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agreement to not work for competitors

I have signed a work agreement with a non-american company, that I will not be able to work for any competitors for 1 year after I leave.
Previousely I was working outside the states, and am now back in the states.I want to apply for a competitor, as  they are making the same kind of products I was working on, and have some expertise in this area.
If I do send my resume, and they contact my previous employer, what's going to happen?

anon
Thursday, August 28, 2003

Before all the self-proclaimed Legal Beagles offer their advice up, take this advice:

Leave here, and go contact an attorney. The laws differ from state and state and people's personal experience, although interesting, isn't really going to be useful.

Go shell out a few hundred bucks and get a qualified attorney to advice you.

Mark Hoffman
Thursday, August 28, 2003

As a Virginia-proclaimed legal beagle, I agree 100% - you need to talk to an attorney. Do NOT take the advice of the company you are applying to - they have a conflict of interest and couldn't care less if you get sued.

Find a lawyer.

Philo

Philo
Thursday, August 28, 2003

Umm... If you signed a non-compete, why do you think it's OK to try to go to work for a competitor? Just because the company you signed with is in another country and may not be able to easily sue you? You signed the agreement, so unless there is something in the agreement that is illegal, I don't see why you think ignoring it is OK.

I think there is an ethics issue here - you signed up for a 1 year non-compete. Whether you should have or not is irrelevant, you did. Now you should stick to it.

And yes, if you intend to try to break your non-compete, you should get a lawyer. You're going to need one. You also need to be careful about your future employer - if intellectual properly is an issue in your field, they might be somewhat nervous about hiring a guy who has no ethical problem breaking contracts.

Michael Kohne
Thursday, August 28, 2003

as far as i know, non-compete agreements within software in the USA are generally regarded as unenforceable. 

rz
Thursday, August 28, 2003

Michael,

Although I would generally agree that one should abide by their agreements, what ought to happen if "anon" was laid off?

If I quit, then it's entirely reasonable for the non-compete to apply. But, if I get laid off through no fault of my own, then should it still apply?

I got burned by this in the past.  It's something that you need to look at before signing one of these things: make sure that either it does not apply to a lay-off, or that you can get "gardening leave" if this happens.

And if "anon" was indeed laid off, then yes, he ought to get a lawyer.

David Jones
Thursday, August 28, 2003

david jones, how did you get burned?

in my experience, these clauses are just boilerplate text in everyone's contract. it is actually targeted more towards senior manager types. when i lived in california I had to sign these agreements for every company i worked at, and I always ignored the agreement when i left. in software, anyone can be construed as a competitor, so I don't believe the clauses are enforceable.

rz
Thursday, August 28, 2003

I'm with rz.  I haven't yet worked for a company that didn't require me to sign a non-compete.

Since the non-competes are unenforcable in California (where I am) especially when you aren't very senior, I just sign them and never worry about them again.

I've never jumped ship from a company to a direct competitor, so it is a little different than what the original post was asking about, but I have no qualms with ignoring such agreements if they are so vague as to include any possible software company doing anything similar to a former company.

Mister Fancypants
Thursday, August 28, 2003

The following is all opinion, not legal advice. Most employees sign "non-compete" employee agreements under perceived duress/coercion - it happens when the employee is hired by a company and they feel that the employment offer will be rescinded if they don't sign the agreement. Such agreements generally conflict with the employee's "right to work" and can be considered as "constraint of [the employee's] trade" and therefore in violation of anti-trust laws. In the US, the enforcability of non-compete agreements varies by state, with California being the most in favor of the employee's right to work. However, even California allows non-compete agreements to be enforced in some cases (involving trade secrets or extraordinary training, for example). Even if the agreement is not enforceable, a former employer can still take you to court and cost you a lot of money in legal fees even if the employer eventually loses the case. A search on Google - for example http://www.google.com/search?q=%22non-compete%22+employee+agreement+enforcement will provide a lot more reading on the subject.

