Home Forums Hunting & Shooting Hunter's Campfire Question about employers and non-compete clauses.

In a nutshell, my employer, who I've been with for 18+ years under one company name or another, has updated his employee handbook. This is the first time it has been updated in about 10 years and includes a non-compete clause that I'm just not comfortable with. It's a plumbing and heating business and he's basically trying to stake a claim to any general contractor or citizen that he's ever had business with in his 30 year business history.

The wording of the clause aside, I'm questioning the tactic used to force all employees to sign the agreement. In a nutshell we're told that we sign it or lose our job. I can see that being a condition of employment for a new hire, but to tell an existing employee such a thing sounds an awful lot like blackmail of some sort.

The kicker is that Michigan is an "At Will" state, meaning employers can fire the employees at any time and for no reason whatsoever.

Does anyone have any solid info on the legality of being forced to sign an agreement under threat of termination?

I'm fully licensed to "go out on my own" as we say and am currently looking for another employer and I really don't want such an agreement that I'm forced to sign against my will hanging around my neck, so to speak.

*I'm aware of why employers institute these types of clauses. I don't need input on that topic. I'm strictly looking for input on whether coercing an employee to do something like this under threat of termination is legal.

Thanks in advance.

BOOM:

do you have a written contract , one for each employee ?

did he edit the handbook himself or hire an atty to do it?

if not, it'd be unenforceable

also, the employer seems to be confusing non-compete clause (which is a geographical restriction concept) with intellectual property theft (the client list is owned by the company).


enforce-ability of a geographical non-compete clause is based on a "reasonableness" standard for a given trade.

for example, for a veterinary associate, a 2-mile radius for 2 years is enforceable. any more or longer is unreasonable.

for an owner of a veterinary clinic, a 30-mile radius and 5 years is likely enforceable

Read this carefully, Looks like you might be covered.

http://www.myemploymentlawyer.com/wiki/Michigan-Non-competition-Agreement-Law.htm

DO NOT TAKE INTERNET ADVICE OR RELY ON INTERNET RESEARCH. Noncompete clauses have significantly different effects in different states and jurisdictions. See a lawyer before signing anything. If the radius/jurisdiction/contacts clauses cross state lines in scope, you may need more than one lawyer. Even if somebody advises that the agreement is not effective, how much personal money can you spend out of pocket to defend a lawsuit brought by the employer if the employer decides to make you a test case? Further, if there is any chance that a future employer may get dragged into the suit, the prospect of remaining with a new employer may be diminished.

If you are being pressured to sign, consider saying that you don’t understand what it means and that you want to get a lawyer to tell you what it means.

I personally would not sign a non-compete agreement unless I was making so much money out of the deal (like in the sale of a business) that it would not matter, or I was planning totally to retire, start a totally new line of work or to relocate to somewhere not covered by the agreement. YMMV

Therein lies the power of "collective" bargaining.

Being in an "at will" state further sweetens the pot for the employer.

OP, I wish you the best.

Geno

The last company I worked for before retiring required all their employees to sign a non-disclosure/non-compete agreement, regardless what duties their job description entailed, or else leave their employment. They had a relatively high employee turn-over rate so I imagine they had been burned in the past.

I do know they successfully went after a upper level salesman who quit them and accepted a position as national marketing manager at another company in the same line of business. His new employer had to let him go.

But they also hired a skilled field technician/salesman (field technicians were expected to also do sales) who was still under a non-compete agreement with another company. Their work-around was they created a position for him as a full time training instructor until his non-compete expired.

Hot topic here in Utah at the moment... one of our state legislators sponsored a bill to ban all non-compete agreements. Angry business owners seem to have melted his phone.

As stated, internet advice is what worth what you paid for it.

If both my brain cells are still functioning, what they taught us in MBA school several decades ago was that for regular employees, the rule of thumb was that you could enforce a non-compete on a regular employee (not someone with access to stuff like corporate financial info) for about a year. As Matt said, it's based on "reasonableness" and that varies from time to time and place to place.

If it were me, I wouldn't worry about it. Yes, sometimes those clauses get enforced, but it isn't common outside executive positions. Sometimes during a corporate restructuring, executives being sent packing get a severance package, and non-compete is one of the terms of the package. That's very enforceable.

http://www.beckreedriden.com/httpww...competes-50-state-survey-chart-20150823/

http://www.beckreedriden.com/wp-con...petes-50-State-Survey-Chart-20151214.pdf

They typically don't hold up in the "trades" side of the world. I'd sign it and continue to work.

If you leave or get fired, I'd tell him to stick it in his ass.
He won't fight you on it because he'll lose.

