Non-Competes For Integrators: Love 'Em Or Hate 'eM?
Many integration companies love having their employee sign non-competes to make sure they cannot get another job in the industry in their region (for a certain period of time).
However, typically employees dislike them as it makes it very hard to find a new job that does not risk you getting sued or having to move.
What's your experience? Advice? Horror stories?
A frank question: Does this mean an integrator must sue an offending (former) employee who breaks the NDA? Even if the case goes to trial, what sort of settlement is hoped for? Does it mean spending thousands to get back pennies?
I understand NDAs where a manufacturer's intellectual property or technology is involved, but it seems like an 'nuclear option' in the case of integrators. Can tradespeople be prevented from engaging in their trade of choice?
Sounds like a really odd thing. Wouldn't know why on earth you would want to accept that.
If you cannot find another job or start your own company without the risk of getting sued, wouldn't that make your vurnable for abuse by your employer ? They can treat you like shit cause you won't be jumping bandwagons anytime soon.
How do these non-competes work ? What is their time-frame ?
Noncompeting Party will not; (i) engage in a similar business, or (ii) solicit the Protected Party's customers or employees. Most non-competes I've seen here in Texas are 1 year in length and verbiage depends on the position one holds. Executives and consultants may be more likely to have longer ones (2-5 years and can have geographical clauses as well- ouch!) due to the amount and type of information they obtain while working at said company.
Prior to October of 2006 it was extremely difficult for an employer to sue an employee here where it is considered an At-Will state meaning employer or employee can resign for whatever reason. Since then, we have had a few cases here that caused employers to write the non-competes in a very specific, unambiguous manner.
Rogier, you live in the Netherlands? How does it work there with employer/employee relationships? I gather there's no need for a form like this?
Has anyone ever had a NDA enforced on them? I've found that most NDA's aren't worth the paper they are written on.
The majority of US states (not all) are 'right to work' states (or 'at will' as Undisclosed stated) which makes it very difficult for companies to sue former employees (even with NDAs) - unless they can prove real damages. i.e. loss of actual value.
If an integrator tech quits to go work for another integrator - good luck enforcing any NDA; the move does not take any value from the company.
If an integrator tech quits to go work for the end user company (customer of integrator; cutting out the integrator), then the company has some basis to sue to enforce the NDA. By going to work directly for the customer, this move can (possibly) be shown to be 'taking value' from the integrator, thereby making the NDA more enforcable. Also, if an employee 'walks out the door, taking projects with them', I would imagine this would be an example of where a company has footing to sue to recoup this 'loss' under the NDA.
Keep in mind that no employer is going to expend the amount it costs to sue a former employee unless they are protecting 'value'. And this value has to be great enough to offset the costs of enforcement (unless they are just pursuing litigation out of spite - which can happen).
IMHO, if a company has low-level employees sign NDA's, then this is a sign of a company with retention issues, indicating this is probably not a great place to work to begin with. :)
We wrestled with this for years. We do not want to "Lord over" our employees, but, on the other hand, we, the company, oftentimes pay for the training and experience that makes someone much more marketable than when they first came to us.
How much does it cost to train someone? Travel, Time, Direct Training Costs. How about on the job training, where mistakes are made and that cost us?
Yes. Many will say it is the cost of doing business. Hopefully all that cost can be passed on to the customer.
What if an integrator wants an employee to get their CCNA. Who should pay for that? The CCNA goes with the employee, should they decide to leave.
Here is where we settled with training and non-competes:
If we require the training, then we, as the integrator should pay for it. If it is a cert (like CCNA), which can go with the employee should they leave, then there is an expectation that the employee will have some skin in the game.
Non-Competes have precedent in PA as not holding water due to the inability to keep someone from providing for themselves.
The other side of this question, is “How do you create a company culture that keeps people from leaving?”
A proactive approach, and associated thread, along these lines would prove productive in this community.
I actually worked for one company that wanted me to sign a contract saying I'd stay on for two years after they sent me to training. The training cost $500, took two days, and was required for us to even sell the product. That was insanity.
