“My former employer says he will waive my non-compete, but only if I repay him two months salary. Is this extortion?”

Question: Dear Mr. Sklover: I have worked for my employer not quite two months. Today I was told I did not meet his sales goals. However, if I wanted to return my salary to him, he would destroy the non-compete. Otherwise, if I stayed in the industry which I have worked in for the last 15 years he would be forced to pursue me legally and keep me out of work for a year.

Is that extortion?

Painesville, Ohio

Answer: Dear Lori: I have been helping people resolve non-compete issues for over thirty years. Yours is the first time I have heard of an employer saying, “Give me money and I will give you back your freedom to work.” I am (almost) stunned by his audacity. Here are my thoughts.

1. Though I have been negotiating non-competition agreements and related issues for over 30 years, this is a “new one” on me. Honestly, I do not recall ever hearing that an employer had the audacity to “sell” you back your freedom in exchange for money. I find that appalling, unfair and near evil. 

The closest that I have seen to what is happening to you was when a female client from Boston quit her job due to extreme sexual harassment – bordering on assault – and she was offered a release from her non-competition agreement in exchange for her providing a release of claims and confidentiality about the harassment. She took the deal, which was probably for the best. 

Asked to sign a non-competition agreement? Maybe you can avoid signing, or have it made less of a problem. How should you respond? Our “Model Letter: Response to Request You Sign a Non-Compete” shows you “What to Say, and How to Say It.™ To obtain your copy, just [click here.] Delivered by Email – Instantly! 

2. I don’t see this as extortion, which is a very serious crime, which is generally defined as (i) intentionally, (ii) threatening to harm someone, (iii) in order to gain something of value from them. Surely, your former employer is trying to get something of value from you, namely two months’ pay, and surely, too, he is acting intentionally. However, I do have some doubts that it can be said (ii) he is threatening to harm you. Take advantage of you? Yes. Actually harm you? I don’t think so. 

I think your former employer is saying to himself, “I have something she wants, and she has something I want. Maybe we can trade.” Thus, the element of “threatening harm” does not seem to me to be present here. What your former boss seems to be doing seems to me to be more like “threatening to exercise what he thinks are his legal rights.” I expect that many of my readers may see it differently than the way I see it, but I don’t think he is actually threatening to harm you. Rather, I think what he is doing is pretty close to extortion, but not “all the way there.” 

I am sensitive to the use of the word “extortion,” and where and when it is used, because so many employers and their attorneys have accused me of being an “extortionist” when they discover their employees know how to negotiate for themselves, using the information, insights and inspiration I have offered. Employers and their attorneys become upset, frustrated and downright cranky when their employees start to understand employment negotiation, and start doing it well for themselves, using all their available leverage.   

3. There are three primary reasons we don’t see “buy-back-your-freedom” offers such as the one your former employer has made: the legal concepts of (a) “secrecy,” (b) “necessity,” and (c) “equity.” The three basic legal rationales for employers’ requests that Courts’ enforce Non-Competition Agreements are that (i) employees will steal valuable secrets, (ii) even a lawsuit for monetary damages would not replace the great value of lost business secrets, and (c) “equity” or basic fairness cannot be achieved in any other way.

 In Court, an employer must establish that, without the Court’s help, (i) it will lose irreplaceable secrets, (ii) money is not an acceptable remedy, and (iii) in only this way can “fairness” be achieved. 

What your former employer is doing proves the exact opposite of all three: (i) it shows that he has no concern for secrets, at all, because he is willing to abandon them for the return of two months’ pay, (ii) your non-competition agreement really is not necessary to his protecting his business and business secrets, and (iii) what he is requiring you do is perfectly unfair. 

4. In fact, if you can prove what he is trying to do – asking for the return of two months’ pay in exchange for your freedom – that may go a long way toward gaining back your working freedom. I suggest you try to get your employer to repeat what he has told you, either (a) on the telephone while you are recording it, or (b) by use of email. If you do, you can then send him a letter, transmitted to him in a “provable manner, such as FedEx or UPS, in which you demonstrate that you have all you need to win any Court effort he may start to enforce your non-compete. 

Why? Because it shows that (a) you really don’t have any business “secrets” that he cares about, (b) even your former employer thinks that money is an acceptable alternative to the non-competition agreement, and (c) keeping you unemployable is 1,000% unfair or what we call in law “inequitable.” 

You should also tell your former employer that, if he does anything whatsoever to interfere with your next employment, you will take him to Court “in a snap,” and demand hefty damages from him for acting in such bad faith. 

We offer a model letter to convince your former employer to withdraw a Non-Compete Agreement. It is our “Model Letter: Proactive Attempt to Prevent a Potential Non-Compete Dispute” that shows you “What to Say, and How to Say It.” To get your copy, just [click here.] Delivered by Email – Instantly!

5. In your brief note to me I also noticed three factors in your favor that might help you defeat your non-compete, which should be mentioned in your letter. Courts look for certain other factors to determine whether to enforce a non-competition agreement. I noticed three of them in your favor in your brief note: (i) you were on this job for only two months, and so had little if any opportunity to learn many trade secrets, (ii) you have been employed in the same industry for 15 years before this short-term job, and thus may know more trade secrets than even your former boss, and (iii) you did not resign to go and work for a competitor, but instead were terminated with “cause” or bad conduct.

 6. By the way, keep in mind that you live in one of the states that permits one party to a phone call to tape the other party to the call without his or her consent. You are fortunate in that your home state of Ohio is one of the 38 states in the U.S. whose laws make it entirely legal to tape record a telephone call by one of the two parties to the call. The other twelve require both parties to the call to know someone is taping the call. So fear not about audiotaping a call with your former employer.

 Lori, I hope these thoughts are helpful to you in handling the difficult spot you’ve been placed in. I have a strong sense that, with this information and encouragement, you will not hesitate to stand up to the unfairness that has been placed in your path.

My Best to You,
Al Sklover 

P.S.: Our 185-Point Master Guide & Checklist to Non-Competition Agreements is a perennial favorite. It takes you step-by-step through everything you need to know, with lots of insights and “tricks of the trade.” To obtain your copy, just [click here.] Delivered by Email – Instantly!

Repairing the World,
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© 2014, Alan L. Sklover All Rights Reserved. Commercial Use Prohibited.

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