One time when I was on Twitter, a law student told me that when a contract is drafted, there is a reward for both parties. In the case of a non-compete agreement, that reward is given to people who are privy to information. For example, if you work in a large corporation like Nike and you’re an analyst and know information about the next show, Nike could reward you by giving you an agreement that states that you’re an at Will employee and can be fired at any time for any reason but we will give you two years of your salary if this does happen. Obviously, this is a reasonable agreement between both parties since both parties are being rewarded.
For other employees who are not privy to information, the agreement is different. It usually states that you’re an at Will employee and you can be fired at any time for any reason and you can’t work for a company that has a competing product for two years or within a 10-50 mile radius of your former employer.
Three employment lawyers pointed out to me that companies like yours feel that they are doing you a favor by giving you a job because that is the only reward for this contract. They don’t have to give you anything else; not even a severance package.
Why is two years so important? As the employment lawyers told me, the strategy is to keep you out of a job in the industry so you can’t get back into it. By doing this, you will lose knowledge and skills. As a result, your career is destroyed.
As I said earlier, I was told that I would be terminated if I didn’t sign this contract. That is duress. In addition, everyone isn’t signing the contract and one reason is favoritism. That is discrimination. Both are the basis to make this contract null and void but in the world of non-compete lawyers and companies, this still stands up in court.
In my case, my contract could be reasonable if the non-compete lawyer would list the major competitors on my contract. That doesn’t happen in a non-compete agreement because the lawyers and the company feel that that the competitors are changing all the time. So the standard is that you may not be able to work in the industry even if your competitor has just one product.
As a result, this contract is not about Coke and Pepsi, it’s about Coke and bottled water. If you drink bottled water instead of Coke, then Coke is losing money. If you drink beer instead of Pepsi, then Pepsi is losing money. It’s no different if a disc jockey wants to leave a rock and roll station to work at a jazz station. If they’re in the same area, he or she can be sued under the non-compete agreement.
What does this mean to the employee. For a hairdresser who could be making less than $50,000 a year, that person has to be away from clients that they worked with. As a result, it will be harder for that person to get a job because that person doesn’t have any clients. If they get a job at another hair salon, then they have to start all over again, losing even more money.
For an account manager who could be making $30,000 a year, that person will have to start all over again in another industry, maybe starting again at an entry level position.
In my case, I have to apply for jobs that I am unqualified for, losing a significant amount of my salary, which could be anywhere from $10 - $15,000 a year. Like other employees, I would be starting over again in an industry that is unfamiliar to me, putting me in a position where I could lose that job.
If you look at my industry for example, there are several companies that have different products. I could be in a position where I can sell another product that doesn’t compete with my company. Unfortunately, other companies do have at least one product that competes with my company and that would eliminate me from getting that job. As my employment lawyer told me, all my company needs is a legal argument. It doesn’t matter how weak the argument is. It’s still an argument and they can take out an injunction to stop me from working in that company and sue that same company for any lost business.
Of course, once a company in the industry sees my non-compete agreement, their lawyer will advise them not to hire me. I can challenge it if I’m fired but it would cost me $10,000. There is no guarantee that I would win since I signed this agreement. The judge can rule two years seems unreasonable. I’ll make it a year.
As far as the standards are concerned, you can listen to the podcast below regarding how Georgia had to justify their new law, Amendment 1. They state in this podcast that they can’t afford to have employees contact any of the clients. Remember that everyone is supposed to sign this agreement, including the receptionist. During this podcast, you will hear that lawyers are exempt from non-compete agreements.
Now, is two years a reasonable amount of time for a non-compete agreement for the employee? That seems to have changed in Indiana where a judge ruled that a five year non-compete agreement was considered reasonable.
When a disc jockey works for an FM station and is terminated, he is sued by his employer because he wanted to start his own podcast. Was it fair to sue this disc jockey since he worked at an FM station but he started to work on a podcast that was only received on the Internet. Is it reasonable to say that this disc jockey was competing with his station because their station can be picked up on a computer or the internet as well.
