I am happy to report that the state of New York has passed the Broadcast Employees Freedom to Work Act. This is huge news for radio and television anchors and reporters who are often required to sign non-compete agreements, which forbid them from working in a particular city for a certain length of time after their employment ends.
Come on Virginia...what are you waiting for?
Friday, June 27, 2008
Monday, June 23, 2008
PC World Magazine: Noncompetes are Bad Business
A great article appeared in the June 20 edition of PC World magazine entitled, Non-compete Pacts Called Bad for Tech Innovation. I think it is a great article because it "hits the nail on the head" on my thoughts about the negative effects of noncompete agreements in today's business world.
The article stated that employee non-compete agreements have stifled tech startup development in Massachusetts, where the pacts are aggressively enforced, but failed to hold back the IT industry boom in states like California, where they are mostly unenforceable.
Read the article on the negative effects of non-compete agreements here.
The article stated that employee non-compete agreements have stifled tech startup development in Massachusetts, where the pacts are aggressively enforced, but failed to hold back the IT industry boom in states like California, where they are mostly unenforceable.
Read the article on the negative effects of non-compete agreements here.
Friday, June 13, 2008
MY BOSS ASKED ME TO SIGN A NONCOMPETE AFTER I STARTED MY NEW JOB
I am frequently asked this question, "I started my new job 6 months ago and now my boss wants me to sign a noncompete agreement...can they do this? The answer is YES.
Virginia is an "employment at will" state. This means that, absent a written employment agreement which defines the job and its duration, your employer can fire you for any reason or no reason at all. In other words, your boss can fire you for not signing the noncompete agreement even though it was not mentioned when you accepted the job.
In some states, courts will not enforce a noncompete agreement executed after the commencement of the job, finding that there is no "legal consideration" for the new promise by the employee not to compete with the employer. In those states, the only way around this problem for the employer is to pay the employee a bonus or give them a pay raise in return for signing the noncompete agreement. Unfortunately, Virginia law does not require the payment of additional consideration and considers continuing employment as sufficient legal consideration.
Virginia is not a great place to be an employee!
Virginia is an "employment at will" state. This means that, absent a written employment agreement which defines the job and its duration, your employer can fire you for any reason or no reason at all. In other words, your boss can fire you for not signing the noncompete agreement even though it was not mentioned when you accepted the job.
In some states, courts will not enforce a noncompete agreement executed after the commencement of the job, finding that there is no "legal consideration" for the new promise by the employee not to compete with the employer. In those states, the only way around this problem for the employer is to pay the employee a bonus or give them a pay raise in return for signing the noncompete agreement. Unfortunately, Virginia law does not require the payment of additional consideration and considers continuing employment as sufficient legal consideration.
Virginia is not a great place to be an employee!
Thursday, June 12, 2008
CHOICE OF LAW PROVISIONS ARE BIG
When you are asked to sign a non-compete (or flip side if you ask your staff to sign a non-compete) consider what state you want to govern the contract. I have had folks call me from Washington State with contracts that had Virginia Choice of law provisions, and Virginia employees call with Michigan, North Carolina, etc.
Most contracts contain the language CHOICE OF LAW PROVISION or will state something like "The laws of Virginia will govern this contract." That matters, because every state is different when it comes to Non-competes. It also matters, because you may be less likely to break a non-compete in Oregon, if you know the litigation will occur in Virginia - or vice a versa, if you have a favorable choice of law state, then you may be able to gamble.
The bottom line is each state is different, so find an attorney in the state where the contract is governed, and ask them....
Most contracts contain the language CHOICE OF LAW PROVISION or will state something like "The laws of Virginia will govern this contract." That matters, because every state is different when it comes to Non-competes. It also matters, because you may be less likely to break a non-compete in Oregon, if you know the litigation will occur in Virginia - or vice a versa, if you have a favorable choice of law state, then you may be able to gamble.
The bottom line is each state is different, so find an attorney in the state where the contract is governed, and ask them....
Friday, June 6, 2008
LEAVING YOUR JOB? HERE IS WHAT YOU NEED TO DO!
I receive telephone calls all the time from individuals who are getting ready to leave their current job and GO work for a competitor. The phone call goes like this, " I signed this non-compete agreement 3 years ago...I have not seen it in yearS and don't know exactly what it says...will I get into trouble if I go to work with a competitor of my company?"
The issues to consider (and their answers) are too many to post in this blog but here is a short of Do's and Don'ts:
1. Get a copy of the non-compete agreement as discreetly as possible - no reason to wake sleeping dogs. Read and know what the agreement says.
2. Do not communicate with your future (prospective) employer while "on the clock" with your current employer.
3. Do not use company email to discuss other job opportunities.
4. Do not copy or remove client or customer lists from your current office.
5. If you are starting a new business, remember the date of incorporation, registration, etc can easily be discovered afterwards and can be used as evidence against you in litigation.
6. If you are planning on going with an already established business...tell your soon to be employer about your noncompete agreement. If possible, ask the prospective employer to pay the legal costs you may incur if your current employer files suit.