Similar to what Charlie said in PA, also in NY non-compete agreements are extremely difficult to enforce. I have worked for a company where I had a non-compete clause, and when I quit and went to a competitor it was on good terms, and nothing happened. I have also worked for a company with no non-compete or non-disclosure and was sued when I left on bad terms, but the suit was dropped within 24 hours of my lawyer responding to their initial filing.
I spoke to a few lawyers before I left the company where I had a non-compete/non-solicit and they basically said unless you leave that company and start a new company stealing code/products/systems from the original company, at least in NY state, you're fine. I'm sure this isnt the same elsewhere...
The bigger practical problem is the fear of being sued. A company can easily allocate thousands or tens of thousands to a lawsuit. Can most employees match that? Probably not.
Plus, that fear can demotivate competitors from making an offer, as the potential added legal expenses increases the cost of hiring that employee.
Here's the personal choice - The employer is giving you something of value - a job - in 'consideration' of that, the employee is granting the employer the right to restrict future employment for a certain period of time.
The employer would argue that it is not 'forcing a contract'. The prospective employee is free to accept or reject.
That said, obviously the practical power dynamic is frequently warped, which does make it essentially more coercive.
no name cause others here read this.....
We have a NDA and non com.... this is for three years after leaving the company unless going out of their main market area....... also the last 24 months of training at cost(also hotel flight etc) is billed to employee if they leave (not if fired as far as i have seen) so if you quit to take other job after say a 5k training then yes they will and have gone after the employer who hired them. but if they fire you I don't see how they could enforce as it was not your choice (im in a At-will state they can fire you for anything)
case in point two techs left for "greener pastures" the company went after the new employer due to knowing about the NDA and Non comp and actively recruiting them anyway. one lost his job and the other moved into different field.
But the tech was actively going after the companies contracts and leads so that might have been tipping point
For me I had training and exper before I came here and so did many others hard to sue if you have 5-10 years in the field and trained prior to hiring.... but if there are green i can see the issue.
also kept his last check to help pay the training he had recieved prior to leaving
Hi Everyone Having said all of that, if you owned a company, what would you do to your novice greenfield new hirees? What terms would you have them sign? What terms would you have them sign. Assume the law lets you enforce whatever NDA or Non compete you want. I personally expect hirees to sign 2 years after a training.
Pay them less than experienced people. That's inherently a 'penalty' for being green. But it's a tactic that does not ban them from the industry for years or force them to move, if they ever want to leave the company.
Quite frankly, telling an employee that they cannot work in the same field for multiple years or have to move is mean.
Also, training should immediately and noticeably increase the productivity of the employee. If you send an employee to a training class on X and X is part of their regular responsibilities, the employee should be able to install / configure / troubleshoot X more efficiently after the training (i.e., being able to complete tasks in less time or do tasks that higher paid employees would otherwise have to do). That should increase value for the employer.
Let's say you spend $5,000 training an employee - a fairly liberal estimate - that training should make the employee more productive. If the employee is only $100 more productive per week, the return to the employer in year 1 is ~$5,000.
I can understand an employer being pissed about an employee getting hired, getting trained and quitting with a few months time but that's not common. More typically is someone who has been employed for 3, 4, 5 years and then leaves. How much training did they really consume and how much increased value did that training lead to during their time of employment.
Can anyone really say, for the $5,000 or $10,000 the employer paid for training, the employee should now be barred from working in the same domain or market for X number of years?
"case in point two techs left for "greener pastures" the company went after the new employer due to knowing about the NDA and Non comp and actively recruiting them anyway."
The 'new' employer is not a party to either of the two contracts (NDA or NonCom) - they are not bound to the contracts simply because they 'know about them'.
Unless there is proof that the new company conspired with their 'new' employee to liberate intellectual property from the old company, the old company has no basis on which to sue the new employer of their old employee.
Let me say, there is not a lawyer in the bunch of you. But I will say the 1. an NDA is a non disclosure agreement not a non compete. 2. A non-compete agreement in most cases is not enforceable unless there sever damage to the suing party. If the suing parties is willing to pay the lost wage etc of the breaching party then we may have an enforceable contract. There are many ingredients in the issue of a perfected contract breach. Is there any special knowledge obtained that can be used by the employee. Is there proprietary processes or info that the employing company has. Again this is a personal service contract and enforcable as suck.