Another example is a group of cardiologists and their non-compete agreement. They could be fined as much as $750,000 if they did not go beyond the 50 mile radius of their employer. That is something to be concerned about since fines can be applied to any non-compete agreement.
How about the Warren Stephens contract? This contract was written after he acquired 16 editions of the New York Times. it said that a journalist can be fired at any time for any reason and can’t work for a media outlet for two years where Halifax has an office. That means he or she can’t work for a newspaper, a magazine, a radio station, or a television station. While Stephens backed down on this after the acquisition, he did say that new employees would have to be under this agreement. As the article points out, this creates ownership of a story. But the more important question is how much harm can a journalist do if he or she works at any of these outlets.
The reason I bring this up is because that is the foundation for a non-compete agreement. It works based on the possibility that when an employee leaves or is fired from their employer, they will have an impact on them if they join the competitor. Yet we really don’t know what this impact will be. Again, let’s remember that this isn’t just about sales people, it’s about all the employees at a company. If you need an example, ask yourself what impact Katie Couric had when she left NBC to go to CBS.
Yet today, we are making this non-compete agreement the law of the land. It’s turning up in nearly every line of business. We see it for radio stations, television stations, hairdressers, dog and cat groomers, and maid services. This agreement is turning up in nearly every line of business because the feeling is that the business has the right to protect itself from employees like me. As a result, employees are left with no rights since they can’t leave their company or chosen profession and have to accept a career of indentured servitude. If they leave the industry, they will have to take a huge salary cut of anywhere from $10,000 - $15,000 depending on the job.
In the end, a non-compete lawyer will tell you that there is still no need to regulate this. If you’re unhappy with this, you can challenge it in court. Of course, that’s $10,000 in legal fees.
These are the problems that employees face when they are on a non-compete agreement. Companies and lawyers feel that this is justified because employees have either stolen information or trade secrets. So in the next post, I will talk about information being stolen and you can decide if this justifies employees being on a non-compete agreement.
Rick Holman
http://resultsmatterradio.businessradiox.com/2012/04/30/noncompete/
For other employees who are not privy to information, the agreement is different. It usually states that you’re an at Will employee and you can be fired at any time for any reason and you can’t work for a company that has a competing product for two years or within a 10-50 mile radius of your former employer.
Three employment lawyers pointed out to me that companies like yours feel that they are doing you a favor by giving you a job because that is the only reward for this contract. They don’t have to give you anything else; not even a severance package.
Why is two years so important? As the employment lawyers told me, the strategy is to keep you out of a job in the industry so you can’t get back into it. By doing this, you will lose knowledge and skills. As a result, your career is destroyed.
As I said earlier, I was told that I would be terminated if I didn’t sign this contract. That is duress. In addition, everyone isn’t signing the contract and one reason is favoritism. That is discrimination. Both are the basis to make this contract null and void but in the world of non-compete lawyers and companies, this still stands up in court.
In my case, my contract could be reasonable if the non-compete lawyer would list the major competitors on my contract. That doesn’t happen in a non-compete agreement because the lawyers and the company feel that that the competitors are changing all the time. So the standard is that you may not be able to work in the industry even if your competitor has just one product.
As a result, this contract is not about Coke and Pepsi, it’s about Coke and bottled water. If you drink bottled water instead of Coke, then Coke is losing money. If you drink beer instead of Pepsi, then Pepsi is losing money. It’s no different if a disc jockey wants to leave a rock and roll station to work at a jazz station. If they’re in the same area, he or she can be sued under the non-compete agreement.
What does this mean to the employee. For a hairdresser who could be making less than $50,000 a year, that person has to be away from clients that they worked with. As a result, it will be harder for that person to get a job because that person doesn’t have any clients. If they get a job at another hair salon, then they have to start all over again, losing even more money.
For an account manager who could be making $30,000 a year, that person will have to start all over again in another industry, maybe starting again at an entry level position.
