You’d expect a fat non-compete clause in a top-tier investment banker’s employment contract. Yet more companies of all stripes are foisting non-compete contracts on lower-level lieutenants–and even line workers.
Some employers also use non-disclosure or confidentiality agreements. A non-disclosure agreement helps an organization safeguard its trade secrets and other proprietary information. Under the agreement, employees are prohibited from disclosing this information. Confidentiality agreements are similar, except that the agreement requires that one or both parties must keep information confidential.
“Even though hair stylists aren’t six-figure earners, they are frequently being asked to sign [non-competes],” says David Conforto , an attorney at Conforto Law Group in Boston. Conforto recently won an injunction for a stylist client so she could continue to work; the judge deemed her non-compete contract un-enforceable because of the high demand for qualified stylists.
Employers wield non-competes to stanch turnover and keep a firm grip on proprietary client lists and critical research. And with global competition more fierce than ever, the paranoia is at a fever pitch. Being a member of this so-called professional industry a few words of wisdom from me to you may help you from being deceived from business owners who rent chairs. After your interview make sure you take a copy of the contract to a lawyer, NOT YOUR FRIEND TO READ. But a Lawyer. Sign nothing, and if the owner will not let you take it out of the salon to give to an attorney, they are probably 100% not honest with you. SCAMMERS are abundant in the beauty industry my friends. Do not get your advice on Non-Compete contracts from a beauty industry magazine, beauty industry website, a hair idol, or so-called Icon, but from an attorney licensed in your state. Read On My Friends.
While you probably can’t avoid having to sign these contracts, you should make every effort to negotiate as much wiggle room as possible. It is your business and you must conduct yourself as a business owner.
First step: Hire an attorney to vet your contract before you sign it. Yes, you might pay $200 to $500 an hour for the privilege, but that’s probably a good bet. The cost of going to trial over a breach of a non-compete typically runs in the tens of thousands of dollars. Even if you do win the case, you don’t recoup those legal fees, as defendants typically do in other cases. If you lose, you’re out of work to boot.
If you’re presented with a non-compete clause, send your potential employer a letter confirming that you are consulting an attorney to make sure you understand all the terms. Declaring that step in writing is important because it prevents the employer from retaliating by swiping the job offer later on. (Judges don’t look too kindly on a move like that.)
In lieu of a traditional non-compete contract, try to angle for a “non-disclosure” or a “non-solicitation” agreement. Non-disclosure agreements stipulate that departing employees can’t make off with valuable research, while non-solicitation agreements prohibit them from going after important clients–except those they cultivated prior to joining the company. If that doesn’t work, focus on winnowing the scope of the non-compete. “The employer is going to push it to be as broad as possible, but you want to make it as restricted as possible without jeopardizing the job offer. Two key elements here: geography and time. Try to limit both. Reasonable restrictions will vary by industry, of course.
For example, temporarily barring a hairstylist from working in an entire county might not be plausible, but shackling a pharmaceutical rep in the same area might. Contracts stating that you can’t work in the industry throughout the U.S. probably won’t hold up in court, although some tech companies may be able to enforce them, because of the global nature of the Internet. The same strategy goes for the time span of the non-compete. The standard window for these contracts is six months to a year. Anything more than two years is downright draconian, and probably won’t hold up in court. Then again, don’t count on a judge to bail you out. “You still have to pay for litigation, or hope that your new employer will pay for it. In a tough economy, that’s a chance you probably don’t want to take. Take my advice my fellow professionals go see a lawyer.
While there are no federal laws directly governing non-compete agreements, some states do address the legality of such agreements. Under Wisconsin law, for example, the agreements must:
- Be necessary for the protection of the employer;
- Provide a reasonable time period;
- Cover a reasonable territory;
- Not be unreasonable to the employee; and
- Not be unreasonable to the general public.
Although most states will enforce non-compete agreements if they are “reasonable” in terms of breadth and length of the restriction, the definition of what is “reasonable” varies. When crafting a non-compete agreement, an organization must pay careful attention to the agreement’s scope. An overly limiting agreement may be deemed un-enforceable by state courts.