Non-competition and non-solicitation agreements are designed to protect employers from unfair competition by a former employee, and they are no longer just for CEOs and other highly paid professionals.
Non-compete and non-solicitation agreements are now being used for lower-wage employees such as janitors, sandwich makers and hair stylists. One out of every five workers in the United States, or approximately 30 million people, are bound by non-compete and non-solicitation agreements, according to recent surveys. Approximately 15% of U.S. workers with earnings of less than $40,000 per year also report having a non-compete.
A non-compete prevents an employee from working for an employer’s competitor or starting a competing business for a set period of time, typically between one to two years, and within a designated geographic area, such as within a city or county limit. A non-solicitation agreement is slightly different: it prevents the employee from soliciting business from the employer’s customers or soliciting the employer’s other employees to join the competitor, typically for the same time period as the non-compete. These agreements also prevent an employee from taking the employer’s valuable information, including its trade secrets, customer lists and pricing information.
Given the proliferation of non-competes in the United States, it’s important for employees to understand their rights and what to do if your boss asks you to sign one. While laws differ by state, here are six general tips to follow.
Read the contract
Let’s start with the most obvious: read the contract before you sign it. Too often, employees believe non-competes are not enforceable, so they do not bother to read them or negotiate their terms. This is a serious mistake. Non-competes are allowed in all states except California, North Dakota, and Oklahoma. A carefully drafted non-compete could force you to move to another city or state for a new job. Read the entire contract so you know what restrictions are being placed on your ability to find a new job.
If you are unsure of what the non-compete means, don’t be embarrassed; they are often drafted in convoluted terms. Consult an attorney.
Negotiate the non-compete
Outside of failing to read the contract, the worst mistake employees make is being afraid to negotiate its terms. Remember, employers can’t force you to sign a non-compete, so use that as leverage to remove terms that are unfavorable. Your goal should be to narrow the restrictions placed on your ability to find a new job as much as possible. To do that, focus on three key provisions.
1. Start with the geographic scope of the non-compete. Request that it cover only the area in which you actually work instead of all the locations your employer does business.
2. Ask for the length of the non-compete to be as short as possible so you don’t face long-term limitations in the job market. Most non-competes run from six months to two years. The latter should be reserved only for high-ranking officials and professionals. If you are a lower-level employee, try to keep the length to six months to a year.
3. Make sure the scope of competition you are prohibited from engaging in is as narrow as possible. If you spend the majority of your time selling one type of product for your employer, only agree to a non-compete that prohibits you from selling that same product for a competitor. Don’t agree to a non-compete that prohibits you from working for a competitor in a different line of work.
Don’t agree to pay your employer’s attorney fees
Watch out for contractual provisions that require you to pay your employer’s attorney fees if it sues you for violating the non-compete. Attorney fees can cost thousands of dollars. If you face the risk of paying your own attorney’s fees as well as those of your employer, it could create serious financial problems for you and reduce your leverage when trying to negotiate a settlement. Ask your employer to remove that clause from your contract. At a minimum, request that the clause is changed to a mutual prevailing party attorney’s fee provision, so whoever wins the lawsuit is entitled to have their attorney’s fees paid by the other side.
Put everything in the contract
Almost any employment contract has an “integration” clause. This clause says that the written employment contract is the entire agreement between the employer and employee, and any other agreements between the parties not in the agreement, including oral promises made by the employer, are void.
Some employers ask employees to sign a non-compete but promise to not enforce it upon the employee’s termination. If there is an integration clause in the contract, that promise is meaningless. Your employer can (and likely will) require you to comply with the non-compete you signed, denying that any such promise existed.
Don’t swipe the customer list
Do not take your former employer’s property, such as its customer lists, pricing information or product information to your new job. It is not worth the risk. Employers invest considerable money in creating and maintaining this information and will go to great lengths to protect it. If an employer suspects you might have taken valuable information with you, it could hire a computer forensic expert to examine your computer.
No matter how well you think you have covered your tracks, odds are a computer forensic expert will find out if you downloaded a customer list, emailed clients about your new job, or stole other valuable company information. Whatever benefit you might receive from this information pales in comparison to the cost of a lawsuit.
Save yourself the headache and cost, and leave your employer’s property behind.
Be mindful of social media activity
Recently, employers have sued former employees for their social media activity, particularly on LinkedIn.
In Illinois, an employer sued an employee for violating his non-solicitation agreement because the employee sent requests to connect on LinkedIn to his former customers and work colleagues. The court sided with the employee, however, on the grounds that the LinkedIn requests were generic and did not directly solicit the customers or employees.
But a court in Minnesota recently held that a former employee violated her non-solicitation agreement by posting updates on LinkedIn that described her new employer’s business and invited her connections to contact her for a quote. The court described the posts as “blatant sales pitches” designed to “entice members of [her] network to call her for the purpose of making sales” for her new employer.
The different outcomes of these cases highlight the perils employees face when interacting on social media. The best approach is to err on the side of caution and avoid sending direct or targeted messages to customers or former work colleagues about your new job, whether on social media or otherwise.
Patrick Causey is a commercial litigation attorney at Trenam Law’s St. Petersburg, Fla., office whose practice includes breach of contract, non-competition and non-solicitation agreements.
