no compete clause for employees?

[Guido]

I have been talking with a good friend back in the states who may be getting into the heavier side of landscaping and drainage work, but this question applies here just as much so I figured I would post it for some ideas.

He was talking about having a "no compete" contract that he will have new employees sign before getting on the payroll. He wants to say while they are under his employment they will not provide customers with similiar work in his market area and he will not for 3 years after termination from the company.

Its a good idea for a perfect world, but it will only work for employees that will box themselves in to always working for someone else.

#1 question I have is: Is this legal? and #2 what are your thoughts? I think I would try it and see how easy it worked, but I don't think I would push it if it came down to loosing a potentially good employee.

I would definetly think of doing something that said the guy could not work for himself in the same field and market are while he was employed full time by me, but how much do we control this? Again, is it legal if he signs it? It would be nice because I know a lot of people are scared to give their workers proper training because they fear them running off with their business, etc.

What are your thoughts?

[LoneStarLawn]

It is legal. I don't know how it will hold up though.

I had to sign one when working for a computer programming agency.

Since I knew all the code if I was ever terminated or quit I couldn't compete for 2 years.

[Stonehenge]

It is legal. I think there's a thread or two in here about that, and I had a conversation or two with JAA about it. From what I understand, as long as you provide compensation for them signing this agreement/contract (like $250), then it's enforceable. 3 years is a long time, though. Might have trouble with that.

The other problem is enforcing it. You've gotta catch them and drag them into court.

As for good employees, for me, that's all the more reason to have them sign. If they're bright and knowledgable, they may need just those last bits of knowledge from your operation before they start their own.

I'm going to have one of my guys sign one this year. It's a deal-breaker if he doesn't. I won't fire him, but I'll never promote him.

[KDJ]

It is very easy to beat in court if it is not done right.
Cost is very high to make it stick.
But would still do it, just wouldn't enforce it $$$$$

[Stephen]

I started having my guys sign non-compete agreements since a few years ago when a guy that was working for me told some people that he was starting a snow plowing business, and I figured the only customers he knew were those he knew from working for me. He also did some work behind my back for a customer and I was notified by the customer to make sure the guy wasn't up to something fishy.

Now everyone that works for me that is more than just help for a day or two here or there has to sign one. Besides saying three years as a limit you should also set a geographical boundary like 50 miles. My agreements are drawn up by my attorney and they are legally enforceable.

From the research I have done on these types of agreements you have to limit them as much as you can for the court to favor yourside. You can't afterall, limit the employee from having absolutely no job.

As far as offering them something to sign it this part is true, legally it is called consideration, when both sides do something for the other. For example, he signs for me and I give a signing bonus of 150 dollars. But you only have to give them something if they are employed by you when they sign. If it is a new hire, then you are giving them a job on the condition the agreement is signed. This is why my guys sign before they start if it is for a full time position.

They also state that if an account is lost to them if they try to do something on their own they will pay me three years gross of that account. This is just a few points that I can remember right at the moment, sorry to be so long winded.

It is also important to be as specific as you can, and note that if any part of this agreement is unenforceable, the rest of the agreement is still in effect.

If I get a second I would be happy to post my agreement if anyone requests to see them.


Stephen

[KDJ]

Well Stephen , sounds like you have it down pat.

But for all readers keep in mine that laws change from State to State. What will work in one state may not work in another.

I will also state that legal advice should come from consultation of a Attorney at Law. NOT from people that cut grass LOL. This is a good way to make mistakes.
A no compete clause for employees will work well only because they think they have to adbide by it.
But the fact of the matter at least in Florida, is if one wants it to hold up in court the person in question has to be of sound mind.
So? how is this done? Get this, Psychological Evaluation and you will pay dearly for this.
All a person has to tell a judge is I needed the job real bad I would have signed anything, I needed to pay my bills and so on and so on. In Florida they call that signing under duress. Case dismissed. You lose but still have lost time, Attorney fees and court costs.
This doesn't mean not to have them sign it, just don't take the risk to try to enforce it. If they can afford a Attorney Iam sure you would lose.

Duress= Compulsion by threat / Coercion illegally applied / Forced restraint.

If someone was down on there luck and needed a job the above would apply.

[Stonehenge]

KDL,

To be honest, some of the stuff you suggest sounds like a bit of a stretch. I think that getting legal advice from a lawyer is right on.

But being under duress is quite a bit different than what you propose. Telling someone to sign a piece of paper saying they admit to killing somone, otherwise they'll go to jail forever, that's duress. Making it a condition of a job offer is not duress. In that dictionary definition you forgot 'confession under duress.' Believe me when I tell you, people have these things enforced against them, and they stick. If you dig you can find some past threads where members here have made them stick.

