How non-compete agreements can work against you
March 2, 2016 8:34 AM   Subscribe

"That Seemingly Harmless Paper You Signed When You Were Hired Can Bite You in the Ass"

Stephanie Russell-Kraft talks about her experience with a non-compete agreement:
Legal experts have spent far too much time debating the enforceability of non-compete contracts, a line of questioning that inherently favors employers because it places the burden on individual employees to challenge their bosses in court. Jonathan Pollard estimates that only about 10-15 percent of the agreements he comes across in his practice are enforceable. But that doesn’t stop the rest from causing damage.
posted by jazzbaby (60 comments total) 20 users marked this as a favorite
 
The WSJ article is requiring me to subscribe or sign in to read it.
posted by EndsOfInvention at 8:43 AM on March 2, 2016 [5 favorites]


Is there any way in which non-compete agreements can work FOR you? (aside from letting you be employed by whoever is hiring you)
posted by jonathanhughes at 8:49 AM on March 2, 2016 [6 favorites]


I've said it before, but it's almost laughable to assume that the idea that your average citizen is considered an equal party to a multimillion or multibillion company.
posted by Carillon at 8:51 AM on March 2, 2016 [35 favorites]


you can read a non-paywalled version on this WSJ tumblr
posted by zingiberene at 8:51 AM on March 2, 2016 [7 favorites]


Is there any way in which non-compete agreements can work FOR you? (aside from letting you be employed by whoever is hiring you)

That's exactly what my question was.
posted by OmieWise at 8:56 AM on March 2, 2016 [1 favorite]


A few quick points:

1. Non-competes generally more enforceable the less restrictive in scope they are.
2. Non-competes may be unenforceable depending upon your state (California) or your profession (attorney).
3. Non-competes (you can't do your job for X years within Y miles of us) are NOT the same thing as non-solicitation clauses (you can't poach our clients).
posted by leotrotsky at 8:57 AM on March 2, 2016 [13 favorites]


Is there any way in which non-compete agreements can work FOR you? (aside from letting you be employed by whoever is hiring you)

You may negotiate a larger salary and or benefits in exchange for signing one, depending upon the amount of leverage you have in the negotiations.
posted by leotrotsky at 8:58 AM on March 2, 2016 [3 favorites]


Non-compete clauses are defensible in the context of a sale of a business. You wouldn't be willing to buy a business if you knew the previous owner could just start up again across the street.

In the employment context, I think they're awful.
posted by LegallyBread at 9:02 AM on March 2, 2016 [15 favorites]


> Is there any way in which non-compete agreements can work FOR you?

If you have to sell your labor time to live, law on the whole does not concern itself with your interests.
posted by You Can't Tip a Buick at 9:08 AM on March 2, 2016 [28 favorites]


so have a worker develop skills by working for you. you increase your revenue the more skilled the worker is

you don't pay your worker good enough wages or you decided to set up shop in the middle of nowhere to save money or you hired shitty managers or whatever. and so your skilled workers go somewhere else with their skills. you lose out on that decent chunk of change. this makes you so mad

so you force future employees to sign non-competes, thus relegating them to useless human flesh bags devoid of any experience in the eyes of the free market unless they work for you, forever. you don't call this serfdom because you don't consider yourself a fiefdom, you're a corporation, a real person with human rights, and god help you if the rule of law takes that away from you

you continue gnawing away at the underbelly of humanity with your serfs, pretending to service some useless, abstract need like 'the derivatives market' until, one day, Dr. Government comes by and says 'boy we really need to fix this condition'

you pitch a fit and decide to also attack the doctor in any way that you can because you are a parasite, excuse me, a person, and people can brainwash other people a la Kilgrave because that's a wholly rational move and it's really Dr. Government at fault for not doing their due diligence and thinking a million steps ahead so they can counter ever connivance, thank you, economists

you accrue more serfs. they either stay with you or they die. some of them try to vaccinate you with lawsuits but that just makes you stronger and stronger and stronger and stronger and stronger and stronger and stronger and etc

or am I getting this wrong
posted by runt at 9:08 AM on March 2, 2016 [34 favorites]


Non compete clauses can work for you. When I started to work for my current company, I stipulated that I also already operated a consulting business on the side and that has come in handy twice to prevent certain requests to over-scope, and has helped secure a degree of freedom in my post employer life, since they cannot keep me from working on aspects as originally stated in the original agreement I could not sign.
posted by Nanukthedog at 9:11 AM on March 2, 2016 [1 favorite]


When I was a freelancer in the world of bad reality TV (you know, as opposed to the good reality TV like...well, never mind), I was asked a few times to sign contracts that included noncompete clauses.

