How Employees Can Negotiate Around a Non-Compete Agreement
Its sort of like stealing second base: employees switching jobs to a competing company have to watch their backs and keep their eyes open going forward, because non-compete agreements these days can mean employees and their former bosses end up in court.
Marissa Mayer is a good example of stealing second safely. The former Google executive, started as Yahoos new CEO Tuesday, and no lawsuits were filed.
In a previous CorpCounsel.com article, we wrote about the ways employers could protect themselves against potential litigation when they hire talent away from a direct competitor. Now were turning to the other end of the equation to look at what employees on the move can do to protect themselves from the pitfalls of restrictive documents like non-compete agreements.
The only real protection is not signing one of these in the first place, but thats easier said than done, said Logan Robinson, a professor of corporate governance at the University of Detroit Mercy School of Law and previously general counsel for the automotive supply company Delphi and also Chryslers international operations.
Companies may have routine non-compete agreements for low-level employees that they require everyone to sign before joining the company. Robinson suggests offering to sign an intellectual property protection agreement instead of a non-compete. But if you have to sign a non-compete, negotiate it.
This is a potentially career-destroying agreement, Robinson said. At their worst, non-compete agreements can force a former employee to leave the profession or even move to another state. Most often someone will leave the region but not leave the profession, he notes. But if its a national business or if its a tech business, they are going to argue and put in their agreements that its national and possibly international in scope.
Megan Belcher sits on the other side of the hiring conversation in her position as vice president and chief employment counsel at ConAgra Foods. As she said in our earlier article, her biggest concern is that many employers hire people before considering or even knowing if an employee is bound to a non-compete. Fortunately for both employer and employee, she says its a situation that can usually be resolved.
Its more of a rarity that you cant modify someones contract, Belcher said. Nonetheless, she urges employers to be prepared for potential litigation when hiring talent from a competitor: These arent nice litigation fights. Theyre short, theyre expensive, and they involve highly confidential info on both sides. Say youre hiring a director whos going to be paid $90,000 a year. Is it going to be worth $60,000 to fight a temporary restraining order? Maybe yes, but be educated.
The same goes for employees: dont sign an agreement thats hard to keep. As an example, Belcher gave a hyphothetical: a key account manager at a national beverage company doesnt have an MBA, and he knows hell never get promoted at his present company without it. In the beverage field, there are other companies that dont require MBAs for top jobs. But the employee joins his company anyway and signs a non-compete, disregarding his own future plans to move to one of those competing companies.
Belcher notes that in a situation like this, The question [for the employer] becomes are you getting a get when you hire away the employee, and is the get worse than what youre giving up?
Michael Greco, a partner at Fisher & Phillips whos written a list of top 10 things for employees to do in these types of situations, says commonsense suggestionslike dont badmouth the company youre leaving to clients or other employees, and give 100 percent until the last daybear repeating, Because you dont want to give the company any excuse to sue.
An employee who talks badly about their employer before moving to a competing company could be perceived to be making moves to take clients with him or her. And an employee who slacks off six months before leaving, then has great success in the first few months at the new job, might look as though they held back on opportunities and then took them from their old employer.
So whats the best-case scenario for employees seeking new opportunities in their industry?
That the new employer is enthusiastic about hiring you and, according to Robinson, you sit down with your current employer and their non-compete document, and say: I understand your needs to protect intellectual property. I have been trained in this profession; I cant simply give up my livelihood to give you years of protection for your property.
Then, Robinson says, its time to start the negotiations.
See also: "Mayer Didn't Have a Non-Compete, But Your Competitor Might," CorpCounsel, July 2012.