Philip Dickerson
Thursday, August 28, 2003

anon, non-compete agreements are often void because they try to grab too much for the employer, and courts don't consider that to be fair.

For example, the agreements will be voided if the area they try to restrict is too broad in subject area, geographic area or duration, and also if you have not been provided with appropriate consideration ( payment ) in return for that restriction.

If your agreement is in another country, it could well be that the restriction shouldn't and doesn't hold in America. Twelve months also sounds excessive, especially if you weren't senior.

Contrary to the assertions above, consulting a lawyer is not necessarily a great solution at all. Many of them don't understand these issues well, or don't understand them as they impact on individual professionals (since they're more accustomed to seeing it from the employer's point of view.)

Wig
Thursday, August 28, 2003

And the strength of the no-compete also depends on how much they paid whoever drafted said agreement.

And, as an added bonus, even if they don't have a legal leg to stand upon, they still have the option of suing you anyways until they wear you out. 

Flamebait Sr.
Thursday, August 28, 2003

"Contrary to the assertions above, consulting a lawyer is not necessarily a great solution at all. Many of them don't understand these issues well, or don't understand them as they impact on individual professionals (since they're more accustomed to seeing it from the employer's point of view.) "

I'm sorry, but this sort of statement simply indicates how poorly suited this sort of forum is for getting accurate advice on legal questions.

Re: "Many of them don't understand these issues well" --  Lots of lawyers have plenty of experience with noncompete agreements.  Noncompete agreements are common.  The law relevant to noncompete agreements isn't specific to software development at all; the same issues will generally apply to any sort of noncompete.  And a decent lawyer will have a good feel for whether one is non-enforceable or not. 

Re: ". . . since they're more accustomed to seeing it from the employer's point of view" :  If a lawyer can see it from the employer's point of view, then he can see it from the employee's point of view; they're simply flip sides of a coin.  Anyway, there are two sides to any dispute; what makes you think that the employer side is the only one that lawyers have experience in?

Re:  ". . . will be voided if  . . . you have not been provided with appropriate consideration ( payment ) in return for that restriction." :  this statement is basically just inaccurate.  Yes, noncompetes are generally tested to see whether they are "reasonable" (according to whatever "reasonable" has been fleshed out to be in previous cases in that jurisdiction).  But the amount of "consideration" is irrelevant.  There must be some consideration in order to have a valid contract.  But it could be 50 cents. 

To the original poster:  Forget about getting advice on the internet and find a good small-business lawyer.  The lawyer doesn't even have to be versed in software issues for this one.  My two cents as a former lawyer:  1-year is generally not an unreasonable amount of time for a noncompete in any jurisdiction (unless your employment agreement with original employer was for some absurdly short amount of time, like 2 weeks), and even though there might be an argument that some company you want to work for now is not really a "competitor", if even you acknowledge that it is a competitor then you're not in good shape.  By your own admission you seem to want to wriggle out of something you agreed to. 

Check with a lawyer on the out-of-country work thing as well, there may well be a wrinkle there that goes in your favor (like a practical inability of the foreign company to enforce the agreement).  Even if you've got some wriggle room legally, though, the noncompete could well cause a prospective employer to look past you for someone without potential contractual problems.

Herbert Sitz
Thursday, August 28, 2003

To the original poster - if you do check with a lawyer, let us know how his advice compares with the overview you've obtained here.

Herbert, as you would know, contracts can be and are struck down if they are considered unfair. As one person above observed, this includes the situation where the employee was not given adeqaute time to consider the contract, or in some other way was pressured into signing it.

Most recruitment contracts, for example, have clauses that are pure fiction, and will be overturned if they're tested in court.

Flamebait, the thing is that, for most companies, it's not worth expending expensive legal resources on every little incident. As well, companies face the risk of a public relations backlash if they go off half-cocked on these issues.

