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:
Non-competition agreements must generally be supported by valid consideration -- the employee must receive something of value in exchange for the promise to refrain from competition. If an employee signs a non-competition agreement prior to beginning employment, the employment itself will be sufficient consideration for the promise not to compete.
However, if an employee signs a non-competition agreement after beginning employment, the mere promise of continued employment will not be considered valid consideration for the promise. In this case, the employee must receive something else of value in exchange for the promise. Such additional consideration may consist of a promotion or other additional benefit that was not part of the original employment agreement. - See more at:
http://employment.findlaw.com/hirin...ments-overview.html#sthash.S7mEZJBN.dpuf
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
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
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.
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.
I'm not a lawyer, but I own a small building materials supply company with 30 employees. If you're a plumber and work for a small company, I think it's unreasonable to ask a trade to sign a non-compete. I'm not sure how much plumbers are in demand where you are and how easy it is to find another job, but I think your boss might be shooting himself in the foot. Good reliable tradesmen are hard to come by around here.
I look at my employees as an asset and try to take good care of them and have very little turn over. I would never expect a truck driver or forklift operator to sign something like that. We probably should do something like that for our sales staff, but don't. We've had guys leave and go to work for competitors, but have only had one case where we had a guy, that we taught him the business for about 6 or 8 years, and left to go to work for some competitors. He took our customer list and repeatedly called our customers in an attempt to steal them. After bouncing around to a couple of companies, I think he's finally burned most of his bridges with false promises, but is still a stick in my britches. Most of the other sales guys that I've lost, haven't been a problem.
I think you should ask yourself some questions. Can I make it on my own and furnish health insurance? Can I find a job somewhere else? Do I like where I am now? If you sign it, and later on you want to go out on your own, they might come after you and you'd be screwed.
If you are a plumber, and thought you could leave and find another job or go out on your own and be successful, I'd do it now unless you can negotiate a solution to drop the clause. If it's what I'm thinking, your boss might be an idiot. If he's smart, and you're a good technician and good employee, he'll do anything to keep you, but you need some ammo. Hell, you never know, he might drop the clause and give you a raise.
I think non-competes in something like the "trades" are a complete joke. Make sure your boss knows how a bunch of you think, and that it is forcing many of you to question HIS loyalty to his employees. Turn the tables on him immediately, as he is pulling a fast one. Tell him how it undermines YOUR trust in HIM. It makes HIM seem like his shady in hiring employees and trying to make them suffer later.
If you take a new job, simply make sure they give you a different job title then you had previously. It puts all the onus on the former employer to try to screw you over, and it won't hold up in court usually.
I would be gone so fast if my employer tried any of that crap.
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
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Heed this advice. It's better than spot on.
Signing a no compete clause, as a Plumber, would basically be letting my boss know he has me by the balls,
You're a Plumber, with this clause (which I don't think is enforceable), if he fires you, or you move on,
You're going to get a job as what, a school teacher?
It's your living, it's what you do.
You're not going to compete in the only profession you have?
I wish and hope, you soon find the solution with your career, you've been frustrated for far too long.
I would politely tell them that a no compete clause need to come with a 5 year contract, a raise, and a severance package equal to 3 monthes pay.
Tell your boss to PHUg off. If he lets you go, catch him alone and do what needs doing.
A friend of mine tells a similar story about his parents having a meal with a guy named Edwin who wanted them to invest in a particular chemical process he was experimenting with. They turned him down, and yes, it worked out to be Edwin Land, playing with what would eventually become the Polaroid process. They too threw away some money that day.
I always thought it odd that folks can leave a company on a whim yet expect a company to not do the same and chitcan someone on a whim?
Hire. A. F'kin'. Attorney.
Hire. A. F'kin'. Attorney.
Nothing more! Nothing less!
A friend of mine tells a similar story about his parents having a meal with a guy named Edwin who wanted them to invest in a particular chemical process he was experimenting with. They turned him down, and yes, it worked out to be Edwin Land, playing with what would eventually become the Polaroid process. They too threw away some money that day.
Land worked at the Naval Photographic Center in Washington (DC) when he was developing the process. He tried to get a lot of people there to buy in. When I was a Navy photographer in the '60's I knew several people who'd wished they had.
Just got back home after a driving downstate yesterday for 200 miles like a maniac. Snow squalls, whiteouts and bad road conditions be damned when your nurse sister calls crying from Mom's hospital bedside. My wife and I got there to find a chipper Mom and perplexed medical staff. Blood oxygen levels low and blood gasses in the danger zone earlier in the day should have been her end. The pulmonary specialist and nurses are just shaking their heads. She should be gone, but instead has rebounded, may be discharged on Monday.
OK, that said, my next step is to shoot a scan of this off to my BIL. Wake Forest grad and legendary scorer on the BAR and what not. He's a very sharp cookie and I'm going to ask his advice on it as advised here.
FWIW, here's some more grist for the mill. I'm in a salaried position and wear many hats due to it being a small company. I work in sales, supervision and also put my tool belt on when things get busy. There's no geographical limitation the the non-compete, just a 2 year limit. It's also a low population area. We, like everyone else, serve a large area of many counties. A big town in the area might have a year-round population of 5-8 thousand people, so it's impossible to not dangle a hook in front of a fish someone else has reeled in previously. The limitations of the non-compete are stifling.
I've been trying to find work elsewhere and 1 company has shown strong interest, but I'm at a level where lateral moves are difficult to find and while I'm hoping something might work out there, probability is low. Financially, I'm not able to start my own business, though I'd like to.
Again, I'll be putting this matter before my BIL and will base my decision on his advice.
Thanks again, guys.
Sounds like a tough position Scott.
A non-compete is totally unreasonable in our area.
Either you call their hand and find out if they are serious about trying the strong arm, or sign it and completely neuter yourself as anything other than their employee and they can continue F'ing with you.
But if they fire you over it, well you just might have to find a way to work for yourself somehow.
I suggest you quit, which has always been an option for you.
I suggest you quit, which has always been an option for you.
Drinking, or just being an ass?
You've got to talk to the boss, and you've got to turn this around to show how it demonstrates HIS problems in trusting good employees. He has created a problem for all current and future employees by creating an atmosphere of distrust from the get-go. Ask him if that is what HE intended, because that is what all non-compete clauses do.
In other words, he won't want the type of employees working for him that are stupid enough to sign a non-compete contract.