As a short note, the guy who has the most money usually wins in a lawsuit not the righteous person. If you are warned of the policies of the company at the time of signing and sing it then and you intend to breach said contract you have committed a fraud. Which is a civil court issue.
Undisclosed, are you a lawyer? ;)
I am clearly talking about non-competes, not NDAs, as you can see from the title of this discussion.
Given NDAs are being referenced herein, let me talk about the key differences of the two:
- An NDA is agreement not to disclose private information about an organization. NDAs do not block someone from working somewhere else. They simply restrict them from sharing private information about that organization.
- A non-compete is an agreement not to work in specific places. Even if you do not share private information, you can still be blocked from working.
Often, NDAs and Non-Competes are packaged together in a single document. However, for most employees, NDAs are far less practically problematic than non-competes.
Btw, please refrain from giving undisclosed legal advice like "A non-compete agreement in most cases is not enforceable unless there sever damage to the suing party." Whether a non-compete is enforceable depends on the jurisdiction and the terms within the agreement. Anyone with a non-compete or asked to sign a non-compete should take it seriously and review with an attorney.
I have investigated non-compete agreements both as an employee and then an employer.
In the state of Virginia, broadly drawn non-competes are said to be un-enforceable. For example, if a non-compete agreement can reasonably be interpreted as making employees un-employable elsewhere, the scope is too broad. For example, if you work for a government contractor and your agreement prohibits you from working in any capacity as a government contractor, it's probably drawn so broadly as to be unenforceable.
Given that, I would think employees in Virginia wouldn't worry too gravely about broadly drawn agreements.
Legally in Virginia, employers may find that a broadly drawn non-compete agreement is equivalent to no agreement at all. I would think they should decide what crown jewels are worth protecting and focus their agreements and energy on those specific elements.
Employers should draw non-competes very narrowly, probably focusing on preventing former employees from cannibalizing the firm's customers. Before the hire, employees likely have no relationship with a business' specific customers. After working for a time, they learn deep inside knowledge of a business' specific pricing, processes, pitches, strengths and weaknesses, and especially customers. With that, they can destroy the business that trusted and nurtured them. This makes an ex-employee competitor much more damaging than a routine competitor who has no inside knowledge of a business' specific approach.
Regarding enforcement, such efforts seem rare for the average ex-employee acting in good faith, but a simple google search allows you to draw your own conclusions.
Regarding intellectual property, trade secrets, and so on, I would think that sort of issue is better addressed through non-disclosure agreements. In my experience as an employee, it was typical to be required to sign half a dozen different types of agreements as a condition of employment.
I should caveat all this with, I'm not qualified to provide legal advice, seek professional help, I'm just some yahoo,etc. :)
"Employers should draw non-competes very narrowly, probably focusing on preventing former employees from cannibalizing the firm's customers."
Typically, that is called non-solicitation, i.e., the former employee cannot solicit (i.e., cannibalize) the firm's customers (i.e., the employee can work for a local competitor so long as they do not solicit the previous firm's customers). Non-solicitation is often handled / ruled differently than non-competes. I have seen companies include a list of specific 'house' customers and, while I am not a lawyer, I suspect having a narrowed, defined list would help in enforcing such agreement in many jurisdictions.
Right but where did the NDA get into this mix. Again, John, I am not being a rude/prude but I have taught R.E. Law etc. at a collage level. Also I had the opportunity to go to mediation and court at least 3 time a year for a company I sat on the Board as it repetitive and officer, not in this industry. So my comments were given to people so they will watch what they sign. Don’t pick a fight unless they can finish it. And most of all don’t try to trick people in business. It will usually backfire.
I also have a non-compete. And I know for a fact my company has tried to enforce it on numerous occasions.
The problem is not whether or not it is legal or enforceable, but it scares away the parties from hiring you.