And the being of sound mind part, well, I think that would be true for anything. I recall in one of by B-law classes talking about that. It's been awhile since I was in college, but the gist was, if they're nuts, you probably can't hold them to anything they'd sign. Or if they're under 18. Or if they're not who they say they are. Hopefully you'd be able to weed out someone who'd try that during the interview process. If not, you could make them change their mind pretty quickly....press releases sent to every media outlet in the area exposing this 'insanity' would pretty much stitch a scarlet 'A' to their resume. If anyone has anyone who tries that, let me know. If I can help by writing a press release, or giving instructions how, I'd be happy to.

[KDJ]

LOL very good We should call you the spin Doctor.

Let me put it this way. It's more complicated than you think.
Untill you have been threw it you wouldn't have anyway to know how twisted the law can be.
If someone was to prove that economical hardship was pending due to the need of a job and a contract was signed to secure employment that would fall under duress. He needed a job - one was offered - Had to pay his rent or live on the street so he signed. Sorry in Florida it will not hold water.

For you people out there that employs the services of a Attorney when it comes to writing a contract of this nature, Look him / her
in the eyes and ask " could you beat this in court " and listen.

Now on a final note I am in no way, shape or form saying that a no compete contract is not a usefull tool or should not be used.
It has its uses, just understand the limits of it.

Good Luck

[Stonehenge]

Well, maybe we should 'call' and see what cards you're holding...

What kinds of situations have you personally been through with this issue?

I can't say I've been in any, but there are people here that have, and have enforced their non-competes and won. Several times.

As for the spin thing, if you're referring to the idea of press releases to smoke out weasels who hide behind loops in the system, then yeah. I'll spin 'till I win.

[cos]

I had a friend that bought customers off of someone. He made the guy sign a no-compete clause. It didn't hold up in court at all. It is a good deterent though. He did this 3 times and guess how many times he got screwed? Yep....all 3.

[Guido]

Awesome post, thanks for all the great info and YES I would love to see your contract and anyone else's for that matter. He wants to get some idea's together before e goes to the attorney for the final draft (save some $$)

On the rest of this, I agree with Stonehenge, but youhave to remember what kind of stunts people in Florida can pull and get away with! ;)

Thanks for all the input guys, keep it coming!

[wallzwallz]

I worked for a large company, making plastic . They made us sign a 2 yr no compete basically stating we couldn't work in plastics for 2 yrs. Another company opened up,paid more + everybody started going to work there. The no compete was useless, you can't stop someone from bettering themselves. The only thing it would have prevented was taking there customers.I believe a no compete would be a great deterrant(SP) but much harder to enforce. In court there's more ways for employee to get out of it.

[Guido]

Originally posted by Michael Wall
I worked for a large company, making plastic . They made us sign a 2 yr no compete basically stating we couldn't work in plastics for 2 yrs. Another company opened up,paid more + everybody started going to work there. The no compete was useless, you can't stop someone from bettering themselves. The only thing it would have prevented was taking there customers.I believe a no compete would be a great deterrant(SP) but much harder to enforce. In court there's more ways for employee to get out of it.

I understand he can't stop them from working for another landscape company, he was hoping it would float though if the guy decided he was going to start up on his own.

I believe your right about not holding up for stopping someone from working for someone else.

The thing is, once it's legal and enforcable that he can't start on his own and take your customer base or contacts, you need to be sure you keep him around (if you want him) and not let him go to another landscaper for work. Ya know what I'm saying?

[wallzwallz]

Guido, I know it was a little off the mark, but it's my only personal experience w/ this subject. I still don't know if you could stop them from starting their own business, but it should hold up to protect your customer base, which is of value in itself. I think we need somebody w/ more legal knowledge than I.

[Guido]

I just wanted to re state that the purpose was to stop the foreman from starting up on his own.

Thanks for all the input guys! I think we're getting somewhere!

[Ric]

Contracts are made to be broken. Non-compete is one of the hardest to enforce. Your foreman can start his own business and steal every customer you have and get away with it. All he has to do is put the business in someones name other than his own. His father uncle or sister etc. His wifes name might be a hot point. Even if you sell your business and sign a non-compete you can beat it the same way. I had a lawer write one for me and had my employees sign. One of them went into business for himself but did not hit on my customers. My non-compete has a chanch of winning in court. I let it go. He is a jerk but at least he didn't hit on my customer, more power to him.

Ric
I can't spellll but 2+2=5

[Stephen]

Here is a copy of my non-compete agreement. If you guys see anything that is missing please feel free to discuss it, as it may save us all a headache or two in the future.

I tried to post this as an attatchment but it doesn't seem to be working so I am adding this onto my email.

Please not the names have been changed to protect the innocent. LOL

Stephen



NON- COMPETITION AGREEMENT BETWEEN
Mr. X d/b/a Mr. X Landscaping and
____________________________

THIS AGREEMENT, entered into between Mr. X Landscaping, with its
principal place of business located at 321 Mockingbird Lane, herein called the
“EMPLOYER”, and ___________________, residing at____________________, herein
after called the “EMPLOYEE”, this _____ day of _________, 2000.

