Non-compete agreement, or termination! 8

[JigaWatt]

A Mechanical Engineer friend of mine works for a company who designs UAVs. Recently they told their engineers they have to sign a 1 year non-compete agreement, meaning they cannot work for any other company associated with UAVs for 1 year after termination for any reason. If he doesn't sign, they will plan on replacing him. He isn't sure what to do. Any advice? How easy is it to enforce a non-compete agreement? Can they legally fire him for not signing this agreement?

Thanks!

 

[ChadInColo]

Sounds like 2 choices. Sign the non-compete, or find a new job. Believe it or not, this is very common in many industries, I am actually surprised it is only a 1 year period being in the UAV market. We almost required a 10 year non-compete for all our workers, backed off so only upper management/sales had to sign the non-compete, but everyone in the plant has to sign a non-disclosure, inovation ownership contract.

And on enforcement, it is a contract. How much do you want to spend on a lawyer if you break it? Whether they can legally fire him, look at it this way, he signs it and works on projects, or he doesn't, can't work on projects and is of no value to the company.

 

[COKA]

You should post this in "Professional Ethics in Engineering".

Coka

 

[MortenA]

Usually such an agreement should be followed by a compensation - especially since it was not there when i got the job (or so i assume).

I think it would be quite right for him to ask for a pay raise in connection with signing this agreement - since should he be terminated then he would not be able to seek work within hes most resent area for a year.

I dont know the laws where you live - but here in Denamrk many such "contract" would be void by default because they are too broad or with no compensation.

Best regards

Morten

 

[aspearin1]

I don't believe any contract is legally binding unless it is notorized, especially if coerced to sign. Threats of losing your job for not signing would fit in that category. Read the fine print. Many places, like my company, ask you to sign.
The fine print says, "If you find another job in the same market, please be so kind to give us 30 days notice to evaluate the new position. If we find it is a conflict of interest, you cannot take the new position, but we will pay your offered salary for a 1-year period. If you do not give the 30-day notice, we hold no obligation to pay, even if we decide it's a conflict of interest."
This seems fair to me... Legally binding? Like Coka says, it's an ethics question. If you cannot ethically abide by the contract under the conditions, then don't sign. If they fire you for not signing, then your probably have a decent court case.

aspearin1

 

[RDK]

This issue has come up in a couple of other threads.

Here in Canada, as I understand it, a non-compete contract has to be reasonable to be enforceable. That is it must only cover a specified part of practice for a specified time period and a specified geographic area.

For example if you buy a retail store, you might want a non-compete contract with the previous owner. You would have to limit the time, the geographic area to the area of competition and trading area and the part of practice to your area of retail trade. It would be voidable if it said cannot operate a business anywhere in the country forever.

That is the agreement would have to say cannot operate a retail men’s wear clothing store in the metropolitan area for 5 years.

I would think that employment contracts would be similar. If the area is UAV’s and the scope of the competition is national then no UAV work for 1 year would not be unreasonable for people with specialized or confidential knowledge. To insist that the janitor sign such an agreement would be unreasonable, to insist that all engineer’s sign one would be reasonable.

The issue of additional compensation is interesting. One could argue that the previous pay scale was adequate only if one could keep his employment portability. The argument is that since there is a loss of portability then some additional compensation would be necessary. The counter is that the compensation is continued employment.

Be careful with this one. The company has said that no sign no work. They have expressed a willingness to release anyone who doesn’t sign. They might just use this to make the example. No additional compensation, no sign, no job period.

The only room I see for negotiating this is in the ability to work for companies associated with UAV’s but not in technology associated with UAV’s or to get a one year severance package in the event that the company terminates the employment without cause. (i.e. a layoff) This would protect your ability to continue working if the company decides to end the working relationship and not the individual. (Firing for cause would be another issue since the employee by nature of his conduct is the one taking the action to initiate the termination.)

Is this a pure competitive sort of agreement or are their national security interests here as well?

If in doubt then get legal advice from someone familiar with employment law and precedent in your area.



Rick Kitson MBA P.Eng

Construction Project Management
From conception to completion

http://www.kitsonengineering.com

 

[jmw]

Or more importantly, appropriate severence terms; what is being asked is that when you leave the company you don't work for a year in a field where you are most familiar. If it isn't your coice to leave, that could mean a serious loss of earning power or it could mean an opportunity for retraining... the limitation on retraining is usually time and money. You get the time, you need the funds. Fair is fair. They are asking you to make a committment. See if they will make one too.

