“Your Best Time to Beat a Non-Compete”

“Your Best Time to Beat a Non-Compete”

“The wise are betrayed only once.”

– German Proverb

ACTUAL CASE HISTORIES*: Geraldine, 33 and a fashion coordinator for a New York-based fashion firm, was ecstatic; she had been offered a better position, with a significant pay raise, by a fairly new, upstart competitor. All seemed great, so she took the new job, and started three weeks later.  As is so very common, after starting, Geraldine was asked to sign a non-competition agreement, which she signed, reluctantly.

Nine weeks later, Geraldine came to us with a problem: she wanted to resign. Her Creative Director turned out to be as close to a psychopath as a person could be, despite the fact that the Creative Director was quite warm and personable during all of Geraldine’s interviews.

Because Geraldine was young, with few financial commitments, and had a few dollars put away for such “rainy days,” she was not concerned about resigning. Rather, her concern was the non-competition agreement she was given to sign on her third day on the job. It provided that, should Geraldine ever leave the company’s employ, for any reason, she would not “for a period of two years work for any company that engages in the fashion industry designing, selling or licensing the same kind of products designed, sold or licensed by the Company.”

That didn’t seem fair, as Geraldine’s employer designed, sold and licensed a wide variety of lines of clothing for men, women, boys and girls, including accessories. They were in the business of “hats to shoes,” and everything in between, making Geraldine’s non-compete agreement quite a problem.

And, too, every recruiter and employer asked the same two questions during Geraldine’s new interviews: “Did you sign a non-compete agreement?” and “Can we see it?”

It was not an easy task, involving Court papers and proceedings, lots of stressful times, and a significant expense for Geraldine, to get her relief from her non-competition agreement. Suffice to say that she was glad when it was all over, but wished it had never happened in the first place.

You might say that is the point of the story.

LESSON TO LEARN: During interviews and when given a job offer, no one wants to raise difficult or uncomfortable questions. But sometimes that is the best thing you can do. Besides, asking smart, insightful and probing questions is always a smart thing to do, and shows confidence, sophistication and prudence, three traits sought by all employers.

When a job offer is made, most people think about the “rewards,” the “positives,” and what I call the “sugarplums.” By this I mean (i) salary, (ii) bonus opportunity, (iii) possibility of equity, (iv) title, vacation and the like. Often it is wise to think about the “risks” of the deal, as well, for every job, every deal and every change has within it risks and rewards, both of which should be considered.

Two of the wisest questions you can make when a job offer has been given to you is “Will I have to sign a non-compete agreement in order to work here? If so, may I see it now?” Sure, this raises the possibility that one day you may leave the company, or be asked to leave, which is not the most positive thing you should now have on your mind. Still, it is a reality that no one “marries” everyone they date, and no job is forever. It is wise to ask those questions to know what you are getting into.

It’s wise to ask those two questions at that time for a second reason: you have the most leverage at that time to resist or negotiate the terms and conditions of a non-compete. Never before and never after will you have more leverage in this regard.

You may not be successful in either resisting or in negotiating your non-compete agreement – there are no guarantees in anything you do – but at a minimum you will know what you are getting yourself into if you accept the job.

Geraldine sure wished she did.

WHAT YOU CAN DO: Been offered a new job? Consider these wise steps: 

1. Understand that whether you will be required to sign a Non-Compete Agreement, and how the Non-Compete Agreement will restrict you, is perhaps one of the most important elements of a job offer. It is all too true that employees see job offers almost exclusively in terms of “rewards” above all else. And employers know that, too; they typically note only the rewards of salary, bonus, title, benefits, equity, vacation, car, etc. After you start the job, possibly a week later or possibly 10 years later, when you leave your job – whether voluntarily or involuntarily – you will likely come to understand that whether you signed a Non-Compete agreement was a very important term of your employment, and some people come to see it as the most important term of all.

2. After a job offer is made, inquire whether you will be required to sign a non-compete agreement. Job offers are filled with terms and conditions of the offered relation. While the “good stuff” is often in offer letters, the “bad stuff” is often left out. Don’t be reluctant to ask whether you will be required to sign a non-competition agreement. It is at this time – when it is of greatest importance to your future employer that you agree to come on board – that you have the most leverage to have a non-competition agreement (a) waived, (b) limited, or (c) only effective in certain situations.