Wig
Thursday, August 28, 2003

not to flame herbert, but the first time i encountered a non compete clause, and wanted to jump ship, I went to a lawyer, and what he said was basically what Herbert said, which can be summarized as:

"Your noncompete could be an issue, or maybe it isn't an issue. You might be sued, or might not be sued. In either case, I don't really know, but I am a lawyer nonetheless."

only the difference between getting advice online, and from the lawyer, is that the lawyer's advice cost $673 USD.

Basically if you take this issue to a lawyer, the lawyer will either say "your noncompete means nothing" or they will say "your noncompete does mean something" but most likely they will say "your noncompete may mean something, or it may not mean anything."  the only difference between the advice you will get from random internet people and a lawyer, is that the lawyer will bill you for the advice. 

My advice is, unless you are stealing proprietary IP from your current employer, your noncompete means nothing at all, and the fact that it is a noncompete signed in a different country means that it means even less.

rz
Thursday, August 28, 2003

>"If a lawyer can see it from the employer's point of view, then he can see it from the employee's point of view; they're simply flip sides of a coin."

Yeh right.  If a software manager can see something from the employer's point of view, they can see it from the developer's point of view also, right?  Nonsense.

It's not merely flip sides of a coin; it's more like two sides of the Great Wall of China.

You don't want a lifetime prosecutor who has little or no experience doing defense to represent you when you are on trial. Neither do you want the lawyer who just finished spent 20 years working for BigCorp to lead a class-action suit on behalf of consumers.

If you're looking for a lawyer, find one who spends much or most of their time representing the employEE.

T. Norman
Thursday, August 28, 2003

"Herbert, as you would know, contracts can be and are struck down if they are considered unfair. " 

Virtually never.  There is what is called the "doctrine of unconscionability", in which a contract can be voided if it's found to be unconscionable.  But the legal standard for unconscionability is extremely high.  Mere unfairness will not do it.  If you can find a case outside of the cases lawyers learn in law school where a contract has been voided for unconscionability, I'll eat my hat.  Almost the same thing can be said for the doctrine of duress and coercion.  Yes, if these are present a contract can be void or unenforceable.  But the legal standards for duress and coercion that are extremely difficult to satisfy.  It's not just when the man-on-the-street feels one side was under pressure to sign the contract.

And T. Norman -- I'll stand by my statement that the two sides are two sides of a coin, and that lawyers can do both equally well.  Remember law is adversarial:  if you don't know how the other side is looking at things then you sure aren't going to do a very good job planning your own case; you have to able to predict what the other side's best argument or plan of attack is going to be.  If you do a good job of representing employers, you know exactly how to do a good job representing employees.  Sorry if you think it's nonsense.  It's not.

If you were to tell a seasoned criminal prosecutor that they'd make a poor defense attorney because they could only see things from the prosecutor's point of view, they'd laugh.  Many of the best criminal defense attorneys got their start as prosecutors.  (Most don't go from doing defense to prosecutorial work because prosecutors are govt positions and don't pay as well.)

You said, " If a software manager can see something from the employer's point of view, they can see it from the developer's point of view also, right?  Nonsense." 

Well, I think a software manager could see it from the developer's point of view if they had any interest in doing that.  But because of company politics -- and because the parties get emotionally involved -- they apparently usually don't.  Like I said, the legal system is set up so that lawyers have to be able to pretty good at seeing things from everybody's point of view.  If they don't they're not going to do a good job.  There are no politics involved that work against them doing this, and lawyers learn and practice starting in law school to do as much as they can to keep their emotions separate from their arguments, precisely because they need to be able to do everything they can to see things from every point of view (which is, in other words, from an 'objective' point of view). 

"If you're looking for a lawyer, find one who spends much or most of their time representing the employEE. "

Regarding this, I'd generally agree.  It's not that big a deal, though.

Herbert Sitz
Thursday, August 28, 2003

[this is not legal advice]
In general, noncompetes *may* be held unenforceable if they are overbroad. For example, "you may not work for another gaming company for one year" - well if you're a game software developer this effectively puts you out of work; in that case the noncompete *may* be dismissed. (but you still may be sued, and you will still have to go to trial)

OTOH, if you work on the SQL Server team and leave for Oracle, MS has a pretty good case.

