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Confidentiality/Non Compete Agreements?

The company I'm working at wants me to sign a confidentiality agreement (ok) and a Non-Compete agreement. I don't want to sign it. I do run a competing business - though "compete" is a strong word, it's like saying two fishermen on opposite sides of the lake are competition - there's plenty of fish. It also stipulates that I can't compete with them for 3 years after I leave them. It doesn't specify whether or not it matters if they let me go or I leave myeslf.

I bring to the table not only my skills, but contacts & industry information I've made by being in a similar field for a few months. They're primarily a retail/wholesale bricks & morter outlet, I'm a web guy. They want to expand to the web, which is why they got me. The tried to do this years ago, but without much success.

So I'm their ticket to success on the internet. Without me, they're back at square one. I've done some good work for them, but only with my skills, nothing yet really involving my knowledge of the industry or my contacts.

I don't have a lot of money, but I could survive without them, especially if my business starts making money, which it looks like it will, in the next few months.

How would you handle this situation? Sign the agreement, cross out offensive parts & then sign it, refuse to sign it without certain changes to the wording or addendums that specify what I should or should not be allowed to do (i.e. I can do internet, but I can't do retail). We're still negotiating a compensation, and it seems the real issue here is whether or not I'm to become his employee, or something else, an independant contractor, or business partner, etc. He wants to own me, and I don't want that to happen.

Any advice is welcome.

Anony Moose
Thursday, June 24, 2004

Hire a lawyer to finish negotiating the contract, one who can politely tell them where they can shove their non-compete.

Neat Chi
Thursday, June 24, 2004

You certainly should not sign the documents as they stand. You are not only getting their business going, but also destroying three years of potential business for yourself.

At a bare minimum, you should strike out the clauses relating to non-compete and perhaps also confidentiality.

It sounds like there is a conflict between their definition of the role they hired you for, and what the role is or might actually require. This can be accidental, but sometimes it's deliberate.

If they really need you to build their business, you should insist on a contract that covers you for the full term they propose and would pay you out if they terminate early. In other words, get proper payment for what you're providing.

Inside Job
Thursday, June 24, 2004

Check with a lawyer. Those non-compete agreements are rarely legally enforcable, at least not in Australia.

Matthew Lock
Thursday, June 24, 2004

Non-competes are non enforceable if they're too broad. Three years would be too broad. But don't rely on that. You don't want to have to defend a law suit. Attack the problem up front.

Inside Job
Thursday, June 24, 2004

Definitely negotiate.  Don't walk away.  A reasonable non-compete says you don't compete while you work for them.  After that, not in force.

Thursday, June 24, 2004

Oh yeah, just because it might not be enforcable don't sign something you don't agree with.

I have had a similar clause in a contract before and complained about it, and the boss promptly removed it . I suspect they are often just trying it on.

Matthew Lock
Thursday, June 24, 2004

Lawyers sound expensive. While the potential to make a lot of money is there, there's no gaurantee. He probably got this document from Staples or or something of the sort, I don't see why I should have to invest in a lawyer.

I've found another confidentiality agreement online, and it doesn't have any non-compete clauses, maybe I should present it as an alternative. It's probably just as legally binding as the other one.

I should note that this confidentiality agreement is a good negotiating point. Not signing it shows that I'm not going to accept just anything in my relationship to him & his company and that I'm willing to walk away from anything less than a favorable agreement.

Negotiations really are a stare down sometimes, and have a lot more in common with haggling than you'd think. From the streets of flea markets to the office, tactics remain largely unchanged.

Anony Moose
Thursday, June 24, 2004

You can get a lawyer to read over a contract for about $100 in Australia. What about the US and the UK? I bet it's still worth the money.

Matthew Lock
Thursday, June 24, 2004

in hungary if you sign a non-compete with your employers, and he fires you he should pay ~80% of your salary for the period of the non-compete. so 2 years of sunny vacation with a good salary.

Thursday, June 24, 2004

Just a thought... Are they just trying to take you out of the game ?

Consider this. If they hired you, with the three year non-compete, etc, then you lost your job after a couple of months (for whatever reason), they may have got rid of one of their main competitors (in the web market, at least).

Although your point about negotiating being like a stare-down contest has some merit, it can also be about how much, or little, the parties want it to happen, or how much they have to lose. If you aren't that bothered, you can afford to be more assertive, but if you have mouths to feed, you'll sign.

Steve Jones (UK)
Thursday, June 24, 2004

AnonyMoose, the bottom line is this - you should not agree to the non-compete and probably not to the confidentiality stuff either.

If the situation is as you say, then you're probably pretty safe if they decide not to hire you. In fact, you're probably better off.