I just laughed and redlined them out.

Guess what, dude-who-owns-a-shitty-little-production-company: I'm a fucking freelancer-- of course I'm going to work for a competitor at some point.
posted by dersins at 9:12 AM on March 2, 2016 [12 favorites]


(nb this was in New York, not California where even the shitty little production companies would probably have known better)
posted by dersins at 9:16 AM on March 2, 2016 [1 favorite]


Yeah, in the context where I encounter noncompetes (software industry), it's hard to see them as anything other than punitive. This is because, regardless of a noncompete, we're always asked to sign a confidentiality agreement, which really should cover anything the company would consider a secret. So if you already can't tell anybody about your company's special sauce, then what's the noncompete supposed to do? Well, it's supposed to make you scared and hesitant about switching jobs. Really what it boils down to is the famous "cooling period" where you get a new job, but don't update your LinkedIn for a year in case your old boss stalks you or something.

But of course, noncompetes are totally necessary for technological innovation, right? Think of how shitty the tech industry would be in a world with no noncompetes. Take California, for example, a state that just straight up doesn't respect noncompetes. Their tech industry is shit, right? I can't remember the last time the state of California produced any kind of technology.
posted by panama joe at 9:21 AM on March 2, 2016 [31 favorites]


One of these things, in my opinion, indirectly led to my entire life coming apart, so this is too close to home for me right now, but thanks for posting it!
posted by saulgoodman at 9:23 AM on March 2, 2016


Somehow the IT industry in California manages just fine, even though courts there have consistently refused to uphold/validate NCAs, so I don't buy any of the arguments for their necessity. They're just a way to limit labor mobility.
posted by saulgoodman at 9:25 AM on March 2, 2016 [11 favorites]


I've said it before, but it's almost laughable to assume that the idea that your average citizen is considered an equal party to a multimillion or multibillion company.

"Corporations are people, my friend!"
posted by jeremias at 9:28 AM on March 2, 2016


The IT industry found other ways to retain employees.
posted by lagomorphius at 9:29 AM on March 2, 2016


please, anyone who is reading this: many post-employment restrictions are routinely upheld by California courts and employers are working at all times to increase the qualifying restrictions. Do not sign a California employment contract thinking it will not be enforceable unless a well-informed lawyer tells you so after having read the contract.
posted by MattD at 9:30 AM on March 2, 2016 [3 favorites]


please, anyone who is reading this: many post-employment restrictions are routinely upheld by California courts and employers are working at all times to increase the qualifying restrictions. Do not sign a California employment contract thinking it will not be enforceable unless a well-informed lawyer tells you so after having read the contract.

Interesting! Yeah, when I was working out in CA, I was routinely asked to sign non-solicitation agreements, which I didn't have a problem with. What other stuff are they trying to get away with?
posted by panama joe at 9:32 AM on March 2, 2016 [2 favorites]


Mr. Schneiderman’s office also has been investigating the sandwich chain Jimmy John’s use of agreements that bar its workers from taking jobs at any other sandwich shops near one of its location for two years, according to documents related to the probe that were reviewed by the Journal.

A fucking sandwich shop, are you fucking joking? Where are the pitchfork mobs?
posted by Behemoth at 9:33 AM on March 2, 2016 [8 favorites]


You'll see them next year. The last pitchfork mob required participants to sign a non-compete.
posted by Sangermaine at 9:35 AM on March 2, 2016 [20 favorites]


Is there any way in which non-compete agreements can work FOR you? (aside from letting you be employed by whoever is hiring you)

Yep, you can make other people - your employees - sign them so that they can't switch jobs to work for someone else.
posted by Dysk at 9:37 AM on March 2, 2016 [1 favorite]


The analogy I give my employee-clients who ask about their contracts:

Companies' employment contracts are like institutional memory of the company. When something bad happens (where "bad" means an employee or former employee beat the company in court on some dispute) they add a clause to the employment contract that says, basically, "if X happens, we win."

