Here’s a comment I recently got when I wrote about non-compete agreements and non-solicitation:
Ken,
I’m in no way an expert, but it seems that a non-disclosure/non-solicit agreement would be the most fair for both sides.
Larry D.
Here are the basic arguments about non-compete agreements and solicitation from the perspective of the employee and the employer.
The employee…
- does not have ownership interest in the job
- has no real commitment to the job other than doing the job and getting paid the agreed compensation and benefits and perhaps bonus incentives
- needs to have the flexibility to move to another job without restrictions that may inhibit the ability to get another job in the only industry the employee knows anything about
On the other hand, the employer…
- needs to feel secure that the business confidential and proprietary information does not get revealed to competitors
- needs to feel secure that an investment in training and nurturing an employee will not result in that employee using the training to compete against the employer or assist another in doing so
- needs to feel secure that an investment in training and nurturing an employee is going to be rewarded by an employee devoting sufficient time and effort so that the investment in training and nurturing was worth the investment in time, effort and money.
Inherent Conflict From Non-Compete Agreements
The inherent conflict between employer and employee [between management and worker, those in charge and those in not, between haves and haves-not] is inevitable, and I think that’s true in any society. It’s not going to change.
A balance has to be reached, and I think it has, without meddling from the Federal Trade Commission [or other parties].
In this country, we have a fairly good balance that has been fashioned by the courts in decision after decision in cases involving enforcement of restrictive covenants in employment agreements.
Only a few states have laws that deal with the issue, such as California [and a few others]. All other states have court decisions that more or less hold that employment agreements with restrictive covenants need to strike a balance and be fair to both sides.
What’s fair often depends on the circumstances of each situation, each relationship, the nature of the business, the employer investment in the employee and other factors pertaining to the specific relationship. To borrow from another current political agenda, one needs to engage in “common sense” and be reasonable to each side.
Coca-Cola may very well have a right to restrict its upper management from working for Pepsi, worldwide. But XZY Alarm Co., with 500 accounts in Albany, N.Y., can’t restrict its employee from working for an alarm company in Riverhead, Long Island, N.Y. They just aren’t competitors.
Balance the Real Needs
There are many ways to fashion restrictive covenants in employment agreements. And, if the parties engage in common sense, balancing the real needs of the employer and the employee, the agreement should hold up.
Get the K&K Standard Employment Agreement and have all employees sign it. There are also ways to manipulate provisions that might otherwise be untenable.
For example, if the employer doesn’t want the employee to take a job with a competitor, then perhaps that ex-employee will need to be paid for the period of the restriction. (Sort of to take the employee out of the market long enough to make them less of a threat to the employer, or less useful to the competitor.)
What we don’t need is more laws from Congress, states and regulatory agencies.