This is why At will employment doesn't work for anyone but the employer, i don't think it will hold water, but id ask and attorney first, if he says it won't, id sign it and promptly find another job and tell your old boss to stick it in his ass.

It looks like the "Pre-existing duty rule" under "Consideration" may be what you need to understand. You really need to talk to an employment lawyer, not just any attorney. Who knows, you might have a class action suit, albeit damages could be very limited.


I'm referring to the link provided by bugout4x4
http://www.myemploymentlawyer.com/wiki/Michigan-Non-competition-Agreement-Law.htm

Thanks for the info, links and advice, guys.

Sorry for my absence since posting and this short reply. Minutes after posting this I got a call for a family emergency and will be occupied with that for a while.

I hope everything is ok, be well.

I'm a software developer by trade. I was once presented with a non-compete agreement that essentially said that I couldn't write software for anybody else for three years after leaving employment. I crossed out the offending clause, initialed the elision, and signed the agreement. I got the job anyway; nobody even turned an eyelash.

Just an anecdote; I suspect it's probably no help to you. Sorry...

Gotta share a story about software folks and non-competes, releases, and such.

I spent a few very fun years at Heathkit, managing the kit computer and the test equipment businesses. I had a superb software designer working in engineering, named Rod Brahman. Cool guy.

Long before I was on the scene, he and (mostly) Gordon Letwin had developed HDOS, the Heath operating system. It was a pretty cool system, and Gordon had worked out a lot of things that were quite advanced for the time.

Bill Gates showed up at our door one day, and had a sit-down with the guy that would eventually become my boss, Chas Gilmore. He told Chas that the number of computers you can sell is tied directly to the number of programs you can run on them, and that HDOS was going to limit the growth of Heath. Chas bit, and the move to the modern CP/M was on.

On his way out the door, he hired Gordon and took him to Seattle.

A few weeks after moving, Gordon came back into town, and suggested that the whole gang go to lunch together, just like old times. IIRC, they went to Warren's, just a little way from Heath headquarters. So they laughed and reminisced, and after while Gordon tells Chas that it's obvious that HDOS is dead, but he just wants to be sure that it's OK to use what he's learned over the years. He whips out a release, which Chas signed then and there.

And that is why, if you look in the kernel of MSDOS, which came out shortly after that, you find HDOS.

Chas signed away a huge sum of money over lunch that day.

All large fortunes are based on somebody (or bodies) getting screwed. Not complaining, that's just the way it is.

I would be very careful in your position. I had a non-compete in my contract with my employer and when I returned from Iraq they had substantially reduced my working territory and given half of my clients to the guy they hired to replace me in my absence in Iraq. I was not happy at all about this and quickly took a position with another company. The original company sent me and the new company nasty letters indicating litigation over the non-compete. It all worked out but I was very nervous that the new company was going to let me go because they didn't want to be dragged into litigation. Who is going to pay your litigation bills if your employer brings suit against you?

If you are thinking about leaving anyway, why not leave now and not sign the non-compete? It also appears your company is trying to prevent contact with their client base - if yo don' sign the document that they are requesting I think you have a better argument that those clients are fair game.

If your present company is large and powerful, I would be hesitant to sign the document and then leave as they may simply crush you with litigation expenses and even demand their attorney fees from you. Just something to think about.

To the OP, yeah, talk to an employment lawyer in your state, even if it costs you money.

The funny story I know concerned a company where I was employed for a while. Their head guy had this cute habit of misrepresenting your job while recruiting, and not leveling with you, until you'd relocated, and bought a house. My predecessor was hired to be a Sales Manager, and was made to sign a non-compete.

After a year or so, the Manager had his fill of the boss's lies & erratic micromanagement. He sneaked into the personnel office, which wasn't locked, found his personnel file - which also wasn't locked - and pocketed the company's only copy of the non-compete. Then went to work for a competitor. When threatened with a lawsuit, he replied, "what non-compete?" The same boss pulled the same stunt with me, but I was able to bail out into a different industry.

On the flip side of the coin, I also know of a case where a Sales Manager at a large company took the contacts list, and started a shadow company competing with them, while still employed. His scam was well planned and complex, but he eventually was caught. He was fired, and threatened with criminal prosecution if he ever tried to compete with them again. He signed a non-compete, then immediately tried to get on with a competitor, and lied about not having a non-compete. The previous employer found out, presented all the evidence to the new company, who immediately fired him to avoid a legal mess.

I know of (alleged) cases of industrial espionage, where someone pretends to quit one company, goes to work for a competitor, acquires customer lists, pricing, and technical information, and then goes back to work for the first company. That's not right, and non-competes are not unreasonable IMO.