 

[TheTick]

suggestion: Tel your friend to sign his name misspelled with opposite hand that he normally writes with. If it ever comes up in court, his former employer will be laughed out of the courtroom.

prosecuting attorney: "Is this your signature, Mr. Smith?"

Mr. Smith: "It might have been, if I signed this when I was 3 years old and didn't know how to spell my name or hold a pen."

"Great ideas need landing gear as well as wings."--C. D. Jackson

http://www.EsoxRepublic.com

 

[TheTick]

Seriously, I have discussed this issue with a friend who is an attorney and an engineer. Most of these agreements are unenforceable. Sign it and forget it.

 

[jmw]

On the other hand, some companies like to be as tough as they can.
There are three ways you can leave the company:
(a) you go to a new job for better pay or conditions. The company can do a lot in the case of sensitive skills or knowledge by making this a tough call.
(b) they make you redundant, in which case they are signalling that they no longer consider your particular skills relevent or sensitive and the clause should be void.
(c) they fire you for some other reason. Expect them to play hard ball.
Any others?
(PS, if you work for covert governement organisations, don't rule out being exterminated with extreme prejudice, ha ha)

 

[haggis]

I have to agree with TheTick. Sign it and forget it.
I work for one of the Big Three on a contract basis. The body pedlar had me sign an agreement that if the company wanted to hire me on staff, I would have to wait for a year because they were "his client" and I was "his property".

There isn't a court in the land who would support someone telling you for whom you can or cannot work.

 

[RDK]

I would never sign such an agreement and then attempt to violate the agreement. (While I had a laugh about the left hand signature, I’d never do that because to disprove it would be perjury and that could cost you your engineering license.)

If nothing else you are taking a big gamble. You are gambling that you can afford to fight the case in court and that you will win. The company has deeper pockets than you and if they lose all that happens is that you are able to get on with your life. If you lose then the damages could financially destroy you.

Do you want to take that chance?


Rick Kitson MBA P.Eng

Construction Project Management
From conception to completion

http://www.kitsonengineering.com

 

[TheTick]

This has come up before.

Non-compete agreements can not force you to not work for a competitor. You can not be restricted from lawfully plying your trade. This includes going to work for a competitor doing same job (your trade). You can only be restricted from starting a business yourself or taking company trade secrets.

I would even go one step further and say the company is most likely already aware of this fact but tries to bully its employees anyways.

 

[dwt]

I find myself in a similar situation.
I have worked for a small Canadian manufacturer for eight years. Three years ago we were bought out by a large American company. Six months ago corporate come along with a proprietary, non-disclosure and non-compete agreement for all to sign. I had no problems with the proprietary and non-disclosure clauses but had an issue with the 24 month non-compete clause regardless of the reason for termination.
Some of the issues that arose in our discussions, and as mentioned in previous threads, were the duration and geographic constraints and also the possibility of the company purchasing additional companies in new areas/fields.
I contacted legal and HR resources and all agreed that "it is not legal or moral for a company to stop a person from working in his livelihood."
After a few "discussions" with our management and corporate, because this needed to get signed and if I didn't want to work here I should just say so, corporate conceded that they could not enforce the clause but we should just sign it. My response - then why include it? They finally agreed to remove the clause from the agreement. That was six months ago and I haven't seen a reworded agreement yet.

 

[JPatten]

There was a pretty lengthy discussion on this in another thread. Thread 194-82175.

Bottom line if he is unsure what to do than he should consult an attorney before signing such a contract to get all the information needed before making such a significant career decision.

 

[profengmen]

This happened to a friend of mine, and It was covered well in my Business Law course.

No contract is legally binding if it was signed "Under Duress". Since you are afraid of loosing a job you already have, it is unlikely that the contract is even binding.



Nevertheless, again, you need to have this question answered by a labor lawyer, and those in here are not.

My friend went into direct competition and was sued, the company that hired him before hand knew the risk, and only paid $3,000 to end the suit. Only $3,000... so don't worry about it too much.

 

[RDK]

http://www.gigalaw.com/articles/2000-all/towns-2000-08-all.html

This is an article on non-compete agreements in the computer industry. The basic thrust is that courts are enforcing these agreements but limiting the time (due to the fast changing nature of computers and high technology) and expanding the geographical limitations (due to the net making geography redundant)

http://jobsearchtech.about.com/library/weekly/aa042202.htm

This is a more general article. It states that these agreements are generally enforceable, unless the specific jurisdiction has made them unenforceable. (It cites California as one jurisdiction where these are unenforceable,)

It also states that these agreements, where enforceable, are contracts. This is without regard for when they were signed, before or after initial offer accepted or if signed while an employee.

http://www.jacksonlewis.com/legalupdates/article.cfm?aid=376

This article discusses the situation in Texas regarding these agreements.



