly fired. I assume that it was because I was competing with them, although I can't prove that. Maybe there was another reason, but it seemed to me like that was the reason.
Then they tried to claim that I was fired for 'failure to perform my job in a satistfactory manner'. Basically they tried to deny my unemployment claim. At the time my wife was pregnant and on bedrest so I needed the money and ended up fighting them on it. The state asked them for paperwork/writeups or anything of that manner.....stuff like that. I ended up winning the claim as the state found in favor of me. But, it goes to show that you CAN lose your job over this. Of course I hadn't signed a no compete, so I ended up 'stealing' a couple of their clients.....who approached me and asked if I would do something for them. At first I felt a little bad about it, but then I remembered how they fired me for no reason and got over it quick.

I'd try to be logical and point out to your boss how silly it is to expect you to live on what you get paid, and that you NEED to suppliment your income, tell him that is a good thing for him too, because HE isn't the one that is having to pay you more and that he is getting a screaming deal on having your services cheap because you are able to make money elsewhere to make up for it. Tell him you will sign the part about not stealing his clients (I mean we'd all probably agree that is fair), but unless you make more money, that you can't agree to the 'no freelance' clause. Sometimes that works. Oh yeah, one more thing. Alaska IS a right to work state, so even if you signed it, I'm not sure how much water it would hold. That being said there is NO WAY I'd sign that. You are a smart enough guy that you KNOW that for what you do for them, you are being underpaid severely! You can't pay your bills on a
"Wow nice 3D work on that last spot Shawn. Thanks for making me a pile of money! Now take your $13/hour paycheck and go home to your studio apartment and enjoy your mac and cheese!"

[Shawn McCalip]

Thanks for your responses, everyone. I re-read the entire thing from beginning to end several times and took some time to cool off and think about it. I've already decided not to sign it (as it currently is), and I figure I can be civil and discuss changing some or most of the terms. I'm ready to deal with the fact that I can lose my job over it- since it clearly states that my continued employment depends on my signature.

It looks it was copied from a standard or generic contract of some kind, and the only way I can realistically see this kind of contract being valid is if I was some high-powered executive for Google or Microsoft. So yeah, it would make perfect sense if I was pulling in $100k+ per year- but not when I'm making about a quarter of that! I can understand the whole part about not divulging trade secrets and starting a business based on a proprietary model, but for crying out loud- we make low-budget TV commercials and various flavors of corporate/non-profit videos. There's no secret formula or anything like that- because I'm the only one that works in the video department!

So yeah, I'm liking the idea of a 2 year severance package! If it comes to that, I'll bring it up and see how well it goes. I predict lots of laughs :)

I'll post some follow-up information sometime early next week. So in the meantime, to all you people out there looking for a full-time permanent position, watch out for stuff like this! Don't settle for your manager giving a simple 10-second synopsis. Read EVERYTHING, and don't feel compelled to sign at that instant.