People do odd things when they enter into a new relationship. I call it the honeymoon period. It’s a time when it is all good, your vision is clouded by optimism that overlooks faults or problems that are visible to everyone else. Words of caution from well meaning friends have the sound of crazy alarmist rhetoric. No, this post is not about relationship advice, it’s about the workplace.
1. There is no such thing as a standard agreement; and2. Everything is negotiable…everything.
1. Ask yourself what you are trying to accomplish.
2. Is the restriction reasonable?
3. Employees: How you are going to get paid while the non-compete is in effect?
A common complaint from employees is that the non-compete prohibits them from earning a living once they leave their employer. An employee signing a non-compete should consider asking their employer to pay them for the time that they are bound by the non-compete. Although some may think this is a radical idea, it offers distinct advantages to the employer and employee. For the employer, the prospect of having to pay a departed employee its wages has the effect of causing the employer to give serious thought to the duration and geographic scope of the agreement. In addition, by paying an employee during the period of non-competition, the employer has the contractual and moral high ground in the event it has to enforce the agreement. For the employee, it provides an income during the period of non-competition and thereby provides an incentive not to violate the agreement.
4. What happens if your company is sold or you are laid off.
Many employees signing non-competition agreement find themselves bound by that agreement after they are laid off or their employer merges with or is acquired by another company. The time to address these issues is at the beginning of the employment relationship while the prospect of a lay off, merger or acquisition is not on the horizon.
5. Where are you going to dance and what type of music will you be dancing to?
Lawyers refer to this as venue and choice of law. Venue means the court that will hear any dispute over the non-compete. Savvy employers will insist that cases are heard in jurisdictions that are inclined to enforce non-competes. Choice of law is the law that will apply. Again, employers will insist on jurisdictions that favor enforcement of the agreement. Employees should exercise great care when it comes to venue and choice of law clauses. One of the worst things for an employee to encounter is having to defend against enforcement of or challenge a non-compete in another part of the country. This gives the party with the most money a distinct advantage.
6. Tell prospective employers about your non-compete.
Many employees try to act like a non-compete does not exist. When the former employer alerts the new employer that the employee is bound by a non-compete, the employee acts surprised when they find themselves out of a job. It is always in the employee’s best interests to allow a prospective employer to view their non-compete. In that way, the new employer can have the agreement vetted by their legal counsel. In many instances, if legal counsel opines that an employee is not barred from working at a company because of a non-compete, the employer will agree to provide their employee with legal defense in the event the past employer seeks to enforce the agreement.
7. Tell your employer that you have accepted the new position.
Transparency goes a long way. Many employees create problems by not being candid with their employer. Instead, they accept a position with a potential competitor. Once the former employer learns that the employee has accepted the new position, it immediately assumes the worst. Not only does this usually result in litigation, it also jeopardizes any possibility that the employee will be able to return to the company in the future.
8. Make sure you pay consideration to support the non-compete.
9. Figure out what it is that you need?
10. Don’t forget about the UTSA and the employee’s duty of loyalty.
Rod Stephens: Rod Stephens, of The Stephens Law Firm, brings a unique perspective to the table in that he counsels and represents employers and employees. This provides him with a keen insight into the manner in which employers and employees perceive work-related issues.
Rod is AV rated by Martindale Hubbell, has been recognized in the 2006 Martindale-Hubbell Bar Registry of Preeminent Lawyers, and has been selected as one of Washington Law & Politics magazine’s Super Lawyers from 2000 to 2007. Rod is a frequent speaker at seminars for legal and human resources professionals. To learn more about The Stephens Law Firm go to www.stephenslawfirm.com or Rod’s blog www.employmentadvisoryblog.com
This article originally appeared at Employment Advisory Blog on June 06.2009 and is reprinted here with permission from the author.