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Tuesday, June 21, 2011

Forcing Employees To Sign Non-Compete Agreements

During the past several years, while advertising jobs have gotten fewer and fewer, more and more candidates are being asked to sign non-compete agreements as a condition of employment.  These agreements are presented to candidates at every level of the business.   While in some cases, they are referenced in offer letters, more often than not, employees find out about them on their first day of employment and are asked to sign them once they show up for work.  This is unfair and unfortunate.  And, especially if a candidate has been out of work, most new employees are not in any position to refuse to sign.

In fact, I have yet to hear about any new employee who refuses to sign one.  By the time they are asked, they are captive. (I do recall one candidate who simply “forgot” to sign it and it was never picked up by his employer,)

Employment and advertising lawyers tell me that these agreements are suggested by agency financial and legal people and are written to prevent employees from moving to directly competitive accounts. However, over time language has crept into these agreements which would seem to prevent people from moving to vaguely competitive accounts – the account or creative person who is  working on a vodka account who is precluded from working on a wine brand because the document is written as “alcoholic beverages” or the person working on a cereal account who may not be able to go work on a product made from the same components (I actually saw this – a non-compete which specified that the candidate could not work on any product made from grains.  I wonder if this also included alcoholic beverages?).  I have heard about but not seen agreements which prevent people from moving to another agency which handles an account that is competitive to something which the agency has, even if the person does not work on it.  This whole concept is ridiculous..

While these covenants may be unenforceable, they are nevertheless intimidating for the employee (which may be the point), especially younger, more junior people.  Most employees, are asked to sign these documents on their first day of work.  They rarely have the opportunity to show them to an attorney.  New employees are often told by HR not to worry about them because, “everyone signs one.”  This is, of course, also of questionable legality.  However, these documents have become so routine, that most people don’t pay attention to them.  Dropping these covenants on people, especially juniors, sets a really bad tone - the company as bully.

These covenants are rarely enforced, but they could be.  And the companies requesting the non-compete, have far deeper pockets than the employee being asked to sign; this is true of even the most senior people.  I find asking a junior account person or a junior creative to be rather strange and certainly unnecessary.  I have had any number of candidates who have gone to agencies on only vaguely competitive accounts who have actually gone to their previous employer to ask permission (almost always granted).

My advice for everyone at every level is that when given this document, request to take it home and show a lawyer.  Most of the time if you conveniently “forget” to sign it, the issue will go away.  If reminded by HR, I do advise actually showing it to a lawyer.  He or she will probably tell you to sign it and not to worry about it.  But, it could be a thorn in your side in the future.

11 comments:

  1. Ironic since one of the preliminary screens that agencies use is category experience.

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  2. One might ask, "If I sign the non-compete, could I get a severance agreement in return."

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  3. When I was fired from FCB, they made me sign a form that said I wouldn't work for another "True North" agency for ten years.

    Agencies, in my opinion, like the notion that they own you for life. Essentially, if you leave them you're shut out of every other agency.

    Not only are such attempts demoralizing, they are fundamentally anti labor and anti freedom. They smack of Major League Baseball's old "Reserve Clause."

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  4. The comments, so far, are right on. Anonymous hit the nail on the head.

    However, Geo got it right: I believe that the law (I believe in almost every state, certainly New York) is such that no agreement can preclude or prevent you from earning a living. There are many agencies that force employees to sign documents on the way out as a condition of receiving severance. Contracts, as I understand it, are not enforceable if they are signed under duress. But the agency always has deeper pockets.

    Livvy Miller got it right also. However, try dropping that at the last minute on HR!!

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  5. New York is what is known as a "right to work state" which typically does preclude the force and effect of any non-compete agreement.

    People use lawyers when getting divorced, buying/selling homes and coping with fender-benders. Also, CEOs often hire employment lawyers to negotiate their largesse. My point is simple: Any time you are asked to sign a legal document, consult an attorney. Right now there are THOUSANDS of out-of-work lawyers, so you will find one cheap, or pro bono.

    Remember, lawyers (and corporations advised by lawyers) use language the same way a surgeon uses a scalpel. You wouldn't go performing surgery on yourself; best to leave certain professions to the professionals!

    -dp-

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  6. This is what happens when employers have the advantage due to market conditions. Someday when the economy improves, they won't be enforcing junk documents like this.

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  7. Hi Anonymous: I wish it were only the economy causing this. I was first asked to sign one of these many, many years ago. I think they are more prevalent now and certainly much more specific and onerous. Unfortunately, I believe they are here to stay.

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  8. I was recently let go from a TV station as I refused to sign an unfavorable non-compete/non-solicitation contract that was presented to us from new ownership group.

    I definitely felt bullied into signing and I chose not to be a part of the new owner's way of doing things.

    Having worked there for quite some time, it amazed me how they would let me go with out even batting an eye.

    Now I'm unemployed with options, and MUCH happier to say the least.

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    Replies
    1. @ Anonymous. Good for you. I am sure you will get a better job and take business away from your old employer. It is a shame it had to come to that, but I am sure you did the right thing.

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  9. This is what happens when employers have the advantage due to market conditions. Someday when the economy improves, they won't be enforcing junk documents like this.

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  10. @Tortious: Really good comment and observation. Thanks. Employers have increasingly been doing this and employees in this economy are fearful not to sign. When the economy gets better, I suspect that there will be more employees who simply "forget" to sign.

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