Over time, lots of things happen, and the employment contract they "offer" to new employees gets longer and longer, and every addition favors the company. So when you come along, they want you to sign this document that's astonishingly bad. But since most of the things are relatively low probability for you, it's not worth paying a lawyer to argue and negotiate every one of them.

So you, as a prospective employee, get screwed.

I'm not sure there's a solution, though, other than judicially invalidating the worst abuses. Non-competes are one thing, but really, arbitration clauses are much worse, and much more widespread.
posted by spacewrench at 9:37 AM on March 2, 2016 [8 favorites]


One of my first corporate jobs I crossed out the drug testing section , wrote "I do not agree to this" initialed and signed. Wasn't doing drugs , just on principle. No one noticed and I worked there 7 years.
posted by freecellwizard at 9:40 AM on March 2, 2016 [3 favorites]


I used to think perhaps if high-demand employees like dersins or I (I'm a developer) took a stance against them and refused to work with companies that had them, they might go away. They haven't. I think this is an instance where the government has to step in and prohibit them. They are that bad for people's rights and for the economy.
posted by melissam at 9:40 AM on March 2, 2016 [3 favorites]


Employment lawyer here. Normally, the only way a noncompete can help an employee (other than as an up-front negotiating point for salary, as discussed upthread) is as a negotiating point for severance. You, or your lawyer, says to the employer, "This thing is way overbroad. No court will enforce it. You can either pay me some severance and let me out of it, or we can fight it out in court, and you'll have a judge's written opinion in your home county saying that your standard noncompete is not enforceable."

Is this an unreasonable, tottering, rusted, pointless gantry of legal and political systems built on top of what ought to be a basic exchange of (labor power x time) and cash? YOU BE THE JUDGE.

P.S. I could not currently afford my own hourly rate to litigate the above-mentioned legal argument and defend against the inevitable appeal. I suspect this holds true all the way up to the 95th percentile of income-earners in this country.
posted by radicalawyer at 9:45 AM on March 2, 2016 [21 favorites]


Non-competes are totally out of control. My last job asked for five years for a basic lab analyst position. I managed to get them down to one - but still, it's not good for them. It means I have zero interest in building experience in anything related to the industry or the specific field, since it's all useless when I leave so who cares.
posted by Mitrovarr at 9:46 AM on March 2, 2016


The thing about noncompetes that I do find funny, though, is that they are basically the company admitting that they suck at hiring the right people.

I mean, come on-- if you think I'm going to try to fuck you over, don't hire me.
posted by dersins at 9:50 AM on March 2, 2016 [11 favorites]


a line of questioning that inherently favors employers because it places the burden on individual employees to challenge their bosses in court

The burden is always on the party presenting an affirmative claim, whether in a complaint or an affirmative defense.

The permissibility of a non-compete is going to be set by the governing state's statutory law that provides for non-compete because they subrogate the common law's prohibition on restraints of trade. My state's statute is fairly narrow in the time and geographic scope it will permit. Also, a legitimate business interest must be shown.

I hate to shock, but corporations can be subject to non-compete agreements as well. This is seen commonly in franchise and dealership agreements, for example.
posted by Tanizaki at 10:19 AM on March 2, 2016 [2 favorites]


access to WSJ without subscription (click on first link)
posted by andrewcooke at 10:26 AM on March 2, 2016


a line of questioning that inherently favors employers because it places the burden on individual employees to challenge their bosses in court

I've always found this a short-coming of the legal system, law is largely non self-executing. There are almost certainly schools in rural communities where teachers are leading official prayers, decades after SCOTUS ruled. But it's legal until someone actually files a lawsuit and gets an injunction. Hence, bankruptcy as a legal strategy. If I'm right but you're rich, you just keep the litigation going till I'm broke, truth be damned.
posted by Octaviuz at 10:31 AM on March 2, 2016 [8 favorites]