Sometimes these types of contracts are accidents, but sometimes they are deliberate. You should find out which this is, but either way, don't agree to it as it stands.

A low-cost approach to the situation is to delete all reference to non-compete and anything else you don't like, and sign that. Make sure the other party signs the same contract. If they just sign, it was an accident. If they try to monster you, you know you've just saved yourself a lot of grief.

Inside Job
Thursday, June 24, 2004

I'd say get a lawyer to look over the confidentiality one you've downloaded. It's three years of your life at stake. Of particualar importance is reuse of code.

If you're absolutely sure about it offer it though. Tell them point blank that you're not prepared to accept non-compete unless they want to pay you full whack for the whole period.

Stephen Jones
Thursday, June 24, 2004


Technically, as soon as you sign the existing contract, you would be in breach of it.

Thursday, June 24, 2004

You've got an interesting situation.

As I understand it, you and your employer are discussing a business (Internet-based sales) that might or might not work out for them. Presumably you can solve the technical issues for them, but you personally can't solve the business issues, such as how to reach potential customers, and how to service remote customers. That is up to your employer. Your employer is asking for a commitment (3 year non-compete) regarding a business over which you have only limited control. That doesn't make sense for you.

You present the situation as potentially more of a business-to-business partnership, in which you have important relevant skills and experience, but you are an employee, which is a specific legal relationship. This leads to both business and legal issues.

The business issues seem clear. If I were signing a contract with another business, I'd never agree to a three-year noncompete for something that is a new line of business for my partner. What happens if they walk from the business? What happens if they find a better partner? The best business agreements spell out clearly what is required of each side to remain in the agreement, and spell out clearly how to leave. Most business ventures don't work, so the how to leave portion is important.

Is there anything behind the request for a long non-compete? Is the business worried that what you are doing is so valuable, anyone else could compete with them if you were involved? That doesn't say much for their  business confidence. An existing, successful business should have a huge advantage. Are they worried that they won't need you at all once the software is done? A company that expects to be successful in a new business should assume that they would keep you very busy for some time. Is there a specific competitor that they are concerned about? Did they have a bad experience with a previous employee? Do they just have no clue what they are doing?

Can you negotiate with them about what business arrangement makes sense? You'll need a lawyer to find out how it can be structured if you are an employee.

Overall, it sounds like they are more concerned than they need to be. If their business is successful, you'll want to be around anyway, and if their business fails, they won't care if you compete with their failure.

Dan Brown
Thursday, June 24, 2004

My suggestion: simply ask what he's going to pay you for those three years.  That's all.  Don't argue, protest, whine, just ask the question.  Then tell him you'll think about it, assuming he answers and doesn't tell you to let *him* think about it.  :)

The company I worked for last, they asked me about once a year to sign over perpetual rights to a bunch of things, and each time I asked how much they were going to pay me for it.    Following which, it would get quiet and I wouldn't hear anything again until the next year.

It took 6 years of that before they finally laid me off, so I think it worked out fairly well for me.  :)

Phillip J. Eby
Thursday, June 24, 2004

Do not sign. Do not sign. Do not sign.

i've been through this and you will be screwed in the end.

If you modify the contract, not only must you sign it, but the principals of their business must sign it as well.

Do not go in as employee but as contractor.

Tell them the non-compete is OK but you want $250,000 for your customer list up front and a $1.6 million golden parachute when you leave to cover the three years during which they are preventing you from working.

Be sure to mention the valuable contacts you bring to the table as a contractor in the contract you do sign.

A decent lawyer who is capable of negotiating this sort of deal will run you $300-$600/hr. If that is out of your price range, you shoud not be working for these people at all.

Dennis Atkins
Thursday, June 24, 2004

Get a lawyer.

I have seen a few situations where folks have been called for references only to hear things like "what? he has a no-compete clause in effect. What will he be doing there?" which effectively destroys your chance of gettting a job for some time.

Friday, June 25, 2004

I've been doing a mix of consulting and contracting for 10 years.  I've signed a confidentiality agreement for almost every project.  Every business wants to be protected, and it's never harmed my work.  If I do good work, it's rarely a problem to get exemptions that allow me to use the project as a reference for other business.

No-competes on the other hand are a major inconvienence to the vendor and typically provide only minor benefit to the client.  I've never signed one, and only once did I turn down business because of that stance.  It's not a hard-and-fast rule (I'd do it for enough $$), but there's never been a case when that's true.

To summarize.. don't overreact to this type of demand (as much of the discussion above would have you do).  Instead, treat it as a legitimate signal that the client is very concerned with their intellectual property and data, and negotiate on that basis.  Usually signing a confidentiality agreement is sufficient.

Voice of Rationality
Sunday, June 27, 2004

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