7. Last, but most importantly, CONSULT WITH A KNOWLEDGEABLE LAWYER AND UNDERSTAND THE RISKS OF YOUR BUSINESS DECISIONS!
The issues to consider (and their answers) are too many to post in this blog but here is a short of Do's and Don'ts:
1. Get a copy of the non-compete agreement as discreetly as possible - no reason to wake sleeping dogs. Read and know what the agreement says.
2. Do not communicate with your future (prospective) employer while "on the clock" with your current employer.
3. Do not use company email to discuss other job opportunities.
4. Do not copy or remove client or customer lists from your current office.
5. If you are starting a new business, remember the date of incorporation, registration, etc can easily be discovered afterwards and can be used as evidence against you in litigation.
6. If you are planning on going with an already established business...tell your soon to be employer about your noncompete agreement. If possible, ask the prospective employer to pay the legal costs you may incur if your current employer files suit.
7. Last, but most importantly, CONSULT WITH A KNOWLEDGEABLE LAWYER AND UNDERSTAND THE RISKS OF YOUR BUSINESS DECISIONS!
Tuesday, June 3, 2008
DO NON-COMPETES HINDER PROGRESS?
Here is a good economic and business debate for you.
Do non-competes hinder progress, invention, discovery of new technologies?
What region in the United States is known for technological developments, creativity, and an economy based on both? Silicon Valley in California, of course. And what state has a public policy (as well as code provision) prohibiting non-compete agreements? California. Mere coincidence, or does the spirit of competition promote creativity and ingenuity?
Last year, Harvard Business School doctoral student researched the issue - and his results should not surprise you. READ an interview with now Dr. Marx, here. What did he find? That non competes do constrain mobility in a demonstrable way.
To read his full paper, grab some popcorn and check it out online.
If you want to have an even more exciting debate - throw this out at your next dinner party - does the free market system (yes Adam Smith) and capitalism, favor non-competes, or disfavor?
Bottom line - if you know you are in an industry where competition does spur creativity - might want to think twice before you sign one, or at the very least, move to California!
Do non-competes hinder progress, invention, discovery of new technologies?
What region in the United States is known for technological developments, creativity, and an economy based on both? Silicon Valley in California, of course. And what state has a public policy (as well as code provision) prohibiting non-compete agreements? California. Mere coincidence, or does the spirit of competition promote creativity and ingenuity?
Last year, Harvard Business School doctoral student researched the issue - and his results should not surprise you. READ an interview with now Dr. Marx, here. What did he find? That non competes do constrain mobility in a demonstrable way.
To read his full paper, grab some popcorn and check it out online.
If you want to have an even more exciting debate - throw this out at your next dinner party - does the free market system (yes Adam Smith) and capitalism, favor non-competes, or disfavor?
Bottom line - if you know you are in an industry where competition does spur creativity - might want to think twice before you sign one, or at the very least, move to California!
"SEVERANCE" PACKAGE
Severance package is good, right?
Yesterday the CEO of Wachovia is asked to leave and we hear he is given a "severance package" of 1.45 million. I will bet you a portion of that 1.45, that Mr. CEO had a few terms defining his exit. No working at a large bank for 5 years.... No disclosing confidential information or trade secrets... no writing a book about his company's failures.
In Contract law, in order for there to be a valid contract, both sides have to get something. It is called "consideration." If you can prove that you don't get anything, it is a pretty reasonable argument that the contract is invalid. So large companies can't just fire you and then say - "Sign this non-compete that limits your right to work, and ever make money again." They have to give you something in return, like a severance package.
We get calls frequently from folks that say - "they have told me if I don't sign this non-compete, I won't get my severance package. Can they do that?" To which we often reply - "yes they can. Unless it was previously agreed upon in a separate contract, they have no legal obligation to give you the money and you can chose to sign and take it, or walk. I know its not a great choice - but it is yours to make.
In this difficult economy - it is worth taking the time to review the "severance package" and the terms of it. Have an attorney check it out for you, consider the financial risks of taking it, or not - and then decide. Please don't be rash and just sign - that's when folks get into trouble... My guess is the CEO of Wachovia had a whole team of attorneys review his 30 page exit contract, you should too.
Yesterday the CEO of Wachovia is asked to leave and we hear he is given a "severance package" of 1.45 million. I will bet you a portion of that 1.45, that Mr. CEO had a few terms defining his exit. No working at a large bank for 5 years.... No disclosing confidential information or trade secrets... no writing a book about his company's failures.
In Contract law, in order for there to be a valid contract, both sides have to get something. It is called "consideration." If you can prove that you don't get anything, it is a pretty reasonable argument that the contract is invalid. So large companies can't just fire you and then say - "Sign this non-compete that limits your right to work, and ever make money again." They have to give you something in return, like a severance package.
We get calls frequently from folks that say - "they have told me if I don't sign this non-compete, I won't get my severance package. Can they do that?" To which we often reply - "yes they can. Unless it was previously agreed upon in a separate contract, they have no legal obligation to give you the money and you can chose to sign and take it, or walk. I know its not a great choice - but it is yours to make.
In this difficult economy - it is worth taking the time to review the "severance package" and the terms of it. Have an attorney check it out for you, consider the financial risks of taking it, or not - and then decide. Please don't be rash and just sign - that's when folks get into trouble... My guess is the CEO of Wachovia had a whole team of attorneys review his 30 page exit contract, you should too.
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