Ties in rather well with the recent court decision that *gasp* your employer actually has to pay you for time worked, such as putting on safety gear. in fact.
posted by Carillon at 10:42 AM on March 2, 2016


I signed an overly broad non-compete once when I worked as a contractor in DC. When I jumped ship from that dumpster fire into a permanent position at a client, the contractor threatened to sue me and them over the non-compete. A letter from the company attorney pointing out that a 10 year global ban on me working with a computer was not likely to be enforceable shut them down and they scuttled back off to whatever dark place they came from.

Another time I helped poach a tech from another local MSP. After some email back and forth we ended up paying $250 as a "finders fee" to make them go away.

So my own experience in IT is that non-competes are fairly useless although maybe this points more to the danger of letting unqualified people write legal agreements.
posted by anti social order at 10:52 AM on March 2, 2016 [1 favorite]


This is one of the many reasons why I live in California.
posted by w0mbat at 11:18 AM on March 2, 2016 [1 favorite]


I'm not sure there's a solution, though, other than judicially invalidating the worst abuses. Non-competes are one thing, but really, arbitration clauses are much worse, and much more widespread.

Legislation which places strong restrictions on unfair contracts and a regulator which reviews contract terms and fines employers who subject employees to such terms? Are there reasons why the US could not do that?
posted by howfar at 11:22 AM on March 2, 2016 [3 favorites]


Sure. The Republican party.
posted by Mitrovarr at 11:32 AM on March 2, 2016 [4 favorites]


Freecellwizard:
Is that all it takes? Would crossing things out in pen and signing make it legally binding?

I work a lowly games-testing job, and even we have non-competes. The pay is so low, and the turnover so high on employees that I don't see the point. I've even been told that in reality, they are often disregarded, and people freely switch between the multiple games-testing companies in town.

Some of the content of my contract is objectionable, though I imagine if I had crossed anything out, they would have just passed me over for another applicant. It's still nice to know for future employment.
posted by constantinescharity at 11:41 AM on March 2, 2016 [1 favorite]


Contracts that don't usually get enforced are still dangerous because it allows your employer to harass or threaten you if they have a need to do so, or are someone just doesn't like you specifically.
posted by Mitrovarr at 11:47 AM on March 2, 2016 [2 favorites]


Also non-competes pretty much destroy any leverage you have while negotiating for more money or such in the future, because you would have to jump fields and take a massive pay cut to leave. That's probably why employers use them.
posted by Mitrovarr at 11:49 AM on March 2, 2016


Amazon used to require temp warehouse workers to sign a non-compete (they ceased to do so after it blew up in the media).
posted by splitpeasoup at 11:57 AM on March 2, 2016


As a data point, long non-competes are routine on Wall Street but if employers want to enforce them they have to keep paying your base salary and benefits.
posted by MattD at 11:58 AM on March 2, 2016


I was able to negotiate a clause in my last non-compete that gave the employer the option to pay 100% of my salary for the period of time they wanted me to stay out of the market if I left or was let go of my job. The way I saw it, they hired me for my experience and specific skill set. They have no right to keep me from making a living in the profession I've dedicated my life and education to...especially at no cost to them.

I realize many people don't have that option. I've hired many recent grads that blindly sign the standard company non-compete. I have to say, I respect the candidates that push back or outright tell my company to fuck themselves. I love going back to legal and yelling at them for making us lose great potential hires due to their overreaching and abusive non-competes.
posted by pleem at 11:58 AM on March 2, 2016 [9 favorites]


IMHO, there oughta be punitive damages for a company that attempts to enforce a blatantly non-enforceable and inequitable contract bordering on indentured servitude.
posted by splitpeasoup at 11:59 AM on March 2, 2016 [7 favorites]


> Legislation which places strong restrictions on unfair contracts and a regulator which reviews contract terms and fines employers who subject employees to such terms? Are there reasons why the US could not do that?