In general, in jurisdictions where these are enforceable, the enforceability of any specific agreement depends on the “reasonableness’ of the agreement. The test of reasonableness is based on time of restriction, geographic restriction and scope of restriction. Time is becoming shorter in technology while geographic coverage is becoming broader. Scope of restrictions remains as being the narrowest to protect the former employee’s interests.

To sign under threat of firing is not under duress. Under duress is if you are dying of thirst in the desert and I get you to sign over your entire assets for a glass of water. It would also include signing under threat of violence or unlawful imprisonment. (Sign or be hurt or sign or go to jail.) A bond to get out of jail, i.e. legal imprisonment, would not be under duress.

Simply using job loss as a negotiating threat would not, IMHO, qualify as duress. You have a reasonable alternative, one that is no threat to your life or your freedom, just a threat to your employment.

Bottom line legally is first find out if this is in a jurisdiction where such agreements are enforceable in the first place. Then contact a lawyer (or two or three) to find out is this agreement would be reasonable under current state law and precedent. (Get a brief in writing and read the supporting cases yourself.)

One area that has not been discussed is that UAV’s are usually a military application. Could the former employer make trouble for you under the guise of national security? Remember security works under rumour and innuendo not necessarily legally provable facts. (In other words, if the security agencies think you are a threat, then your clearance is pulled, no need to give reasons or prove it in court. No clearance no work in sensitive areas.)




Rick Kitson MBA P.Eng

Construction Project Management
From conception to completion

http://www.kitsonengineering.com

 

[HDS]

It all depends on where you live. Each state (and country) has different laws about this. However, do not assume that thier lawyers cared what the laws were. Get together with some people you trust there share the lawyer bill to talk to a pro about it. These things are very common for salesmen and executives. There was just a guy named Leach that sued Ford over one and won.

 

[imok2]

I believe your state atterney general office may be able to help you on this

 

[JOM]

As someone who has been down the road of signing a restrictive employment contract and then negotiating my way out of it, may I add some thoughts to the discussion?

It was a stressful, unenjoyable experience. I'm determined never to get into that situation again. I'd rather have a dose of cholera.

The contract I signed with the employer prevented me from working for any of their clients they put me in contact with. This applied for a period of twelve months after working with the client, unless the employer gave me permission.

Why did the employer want this? Never explained. Could be protection of the intellectual property they developed as consultants. Could be they wanted a captive workforce.

Why did I accept the terms? Needed the work. Also did not think it mattered. Also assumed I was the weaker player in the deal.

What do I think now? I've learnt that a person has a right to choose their employer. No other party has a right to interfere with that choice. It's fundamental.

What about intellectual property? Maybe, but if this is the reason then it should be out in the open, not used as camouflage for a hidden reason. But property can be protected by approprate agreements. It still doesn't give one party the right to curtail another's future employment.

What's the legal position? Some people say it's unenforceable as it trangressess free trade principles. Testing that could ruin you financially.

But I signed. I willingly agreed to a crystal clear condition. As a hooman, I can't toss that aside and say the contract isn't enforceable. There's an emotional payoff to that. If I thought that at the time I signed, then I should not have signed. I made an agreement. To breach that isn't a matter of law so much as a matter of peace of mind.

When I expressed a desire to work directly for the client, the employer threatened legal action. This is the Rubicon. Avoid it as strenuously as you can. There's no going back in any life issue when one party threatens another with legal action. Open discussion becomes extinct. Civil discussion becomes scarce.

I shifted from the employer to the client, who paid the employer a fee. I got the work I wanted, but it was not worth the arguments and anxiety.

What would I do next time?

Start with the principle that no party has any right to restrict a person's choice of employer.

Stick to that. Explain it. It's not hard to grasp.

Speak openly about all important issues from the very beginning. Leave hidden agendas in the waste basket.

Consider myself as the most important party to the deal. If I had refused to sign, I think they would have still employed me - and had greater respect for me and valued me all the more.

If I sign an agreement, I'll stick to it. Adhering to your word is more important than legal argument.

J.







Cheers,
John.