Philo

Philo
Thursday, August 28, 2003

some links:

http://pf.inc.com/articles/2001/03/22361.html
http://www.xent.com/FoRK-archive/2001.01/0424.html

mb
Thursday, August 28, 2003

You might consider talking to your previous company. They may just say of course we will sue but they may agree to cancel the agreement.

If you don't want to ask offically you might ask a contact whether they ever try to enforce the agreement.

JOHN
Friday, August 29, 2003

rz, here's how "I got burned".

The non-compete was a part of an employment+buyout agreement created when I (among other principals) sold a business to the employer.

The non-compete prevented me from working for any client or former client of the employer for six months after leaving, anywhere in the world.

Employer was a semiconductor chip design consulting firm. At one time or other they were contracted to Nortel, Cisco, etc. Basically any reasonably-sized high-tech firm. And if ANY office of Nortel used them, then ALL offices of Nortel were locked out for me.

Since the non-compete was part of the buyout, and we had legal advice during this process, the traditional arguments wrt. employment fall flat. There was an expectation of significant benefits if the company succeeded, and we were willing to sign the non-compete to realize those benefits.

However, due to the "former or current client, anywhere in the world" clause, almost all prospective employers were locked out from me at the time I was laid off.

In the end, I did find a job with a competitor, and had to sign a special waiver with the former employer to do so.

And the former employer? They recently went tits-up, sold their assets to a new incarnation of themselves, and left the original shareholders with nothing. Such is life.

David Jones
Friday, August 29, 2003

One thing which I have not seen addressed, in particular by Herbert, is the problem that lawyers will generally not be qualified to accurately judge whether Company B (the one that hired you or wants to hire you) can accurately be described as a competitor to Company A (the one that wants to sue you or Company B).

That's the implication in "lawyers aren't qualified", I think. My solution here has so far been to refuse to sign the document (which they are springing on us after a year with no compensation accordingly) until the definition of "competitor" is explicit and narrow.

If it comes to "sign this or get fired", I will sign it, but I will not consider myself ethically bound by the contract (of course, I'll be legally bound). This is why these things are so bad - they encourage people to have little respect for the law.

Mike
Friday, August 29, 2003

"One thing which I have not seen addressed, in particular by Herbert, is the problem that lawyers will generally not be qualified to accurately judge whether Company B (the one that hired you or wants to hire you) can accurately be described as a competitor to Company A (the one that wants to sue you or Company B)."

I have really, really bad news for you.

When it comes time to get sued, who do you think will be making the decision?

Philo

Philo
Friday, August 29, 2003

Every once in a while we get a revised company handbook that includes, among other things, a non-compete agreement. But I didn't sign one when I accepted the job and I'm not about to sign it now. So what I do is to cross out the parts I don't agree with, initialize them, sign the document and return it. I've never had any problem - most likely nobody in HR sees what I've done!

pUnk
Friday, August 29, 2003

In Canada, we have a nice little claws called "Without Prejudice"...

I always sign all contracts and print under my signature "Without Prejudice" ... Leagally the implications of these two words mean that I was told to "sign here" and so I did infact sign there, however I cannot be held to anything that the document says as I'm not agreeing to what the document says... 

Also to be on the safe side, I cross out and initial anything I do not explicitly agree to....  such as "Any developments, during office or non-office hours belongs to us" ... that always gets scratched out...

I was called on it once, and I simply explained that I do "other" contract work during my free time and agreeing to those types of terms, would viod previously signed NDA's (Non-Disclosure Agreements) with other companies...

If the employer really wants you.. they allow such trivial things, providing that you are an ethical person, and arn't just there to steal "trade secrets"

You would have to check you local state laws in the US to see if the same rule applies...

Robert J. French
Sunday, August 31, 2003

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