In my previous post, I discussed what a non-compete agreement is. In this post, I will discuss my experiences with those agreements.
I’ve had several experiences in signing non-compete agreements. The first time I was asked to sign one was when I worked at a durable medical equipment company. What makes my case so unusual is that I was asked to sign the agreement after I had been employed with the company for about three years. This was done because a few weeks earlier, a senior salesperson had left our company to work for a competitor. He allegedly stole a hard copy of our customer list. There was no proof he took the document. However, based on that experience, our employer required each salesperson to sign the non-compete agreement even though most of us had been with the company for several years.
There was no formal announcement in advance that the entire sales staff would be required to sign this document. Instead, each of us met privately in an office with the owner, his wife and the sales manager. The non-compete agreement was presented to each salesperson. We read it, asked questions and if we agreed to the terms, we signed it. In exchange, we received financial compensation based on the number of years each of us had worked at the company. (Employees who are belatedly asked to sign a non-compete agreement are normally offered something of financial value, like a bonus or a raise).
Being naïve about such agreements, I immediately read and signed it because I wanted the money. However, some of my colleagues did not sign it so quickly. Some took copies to review but were given a specific deadline to make a decision. One of my friends had the foresight to have his attorney review the document. His attorney told him to sign it because the agreement was so vague and “full of holes” that it could not stand up in court. While that news gave me some relief, I now realize I should have been more cautious before signing the agreement. Like my friend, I should have sought legal advice.
A couple of years later, our company was sold to a large competitor. It was soon announced that the entire sales team would probably be laid off within a year or so after the acquisition. However, we were not required to sign a non-compete agreement before joining our new employer. About a year later, shortly before we were to be laid off, the HR department asked each salesperson to sign a non-compete agreement. This time, the entire sales team refused. Since we knew we were going to be laid off, it didn’t make sense for us to sign. Some of us (including me) were seriously considering working for a small competitor after we left, so we didn’t want to ruin our chances for future employment.
As we expected, the HR department backed down and did not force us to sign, since by that point it really had no leverage over us.
I did, in fact, go to work for a small competitor after being laid off. A few weeks after taking that job, I received a nasty letter from a lawyer representing the company that had bought out my previous employer. The letter stated that I was in violation of a non-compete agreement and that legal action would take place unless I immediately quit my new job. I called the attorney and argued that since the agreement was between my old employer and not the new owner (his client,) the agreement was not binding on me. Naturally, he argued differently. I stood my ground and refused to quit my new job. As I suspected, my old employer did not take legal action against me. I believe they didn’t sue me because they thought I would have little impact on their sales. In addition, nothing in the agreement stated that I must comply with the terms if my old employer was bought out or merged with another company.
I found out later that some employers will use threatening legal letters to try to intimidate and scare their old employees who work for competitors, but never follow through with any action. Why? Partly because of the legal expense involved are too high, or because the employer believes you will not have a major negative impact on his business. These employers are playing a game of chicken. They hope a threatening letter is enough to scare you away from a competitor. If you call their bluff, you may win. However, my advice is that if you receive a threatening letter from a previous employer, always see a lawyer.
The third time I was asked to sign a non-compete agreement was when my division at a mid-size publishing company was sold to a large competitor. Unlike the prior buy-out, I experienced, this time my new employer requested that I and everyone on the staff sign the non-compete agreement before being hired. The agreement listed several competitors we were not allowed to work for until a year after we had left the company. I signed the agreement because I had no plans to work for a competitor.
While that agreement was better than the one I signed with the durable medical company, it still did not completely protect my employer. For example, two editors quit and went to work for a competitor that was not listed in the agreement. Three more editors quit and took jobs with a competitor had not been created before the buy-out.
Since then, I have signed two more non-compete agreements before formally being hired by a new employer. (In one rare case, I was actually asked to sign a non-compete agreement before being interviewed. But that agreement only applied to anything that my potential employer discussed with me during our interview. In return, my potential employer signed an agreement promising that he would not disclose that he interviewed me. This agreement was to protect me in case my current employer was snooping around to find out if I was interviewing for a new job).
From a sales point of view, are non-compete agreements fair? In my opinion, it depends on several factors. If you specialize in selling certain products and services, then you should be allowed to continue selling those products and services to other companies. This is especially true if you get laid off, fired or move away. While I understand the employer’s point of view about protecting his business, we all have to make a living. However, I’m strongly opposed to stealing your old employer’s trade secrets, customer lists or anything else that is considered proprietary. It’s just plain unethical and wrong. And if you have done your due diligence in advance, your employer’s competitor will have good products for you to sell, and enough resources to help you.
From my personal experience, I have heard of employers threatening legal action against a former employer, but I was not privy to the outcome or if they followed through on their threats.
If you do decide to work for a competitor even after signing a non-compete agreement, I strongly urge you to seek legal advice first. This could save you a lot of time, money and headache down the road. If your old employer suspects you have stolen trade secrets or client lists, he may sue not only you but your new employer as well.
So if you are confronted with the prospect of signing a non-compete agreement, always seek legal advice. If you feel uncomfortable signing the agreement, and you think you can find a job somewhere else without signing one, then go for it.
Note: If you like my post, please read my book – Advice for New Salespeople: Tips to Help your Sales Career.