In my case, I have to apply for jobs that I am unqualified for, losing a significant amount of my salary, which could be anywhere from $10 - $15,000 a year. Like other employees, I would be starting over again in an industry that is unfamiliar to me, putting me in a position where I could lose that job.
If you look at my industry for example, there are several companies that have different products. I could be in a position where I can sell another product that doesn’t compete with my company. Unfortunately, other companies do have at least one product that competes with my company and that would eliminate me from getting that job. As my employment lawyer told me, all my company needs is a legal argument. It doesn’t matter how weak the argument is. It’s still an argument and they can take out an injunction to stop me from working in that company and sue that same company for any lost business.
Of course, once a company in the industry sees my non-compete agreement, their lawyer will advise them not to hire me. I can challenge it if I’m fired but it would cost me $10,000. There is no guarantee that I would win since I signed this agreement. The judge can rule two years seems unreasonable. I’ll make it a year.
As far as the standards are concerned, you can listen to the podcast below regarding how Georgia had to justify their new law, Amendment 1. They state in this podcast that they can’t afford to have employees contact any of the clients. Remember that everyone is supposed to sign this agreement, including the receptionist. During this podcast, you will hear that lawyers are exempt from non-compete agreements.
Now, is two years a reasonable amount of time for a non-compete agreement for the employee? That seems to have changed in Indiana where a judge ruled that a five year non-compete agreement was considered reasonable.
When a disc jockey works for an FM station and is terminated, he is sued by his employer because he wanted to start his own podcast. Was it fair to sue this disc jockey since he worked at an FM station but he started to work on a podcast that was only received on the Internet. Is it reasonable to say that this disc jockey was competing with his station because their station can be picked up on a computer or the internet as well.
Another example is a group of cardiologists and their non-compete agreement. They could be fined as much as $750,000 if they did not go beyond the 50 mile radius of their employer. That is something to be concerned about since fines can be applied to any non-compete agreement.
How about the Warren Stephens contract? This contract was written after he acquired 16 editions of the New York Times. it said that a journalist can be fired at any time for any reason and can’t work for a media outlet for two years where Halifax has an office. That means he or she can’t work for a newspaper, a magazine, a radio station, or a television station. While Stephens backed down on this after the acquisition, he did say that new employees would have to be under this agreement. As the article points out, this creates ownership of a story. But the more important question is how much harm can a journalist do if he or she works at any of these outlets.
The reason I bring this up is because that is the foundation for a non-compete agreement. It works based on the possibility that when an employee leaves or is fired from their employer, they will have an impact on them if they join the competitor. Yet we really don’t know what this impact will be. Again, let’s remember that this isn’t just about sales people, it’s about all the employees at a company. If you need an example, ask yourself what impact Katie Couric had when she left NBC to go to CBS.
Yet today, we are making this non-compete agreement the law of the land. It’s turning up in nearly every line of business. We see it for radio stations, television stations, hairdressers, dog and cat groomers, and maid services. This agreement is turning up in nearly every line of business because the feeling is that the business has the right to protect itself from employees like me. As a result, employees are left with no rights since they can’t leave their company or chosen profession and have to accept a career of indentured servitude. If they leave the industry, they will have to take a huge salary cut of anywhere from $10,000 - $15,000 depending on the job.
In the end, a non-compete lawyer will tell you that there is still no need to regulate this. If you’re unhappy with this, you can challenge it in court. Of course, that’s $10,000 in legal fees.
These are the problems that employees face when they are on a non-compete agreement. Companies and lawyers feel that this is justified because employees have either stolen information or trade secrets. So in the next post, I will talk about information being stolen and you can decide if this justifies employees being on a non-compete agreement.
Rick Holman
http://resultsmatterradio.businessradiox.com/2012/04/30/noncompete/
http://www.amednews.com/article/20120822/business/308229997/8/
http://kurthanson.com/news/ohio-judge-rules-broadcast-radio-non-compete-does-not-apply-internet-radio
http://www.telegram.com/article/20120722/NEWS/107229960/1002/business
http://www.ajr.org/Article.asp?id=5229