WHEREAS, the employer is engaged in a lawn maintenance and snow removal
business which handles commercial and residential accounts in Sullivan, Orange,
Delaware and Ulster Counties, and;
WHEREAS, the employee is interested in becoming employed by the business
and;
WHEREAS, the employee acknowledges that in the disclosure of the information
which it receives from the business, as to the manner by which Mr. X Landscaping
conducts its business, its contacts, and its list of customers, both present and future, is
privileged information and that any disclosure of such privileged information by any
person or organization other than in the course of its business, with approval of Mr. X
would be highly detrimental and damaging to the business.;
NOW, THEREFORE, in consideration of the mutual promises, covenants
and conditions contained herein, the parties agree as follows:
____________agrees that during or after its relationship as more particularly set
forth herein, with Mr. X d/b/a Mr.X Landscaping, cannot directly or indirectly, use any
privileged information obtained from Mr.X for any purpose or disclose any information
to any person or organization not connected to Mr. X Landscaping, without the express
written consent of Mr. X for a period of five (5) years from the date of termination of its
relationship with Mr. X d/b/a Mr.X Landscaping.
Upon the termination of ____________________’s relationship with Mr.X
Landscaping, ________________ agrees to return any and all documents, records or
customer lists obtained from Mr.X, including any copies .
____________________ agrees while being employed by Mr.X d/b/a Mr.X
Landscaping and for a period of five (5) years from date of termination for any reason, he
shall not become employed by any other competing lawn maintenance or snow removal
business, including third party businesses. The geographical area covered by the
non-compete agreement shall be an area encompassing 100 mile radius from the principal
place of business of the employer, namely Anytown, New York, and must not fall within
the time period of five (5) years.
In the event that_____________________ shall breach this agreement, or in he
event that such breach appears to be in a imminent possibility, Mr. S shall be entitled to
legal and equitable remedies afforded to him by law as a result thereof, and may, in
addition to any and all other forms of relief, recover from________________all
reasonable costs and attorney’s fees encountered by it in seeking any such remedy,
whether or not suit is actually instituted.
This agreement shall be binding upon the parties hereto and upon their successors
and assigns.
This agreement shall be governed by all purposes by the law of, the State of New
York. If any provisions of this agreement are declared void, or otherwise unenforceable,
such provision shall be deemed to have been severed from this agreement, which shall
otherwise remain in full force and effect.
IN WITNESS WHEREOF, the parties executed the foregoing agreement on the
date first shown above.



______________________________ _____________________________
WITNESS Mr. X LANDSCAPING
BY: Mr. X


_____________________________

[bruces]

Seems to have the major elements, but 5 years and 100 miles seems a little strong.

I'd get an attorney to look it over and finalize it.

[Fantasy Lawns]

Make sure that you will not base your decision to hire ....if they DON"T sign it ......that's illegal ...it's just a "barking' dog although ...the perception is a legal binding .... yet won't hold in court unless they steal jobs using privileged info ....time frame n distance have to be “reasonable” if not its a waste of time…..after all a person has the right to start their own thing or work elsewhere ……just can’t back stab using work methods n confidential privy info

COVENANT NOT TO COMPETE:
FLA. STAT. § 542.335

In consideration of my being employed by Fantasy Lawns Inc., yet not necessary for employment, in recognition of the value of the corporate name, reputation, and good will of Fantasy Lawns Inc., and the value of the training and operating methods and techniques of the Company understanding & signing of this Restrictive Covenant. I the undersigned, hereby agree that if such employment is terminated for any cause, employee shall not, for a period of 12 months thereafter engage either directly or indirectly as a principal, alone or in association with others: in the Confidentiality of Information or Solicitation of or in contracting with, existing customers of the company as specifically shown and listed hereto attached, similar services provided such customers by the company, within 10 miles of Fantasy Lawns Inc. mailing address.


Employee Full Name:


___________________________

[MRPLOW]

Good luck trying to enforce any no compete clause. There is a slight possibility of it holding up, but more than likely your going to spend as much money in legal fees as the lost revenue. Also five years will never hold up, the judge may limit it to one year. Also 100 miles may be a stretch too. And if you fire them it will be hard very hard to enforce, you can't fire someone and then tell them they cannot get another job. Also if customers are listed in the phone book it might not be considered confidential information. To have any possibility to win in court your going to have to prove that the employee actively solicited the customer. Good luck. Huge companys have a hard time enofcing these things, and the only reason they try to enforce them is to set an example to other employees. I don't think that I would work for someone that tried to limit my employement for five years after I leave the company.

[bruces]

Another option that is used in the accounting field is not a non compete, but a contract that if the employee leaves and takes your client, they have to pay you a percentage of the fees generated by that client for a set period of time.

If they want to go into business for themselves, fine, take my clients and pay me the revenue you generate for the first 2 years or some period of time.

This seems to be more readily enforceable as you are not restricting the person's ability to go to work where or for who they want to. You are just being compensated for them taking your business.

[kutnkru]

Dave this thread has a copy of one that I use:
http://www.lawnsite.com/showthread.php?s=&threadid=10856

Hope this helps. :D
Kris