Because the United States government is on the whole not on the side of the people of the United States.
posted by You Can't Tip a Buick at 12:03 PM on March 2, 2016 [9 favorites]


This is the same bullshit as not talking about compensation. Make someone sign some mostly unenforceable garbage and rely on the legal sounding nature of it and people's fear of being wrong to keep them in line.
posted by humanfont at 12:24 PM on March 2, 2016


it's not exactly the same bullshit, though, since even if in technical terms non-competes are unenforceable, in real terms there are teeth behind the non-competes that can really screw up an employee's attempt at finding work at other companies. Sure, if the employee has enough time, money, and knowhow to sue a corporation, they'll win, but people who have enough time, money, and knowhow to sue a corporation are a vanishingly small subset of all workers.
posted by You Can't Tip a Buick at 12:32 PM on March 2, 2016


Non-competes are nothing new, as an anecdote in Ken Levine's obit for Charlie Tuna (previously here) mentioned:
In 1972 when he left KHJ there was a no-compete clause in his contract that prevented him from working on the radio in Los Angeles for six months. So he took a job doing mornings at KCBQ, San Diego and COMMUTED every day from the San Fernando Valley. That’s about 280 miles a day. To play Osmond records. You gotta REALLY love it.
posted by oneswellfoop at 12:41 PM on March 2, 2016


They're not new, but I think we can all agree that there's a world of difference between someone who has an audience and a personal brand jumping to a competitor vs. the guy who makes your sandwich.
posted by Etrigan at 12:43 PM on March 2, 2016 [2 favorites]


On the other hand, no matter how integral you are to your company's operations, if you can't leave there is absolutely no reason for them to ever offer you more of anything to stay.
posted by Mitrovarr at 12:53 PM on March 2, 2016 [2 favorites]


A few years ago my husband and his cohorts had to sign a noncompete. He actually spoke to a labor lawyer about it who told him he had no recourse. My husband works in retail marketing. There is no way he can move into a similar position somewhere else unless he does something completely unrelated for a year first.
It's a predicament.
posted by Biblio at 1:25 PM on March 2, 2016


Is that all it takes? Would crossing things out in pen and signing make it legally binding?

IANA contracts L, but I think this would be enforceable only if the other party was aware of the change and also signs. I just reviewed a noncompete for my SO, at it was actually amazingly reasonable. Starts at the effective date of the contract (the beginning of the employment term, rather than the end!), lasts for one year, restricted to a limited geographic area. This is reasonable, I think, if they are hiring you on and incurring significant onboarding costs, to keep you from jumping ship willy-nilly to a local competitor.

Noncompetes that last an extended amount of time, kick in at the end of employment, are overly restrictive (works with a computer? really??), or cover a huge geographic region should be abolished by statute. And fucking Jimmy Johns, Amazon temps? Give me a break.

If you have negotiating leverage, push back. Even if they say it's non-negotiable, if they really want you, it's negotiable. If you don't have leverage, think long and hard about whether signing the agreement is in your best interest. And unfortunately, the way things are stacked in US law today, for some it might be choosing between a bad deal or eating that week.
posted by Existential Dread at 3:52 PM on March 2, 2016 [1 favorite]


Aside from frustration over the existence of non-competes, I think employers should be required to state the existence (and content) of the non-compete at the time they make an offer.

I did push back at my current job, because a) not legal in CA (employer is in another state), b) 20 years in the industry and I know better c) I'm old and mean, but I didn't really think to ask before I gave notice at my former job in part because most of the companies in my industry know they're bullshit and only ask for non-solicitation and confidentiality. So on my first day of work I was pushing back while panicking a little over finding another job on real short notice since my husband was laid off 2 hours after I gave notice, but I guess that gave me a certain amount of emotional intensity behind my "you can't cut off my livelihood" as one of my reasons.
posted by Lyn Never at 4:16 PM on March 2, 2016


I swear the noncompete I signed at a previous job expanded significantly in scope between the time I signed it and the time it became relevant. Is that allowed? Doesn't matter anyway I guess, since it's my understanding all of them later got invalidated in court as overly expansive, but employers aren't allowed to change the terms on you, EULA style are they?
posted by saulgoodman at 4:38 PM on March 2, 2016


