Note from Uncle Dale: Non-Compete Clauses are Cute… Until They Are NOT

Uncle Dale back again!

Questions come in groups. This week everyone wants to about non-compete clauses/agreements. It even showed up on FB interpreters group.

Spring is here! “Big VRS” must be on a hiring binge, because that is when I get these questions. DO NOT TAKE ANY THING I SAY AS LEGAL ADVICE. Go talk to an attorney where you live. This is a blog called Uncle Dale’s Rules for heaven sake. Have you met your uncle? Remember your uncle last Thanksgiving? (If you have questions go talk to an attorney). This is just to get all y’all thinking.

So, what actually is a non-compete clause? It’s just like it says on the label, an agreement with your employer, it could be in writing or verbal or signed, not to compete with the employer after the employment relationship has been terminated.

The point of such an agreement is to make sure that, when you leave that job, you don’t set up shop across the road doing the same thing and using the customer list you took from your old job, or sell the knowledge or skills you acquired on this job to the competition. Makes sense right? You can’t learn the Colonel’s Secret Recipe of herbs and spices then quit and open your own chicken shack, or everyone would do just that and no one would give anyone a job because they would be training and setting up the competition.

The problem is such agreements lead to abuse. If I’m the boss, I want to hire talented people and I don’t want them taking that talent elsewhere-so I make my job offer contingent on an agreement not to work in the same industry or in the same geographic area for 2 years if you quit or are terminated. But the reason I hired you is this industry is what you do. If you can’t do it for two years if you quit then what can you do? You are kind of trapped in this company now, unless you can move outside the geographic boundaries of the agreement or live without a job for a couple of years. This gives license for an employer to mistreat employees because they CANNOT quit.

Because of the potential for abuse courts are suspicious of them generally and not every state allows this kind of agreement under statute. Oklahoma bans them out right. See 15 OK Stat § 15-219A (2014). California doesn’t like them. Its State law says they are not allowed, but in practice they may be allowed sometimes to protect Trade Secrets. Cal. Business & Professions Code sec. 16600. New York is contemplating banning them (more on that later) and Massachusetts is trying to prevent abuse by making it unattractive for an employer to enforce one.

I’m already hearing snoring out there so I will try to spice this up a bit!

Suppose you go to work for a VRS company, they are going to want you to sign all kinds of crap before you can sit in the chair and do your thing. They may want you to sign an NDA (Non-Disclosure Agreement).(As the FCC covers the VRS interpreting part of this by strict legal requirements regarding privacy the NDA covers the workplace itself). You can’t tell anyone outside the company what the office looks like, or the equipment or way you log-in and out of the system… seriously. This stuff is protected. When in doubt just don’t talk about it!

Assignment Agreements… hummm… Proprietary Information and Invention Assignment Agreement, or PIIA for short. That is when you agree that anything you invent or think up while working for them belongs to them. These agreements are iffy, yes, but still may be enforceable. You know what? That is its own Note (I’ve seen these pop up lately in VRS employment agreements). Long story short these are hard for companies to enforce if you can show you created the workshop or did the research on your own time and without company funds or equipment.

Non-Compete Agreements. Ok they could be included in the middle of a whole lot of other clauses in a contract or a stand alone document. Ether way the first thing you need to know is a Non-Compete Agreement is a contract. Even if it’s in the middle of another contract, in some states it is still a separate contract.

What is a contract you ask?

A contract has three parts:

Offer;

Acceptance; and,

Consideration.

The first two are pretty well taken care of the minute you sit your butt in the chair. The third is more complex. Consideration is “the price of the agreement.” Each side is getting a benefit-the company gets your work and you get a paycheck but what are each of you paying for the non-compete? You are paying with giving your right to go work somewhere else and the company? Is giving you a paycheck? But that is for the work you are doing not the agreement not to compete. Remember, that is a separate contractual agreement. Some states say the company has to pay you something separate for that, others say continued employment is the consideration paid by the company. That always seemed like a threat more than a payment but the law is rarely pretty. Check with a lawyer in your own state!!!!

Here is the crux of it. Can a company just require you to sign away you ability to work as a VRS interpreter with anyone else as a condition of employment? No. (Maybe).