For example, a former colleague was leaving to work for a competitor. Once my employer found out, their lawyers contacted the other firm. Suffice to say, the competitor decided not to hire the individual. On other occasions where a person was leaving to work for a customer, they tried a similar approach and the customer threatened to take all business elsewhere. Others they did nothing so I have found it is used when a manager's or executive's “feeling are hurt” like a girlfriend after you break up throwing your clothes out the window.
I understand that the employer invests a certain amount of $$ on the individual for training, however the employee must also put in their own time for the training such as research, study, etc...
Until the Department of Labor in each state outlaw this practice it will continue. I don't like unions, but this is a case where a union would help protect the employees.
Everyone has an opinion on this that you talk to, where they say don’t sign it… then they will fire you… or hire a lawyer to fight it… but who has the $$ to pay for a lawyer to fight this? My employer chose to start this on existing employees after working there for 3 years so I really had no recourse but to sign it.
Thanks for sharing, good real world examples on, "The problem is not whether or not it is legal or enforceable, but it scares away the parties from hiring you."
Years ago, in a different industry, I managaged a small retail/repair shop for a national company. I had signed a non-compete agreement, and when I moved to a different locally owned shop (in the same industry) I was contacted by a lawyer hired by my previous employer. I had to pay a lawyer about $500 to negotiate an agreement where I could work for my new employer but was not allowed to contact any customers or businesses that I had worked with in my previous position. I actually thought that was fair, but I would have preferred if my previous employer had just given me a call. We could have worked out the same agreement without having to pay any lawyers. If I had not worked out that agreement I probably would have had to leave the new position as the new employer didn't want to get into a legal battle with a bigger company that had deeper pockets.
How many of you have experienced poaching from competitors?
How about head hunters?
How about manufacturers and thier reps? Even getting someone to leave your company and go to another?
These are obviously some outside reasons we get defensive about our staff.
A new article from the NY Times titled, "Noncompete Clauses Increasingly Pop Up in Array of Jobs"
This is the type of thinking I find terrible. An attorney is trying to sell his employee agreements using the following scare tactics:
"All employers share a common concern that trying employees, giving employees a start in their career or a chance to make a living, comes with the risk of competition. So a few thoughts come to mind, like "no good deed goes unpunished", and the story of the turtle that took the scorpien across the river only to be stung on the other side. It's one thing to deal with competitors in your industry on a level playing field, and another to reveal your methods and secrets and endure training, only to have the ungrateful ex employee steal your secrets and compete against you..... When it comes to this good guys really do finish last, and broke or at least poorer."
The mindset that employers are doing people a favor is laughable. What is this ditch digging in the 14th century? Talented employees have lots of choices.
And if a security integrator owner is going to go broke for a key employee leaving, this implies 2 very important things: (1) the business itself has no intrinsic value beyond that employee (or else why would customers leave to a single guy) and (2) the owner is paying the key employee so little relative to what the owner is being paid that the employee is motivated enough to do this.
Recently, we have been talking about the security industry being a STEM field but, with tactics like this, it is more like slave labor.
Here a good one. "Whats good for the Goose is good for the gander."
A mfg is always doing non competes. Why should distributors or integrator be different. The one big issue that no one talks about is, if the other party protests the working arrangement of employee going toa competitor, the lay state the emploer must pay the employee a differential or his whole wages differential until adequeste compensations and job is found.
In this manner we jsut cant have integrators using this to cut into competition Situations
Prior to making an employee offer, you should present to the prospective employee your non disclosure privacy agreement. This needs to narrowly defined to protect information and activities about your active clients and prospective clients, and your internal operations.
If the potential employee agrees to the terms of the NDA / Privacy agreement, then and only then do you make an employment offer. The makes the two agreements separate, and much more enforceable.
As part of the employee agreement, the employee agrees to an annual review of the NDA policy, and protected information. as part of the employee review process, include the NDA policy that discussed in writing your clients, processes, and internal secrets is a good thing to remind employees.
Of course all of your RMR and purchase agreements have a clause restricting clients from hiring past employees, or firms that might hire (past employees are restricted from being onsite) for a period, (The shorter the more enforceable.) 12 months is the max.
However, after 25+ years, I have one past employee that I really missed, but we remain friends, and he's brought us more business in his new role.
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