no compete clause for employees?

Discussion in 'Business Operations' started by Guido, Oct 28, 2001.

  1. Guido

    Guido LawnSite Silver Member
    Messages: 2,087

    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?
  2. LoneStarLawn

    LoneStarLawn LawnSite Bronze Member
    Messages: 1,415

    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.
  3. Stonehenge

    Stonehenge LawnSite Bronze Member
    from Midwest
    Messages: 1,276

    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.
  4. KDJ

    KDJ LawnSite Senior Member
    Messages: 325

    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 $$$$$
  5. Stephen

    Stephen LawnSite Member
    Messages: 81

    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.

  6. KDJ

    KDJ LawnSite Senior Member
    Messages: 325

    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.
  7. Stonehenge

    Stonehenge LawnSite Bronze Member
    from Midwest
    Messages: 1,276


    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 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.
  8. KDJ

    KDJ LawnSite Senior Member
    Messages: 325

    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
  9. Stonehenge

    Stonehenge LawnSite Bronze Member
    from Midwest
    Messages: 1,276

    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.
  10. cos

    cos LawnSite Addict
    Messages: 1,253

    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.

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