I will reluctantly say that I think narrow non-competes for certain high level functions are not a bad thing. I liked the legal attitude to them in the Netherlands-- they were only enforceable when 1) the time frame was reasonable (generally one year or less) 2) substantial promotions were excluded (in other words, an employee could always switch jobs if they were getting a promotion) 3) geographically limited. The courts there were also much more likely to uphold non compete agreements in C level functions, since those functions were more likely to have access to trade secrets-- which, again, I think is reasonable.
posted by frumiousb at 4:38 PM on March 2, 2016


Won't they have to take the former employee to court and prove the agreement is broken?
posted by humanfont at 4:39 PM on March 2, 2016


humanfont: Won't they have to take the former employee to court and prove the agreement is broken?

If you're lucky. But most people would probably be dealing with it in arbitration, which is like court, except that everyone's salary is paid by the company. So I'm sure you can guess what your odds would be.
posted by Mitrovarr at 4:44 PM on March 2, 2016


but employers aren't allowed to change the terms on you, EULA style are they?

I do not think they should be able to (maybe there are places where they can?)-- however, many labor contracts state that the contract terms and benefits are subject to change. Occasionally HR will hand you a little pamphlet which gives you an Update on Your Benefits! in big cheerful letters. Always always read those very carefully. Because sometimes nasty things are buried in them. Generally speaking (very generally, can depend on where you are, etc.) they will have a difficult time enforcing unilateral changes in the case where there is substantial impact. However, if they can show that you were informed of the change and you did not protest then they can argue you accepted the change even without signature. At a certain point in my career, I got really good at writing to HR: "Regarding proposed change to contract terms 8.7, I do not accept the proposed change." (Not a happy point in my career, obviously. Bleah.)
posted by frumiousb at 4:44 PM on March 2, 2016 [1 favorite]


I remember a recruiter coming to my town to interview for a position with an overseas company in a country I was interested in working in. The woman interviewing talked up everything about the job and country and the interview went quite well until they mentioned remuneration (abysmal, it would make living there literally hand to mouth, living in hovels) working hours, (100+ a week in the contract) lack of covering relocation costs and a non compete agreement that lasted two years after the end of the job.

I asked the interviewer if I'd got this straight, because it sounded like a mistake, I could be working around the clock, the money would barely cover minimum wage living costs and if I ever left the company, I wouldn't be able to work in the industry in that country and my only choice would be to fly home. If I could afford the airfare at that point. Yes, she said. That was right. Was there any chance of discussing a liveable wage and losing the non compete? No, definitely not and people fight to work for this company. Uh huh.

She was annoyed that I knew enough about what the standard of living there and everything else to know they were deeply screwing over anyone who took the job. I politely declined any further interest in the position and we left it at that.

Lo and behold, three years later a buddy of mine comes to me and tells me about a job with this same company where he's at the final interview. He asked the interviewer if he could bring a friend to listen because it was an international move and he wanted to make sure he understood what was involved. Of course, I knew they would try the same thing with him. And they did. When I raised these points on my friend's behalf, the interviewer tried to tell his friend to get rid of me so they could talk privately so he could talk him around. My friend was already aware of their tricks though because I'd told him about my experience so the interview went downhill from there.

It's been years and I'm still really disgusted that this company takes advantage of people who know nothing about their country and living costs to screw them over.
posted by Jubey at 9:58 PM on March 2, 2016 [3 favorites]


This country needs a government-endorsed boilerplate employment agreement for at-will employees. A small business that can't afford lawyers can pull it out and have people sign. Maybe you can work in a few good standards like paying "on-call" workers or two weeks severance, but the reason I say this is not to revolutionize employment.

No, I want this so I can then justify a demand criminalizing employers who add extra clauses that are not legal and exist solely to bully, harass and intimidate workers, even after they leave. If you want your own agreement because it's a special case with a celebrity consultant or something, fine. But if you try to impose illegal conditions it's not just "Oops, I can't collect"--it's actually a crime.
posted by mark k at 10:02 PM on March 2, 2016 [4 favorites]


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