We offer a Model Letter to do just that: It presents the question “Will I Be Required to Sign a Non-Compete Agreement?” in a most professional way. Just [click here]. Delivered by Email – Instantly. 

3. If you are going to be required to sign a Non-Compete Agreement, ask to see it, and consider how it might affect you in the future – next week or next year. You never know if a job is going to last three weeks or three decades. Sure, we all try to be optimistic, but sometimes reality has a way of making that difficult. Consider how broadly the Non-Compete Agreement is written, how long the restrictions are set to last, whether the restrictions take effect even if you are laid off, that is, even if you don’t resign, and, too, what kind of jobs you could take and stay outside the purview of the restricted activities.

4. Unquestionably, this is your best time and greatest opportunity to ask that the Non-Competition Agreement be made more reasonable and less harsh, or perhaps even waived in your case. Suppose, for the moment, that you have spent twenty years in your specialty field, and that you are being hired to work for a brand new firm or division run by people with little experience in this particular subset of the industry. Chances are pretty good that you have extensive relations in the industry, from vendors to designers to customers, and a deep knowledge of the key points of the business and its negotiation. In such circumstances it is more likely that you will share knowledge and insights with the new company than the new company will share knowledge and insights with you. In this situation, and in many others, too, you would be entirely reasonable to request that it be agreed – in some form of writing – that you will not be required at any time to sign a non-compete agreement.

Likewise, you can ask that (a) the non-compete agreement not be effective until you are employed for at least one year, (b) the non-compete not be effective if you are laid off (as opposed to voluntarily resign), (c) the non-compete not be effective unless you are being paid severance while you remain unemployed, (d) the non-compete not be effective if you are given either a materially different set of responsibilities or materially lower compensation, and (e) perhaps 100 other wise things to ask for to limit the risk your Non-Competition Agreement might pose to you, your career and your family finances.

This is your best opportunity to do so. You have leverage and opportunity now, and you will not later. Don’t let it pass by without a good try!

For such circumstances, we offer a “Model Response to Request You Sign a Non-Compete Agreement” that helps you respond. To obtain a copy, just [click here.] Delivered by Email – Instantly.

5. While you are at it, before you accept the Job Offer, you might ask Human Resources certain significant questions, now, before you agree to make the transition. When do various benefits start? Can you “bank” vacation days? Does the company have a severance policy? Chances are you don’t know the answers to these questions, but they are important aspects of a new job. What if you are entitled to only one week vacation? Sure would be good to know now, if vacation is very important to you and your family. These are among the “10 Critical Questions to Ask Human Resources” we recommend be asked at this time.

We offer a Model Memo for this purpose entitled “10 Critical Questions to Ask Human Resources.” For a copy, just [click here.] Delivered by Email – Instantly.

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. To obtain your copy, just [click here] Delivered by Email – Instantly!

SkloverWorkingWisdom™ emphasizes smart negotiating – and navigating – for yourself at work. Negotiation of work and career issues requires that you think “out of the box,” and build value and avoid risks at every point in your career. We strive to help you understand what is commonly before you, and know what to “watch out” for. Add in a dose of direction, motivation and inspiration, and then the rest is up to you. As they say in cooking class, “Just heat and serve.”

Always be proactive. Always be creative. Always be persistent. Always be vigilant. And always do what you can to achieve for yourself, your family, and your career. Take all available steps to increase and secure employment and career “rewards” and eliminate or reduce employment “risks.” That’s what SkloverWorkingWisdom™ is all about.

*A note about our Actual Case Histories: In order to preserve client confidences, and protect client identities, we alter certain facts, including the name, age, gender, position, date, geographical location, and industry of our clients. The essential facts, the point illustrated and the lesson to be learned, remain actual.

Please Note: This Email Newsletter is not legal advice, but only an effort to provide generalized information about important topics related to employment and the law. Legal advice can only be rendered after formal retention of counsel, and must take into account the facts and circumstances of a particular case. Those in need of legal advice, counsel or representation should retain competent legal counsel.

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