Published on September 10th, 2013 by Alan L Sklover
Question: Business is really slow at my present employer, and my hours have been reduced. I did not sign a non-compete. A company that is a customer of my present employer would like to hire me, and I’d love to work for them, mostly because they are very busy right now.
Problem is that the customer-company has signed an agreement – they call it a “No Poach” agreement – that says that they won’t hire an employee of my employer for four months after the employee leaves the company for any reason.
This is hurting my family livelihood. Please let me know if anything can be done, and if so, what that is. Is there any way around this?
Answer: Dear Crystal: Lately I am more frequently working with clients who are having difficulty with prospective employers having signed just what your prospective employer did: “No Poach” agreements. Your inquiry, though, is the first question any blog visitor has submitted for me on this subject. As you will see, the answer to your difficulty is not all that different from the answers I provide employees who have signed non-compete agreements, and want to get “around, over or out” of them. Here we go:
1. “No-Poach” agreements are increasingly common; they are essentially “no-hire’s” between two employers, and are as valid and binding as any other agreements. Nearly everyone is familiar with non-compete (often called “non-competition”) agreements, which employers use in an attempt to prevent employees from leaving and what they consider “stealing” their business secrets or business relations with customers, suppliers and other affiliates, and bringing them to their next employers. These efforts grow out of a view – mistaken in my own opinion – that employers have any real business “secrets” or “own” their relations with their customers, vendors, suppliers and affiliates. That is why so many Judges decline to enforce non-compete agreements, unless the employee has done some truly bad deed(s) either in planning or in making their departure.
Regarding “No Poach” agreements, in a similar way, employers also don’t want their customers, vendors, suppliers and affiliates to “steal” their employees from them, either. So, with increasing frequency, employers are saying to their customers, suppliers and affiliates, “Please sign this agreement that says you won’t “poach” our employees.” This happens most frequently when the employer is in the business of providing to its customers the valuable business services of its employees, such as (a) computer programmers, (b) systems analysts, (c) researchers, (d) consultants, and the like, and know that it is tempting for some customers to think to themselves, “It sure would be cheaper to just hire the person directly, and “cut out” the middle-man costs of his or her present employer.”
2. Like non-compete agreements, “No Poach” agreements are not usually enforced by going to Court, but rather by the possible “Poacher’s” fear of litigation, and the attendant risks of litigation. As I often say about non-compete agreements, the most important thing to know about them is that perhaps 95% of the time they are not enforced in Court, but rather by the fear of going to Court. This distinction is a really important one, for it helps us better focus on how they are best handled, resolved, or defeated.
You see, no one really wants to go to Court, due to the potential (a) disruption to daily business life, (b) cost of lawyers, (c) exposure of things that people really don’t want exposed, and (d) even a “runaway” jury verdict of hundreds of thousands, or even millions, of dollars. Remember: even Mafia chieftains usually take plea bargains, because they have the same exact fears.
3. Your first step forward should be to see if the prospective employer would really like to hire you, and to work with you to do that by seeking to get the “No Poach” agreement waived. Nothing makes any real sense unless your prospective employer wants to hire you, and is prepared to confront the impediment to your hiring; the “No Poach” agreement. As I’m sure you are aware, most people shy away from anything that seems like confrontation.
Determining whether that is the case is the first step to take. I suggest you request a short face-to-face meeting to determine what their answer is, and to explore their thoughts as to what the best avenue to take might be.
If the answer is positive, then you might mention to the prospective employer that where you now work business is quite slow and even that your hours have been cut way back. That suggests to me, and it may well suggest to them, that your present employer might (a) be worried that that they could lose your prospective employer as a customer (or supplier, vendor or affiliate) if they don’t agree, (b) have no stomach for a Court fight and its expense, and (c) actually be fine with “letting you go,” to avoid the costs of (i) severance, (ii) unemployment, (iii) other sums it might owe you, and, too, (iv) any potential legal claim you might have that your reduction in hours or layoff were improperly motivated.
You see, just as “the best way to fight fire is with fire,” the best way to fight fear is with fear.
4. The second step: seek a negotiated waiver of the “No Poach” agreement, noting the reasons above and other “perceptions of risk” to your present employer. With these thoughts in mind, either you or your prospective employer might approach your employer to see if it might, for these reasons or for others, agree to waive the “No Poach” agreement. Bear in mind, as your hours are already being cut back, the value in keeping you as an employee might just be diminished in your employer’s mind, and the “risk” of losing you might be less important to it than if business was quite busy.
Something else to consider: if you are not a source of revenue to your present employer – that is, not someone whose services they sell to customers – and are more administrative in nature, your gaining the waiver you seek will likely be easier.
In my experience, this second step forward is usually best taken by the prospective employer, the party who signed the No Poach agreement with your present employer. That said, if they don’t want to proceed for any reason, there is no reason you cannot “carry the negotiation ball” yourself.
5. A potential third step you might take is to request your present employer consider agreeing to a “buy-out” of the “No Poach” agreement. If a business is having financial difficulties, as your employer seems to be experiencing, they may be amenable to a cash payment “up front” to waive the “No Poach” agreement. Typically, the payment of the equivalent of a few months pay to a former employer is sufficient to convince them that this is a good deal. I have seen “No Poach” agreements bought out for anything ranging from one month’s pay to one year’s pay. However, if you are a source of revenue to your present employer, as noted above, then their calculation of lost profits that you represent to your present employer would likely be the key to the negotiation: for example, something like six month’s of “lost profits,” payable up front, might be the way to negotiate.
Who should pay that sum? Well, your first suggestion to your prospective employer should be your prospective employer pay that sum, because (i) they are the ones bound by the “No Poach” agreement, (ii) they are the ones who will benefit most by your services, and (iii) they are the ones who surely have more money in their pockets and can afford such a sum.
If your prospective employer doesn’t buy into that, you might suggest that you will contribute, perhaps, one half of the necessary sum, over time, out of your future pay. Another common resolution is for the prospective employer to agree to pay the sum, and for the employee to agree to contribute a portion over time, but for the employee’s portion to be forgiven if he or she remains employed by the prospective employee for a set period of time, usually one full year.
6. One important caveat: Do not threaten to do any type of harm to your present employer’s relation with the prospective employer, divulge or use secrets, or to damage any other aspects of its business or reputation. In discussions and negotiations such as these, sometimes tempers flare, “hot words” are used, and people say things they should not. You must be very careful not to threaten the interests, reputation or relations of your present employer unless you get the waiver you seek. That could be viewed either as (a) a breach of your duty of loyalty to your present employer, for which you could be sued, or (b) even extortion, which is a threat of harm unless something of value is surrendered, and that could even get you arrested. Though these events are very, very rare, carefully avoiding threats of any kind is the way to make sure they don’t take place.
7. A second important caveat: get both the waiver, and any agreement with your prospective employer, in writing, before resigning your present position. Being mindful and careful in all you do is a good habit, especially when your employment, your career and any payment of money is concerned. No agreement needs to be complicated; in fact, all agreements should be kept quite simple. But any waiver, and any agreement as to contribution to any buy-out, should be in writing, so that (a) all are clear as to what has been agreed to, (b) there is a clear record for future reference, and (c) all parties are discouraged from violating those agreements, knowing a clear record exists. No one – not you, least of all – wants or needs to needlessly get involved in a dispute.
I hope this has been helpful. In my experience getting a (a) waiver or (b) buyout of a “No Poach” agreement is not as difficult as you might think, especially with a business that is having enough difficulty that it is cutting back employee’s hours.
Good luck, and thanks for writing in. Please tell your family, friends and colleagues that we are here to help them, too.
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