Non-compete clauses are there to protect from you walking out the door with trade secrets or goodwill (the client’s have not bonded with the company so much as with you and will follow you out the door) or with their extraordinary investment in training or education. These are the things a non-compete is supposed to cover.

So. Ask yourself VRS interpreter, what do you have when you leave that you did not have when you walked in?  I don’t mean to offend but VRS interpreters are like fast food workers, we are not getting and MacDonald’s secrets that we are selling to Burger King. You come, you do your job, you go home. We really came in with the skills to do the job and have the same skills when we leave. (Don’t get too comfortable wait till we talk about Jimmy Johns!)

Do you have a customer list? No. Do you have any special knowledge about the algorithm or programming or mechanics of how VRS works, I mean technology wise, that you could sell to a competing VRS company? No. Are customers going to change VRS provides because you stopped working for one and started with another? No (they don’t even know your name). Did the VRS provider train you to interpret or did they hire you because you already knew how? Is there a unique or secret interpreting technique used by THIS VRS company that others are just DYING to get their hands on? No. Last but not least, did they invest a great deal of time and money in your training? Maybe. Did they pay for workshops? Did they pay for your certification testing? That is where it gets sticky. Courts will likely have to decide if they are enforceable or not.

So in places where non-compete agreements are allowed there are some general rules to how courts test if non-compete agreements are valid or not.

Courts want to know if the non-compete agreement is a product bad faith in the negotiations, in other words is the company using this for an illegitimate purpose (indentured servitude-you can’t leave so we don’t have to pay you well or treat you well) ; is the non-compete agreement necessary to protect legitimate business interest (is there really something you could walk out the door with that would hurt our position in the market or help our competitor); reasonable in time, space, and scope; consideration of hardship (does it say you can’t work in this field anywhere in the whole country forever?).

Consideration of hardship, would enforcing the non-compete agreement just be bad policy. For example in New York the court agreed that Jimmy Johns could enforce its non-compete agreement which stated that after an employee left they could not work for a competing sandwich maker, or any company that derived more than ten percent of its income from putting meat and cheese inside of bread located within 3 miles of a Jimmy Johns for two years. Think about that. What trade secret would a jimmy johns employee have? Jimmy Johns are so prevenient that the 3 mile rule covers most of the US. MacDonald’s-out, Burger King out. Any restaurant that serves subs or wraps-out. According to the New York court you could not work at an amusement park that sold food or s bowling alley if the snack bar sold sandwiches if there was a jimmy johns within three miles. What if your company has cafateria? It would depend on if the cafateria constituted at least 10% of the businesses earnings.

I tell you this because I have worked in VRS and other industries that have required non-compete agreements and I signed them. On two occasions I have received very stern cease and desist letters telling me I could not work at the place I was going to work. I wrote the attorneys back on both occasions told them how adorable I though their cease and desist letters were, explained what a non- compete clause was, wished them all the luck in the world in enforcing it. But I’m me. And it’s fun to be me.

Talk with an atty before you sign one!

Last comments. After the New York court supported Jimmy Johns, the New York legislature started working on making such oppressive non-compete clauses illegal. Jimmy johns was sued in several other states and after having to pay out hundreds of thousands of dollars (over 100,000 in Illinois alone) had dropped its non-compete agreement from its conditions for employment.

Massachusetts has been trying to pass a law that says if a company tries to enforce a non compete agreement it must pay 100% of the former employees highest pay rate for the duration of the time the employer is not to work in the industry (didn’t pass this time but keep trying Massachusetts!)

I know I make even the shortest story long but the point of all of this is non compete clauses are generally disfavored. But don’t treat them lightly.

http://big.assets.huffingtonpost.com/FACExhibitA.pdf

Author: uncledalesrules

These blogs (I have two) began as a series of sayings I use to teach interpreting workshops, and political diatribes on Facebook. They moved from Facebook to this blog site: 1. as a way to remove them from my head (cuts down on the noise in there); and, 2. to give a better home to both my "less serious and satire laden posts" and my "more serious and satire laden posts." I guess it's up to you to decide which is which.

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