April 23, 2009 (Computerworld) Can signing a standard workplace document derail your career plans? Yes, says Jerry Luftman, executive director of graduate IS Programs at Stevens Institute of Technology in Hoboken, N.J. He says a former student almost lost out on a big break because he had signed a noncompete agreement, a contract that prohibits employees from doing certain work for a set period of time following the end of their current job.
The former student had been an IT manager at a Fortune 500 company but didn’t feel that he was moving up fast enough. So he accepted a higher-up IT management position at another big company. But when he gave his notice, his original employer threatened to enforce in court the noncompete agreement he had signed when he first took the job.
“The company was willing to fight to keep him from going to this new company, even though he had accepted the new position and given his resignation,” Luftman says.
The new company was also willing to fight for him, though, and its lawyers helped settle the dispute, in part with assurances that the IT manager would disclose no proprietary information regarding his former employer, Luftman says.
Luftman says this happens often enough — workers happy to start a new job sign a stack of paperwork without realizing the consequences down the road. “It’s the kind of thing people don’t think about until they get into this situation like this one,” he adds.
Here’s what you should know to ensure that you don’t sign away your future.
Know the different documents
Lawyers say they see plenty of workers who don’t know what they’ve signed.
“People come in and say, ‘I signed a noncompete,’ and I look at it and say, ‘No, it’s not really a noncompete. It’s a nonsolicitation,’” says Brad Schleier, managing partner at Schleier Law Offices PC in Phoenix.
In addition to noncompete agreements, companies often have workers sign nondisclosure agreements, antiraiding agreements and/or computer-use policy statements — all of which seek to protect companies in different ways, says C. Forbes Sargent III, chairman of the corporate department and co-chairman of the employment law group at Sherin and Lodgen LLP in Boston.
Although these are all legal contracts, each one puts different restrictions on departing workers, Sargent says. A nondisclosure agreement says you can’t divulge proprietary information, while an antiraiding agreement says you can’t hire your former colleagues to work with you at your new job. A nonsolicitation says you can’t seek out your current employer’s clients once you depart.
They’re not the same as a noncompete agreement, Sargent adds.
Study your state’s take on the issue
If you live and work in California, you’ve got it easy: The state has banned noncompetes in all areas except for limited cases involving the sale of a company. But if you work elsewhere, know that the laws governing noncompetes vary from state to state.
Susan Joffe, an associate professor at Hofstra University School of Law in Hempstead, N.Y., says some states, such as Oregon, require employers to give new hires the contracts before starting. Some, including Massachusetts and Oregon, forbid employers from requiring existing employees to sign them without additional “consideration,” such as a raise or a promotion.
If there’s a legal dispute, the courts in some states tend to be more pro-business and are thus more likely to enforce noncompetes as they’re written, while courts in other states want to promote the mobility of the workforce and might rewrite the terms or decline to enforce them, Joffe says.
Look at your employer’s choice of venue
Even if you know your own state’s law, you might have more homework ahead, because your employer can pick, to some degree, which state’s law will govern if there’s a dispute. Be aware of this as you sign the contract. If the company opts for its choice of venue, it will be written into the actual agreement — so read it before you sign. Schleier cites the case of an Arizona-based worker who signed a noncompete with a Delaware-based company that stipulated that Florida law would govern in case of a dispute.
“Arizona is one state where you’d probably be stuck with that [arrangement], but if you had that in say, California, you’re more likely to get a court that will throw out the Florida law,” Schleier says.
Georgia, South Carolina and Virginia are other states where the courts might uphold that type of contract language, according to Joffe. “These states believe in the sanctity of a contract, and if the parties agreed to the terms, they won’t modify it,” she says. So you really do need to read the fine print before you sign a noncompete, or you might wind up having a dispute settled by judge in a worker-unfriendly state.
Assert your rights
That doesn’t mean, however, your employer can dictate whatever it wants in all situations, lawyers say.
Joseph A. Ciucci, a partner at Duane Morris LLP, recently advised an acquaintance in Michigan who designed software for the auto industry at an international company. The company was getting out of that software line and recently laid off its Michigan workforce.
Ciucci says the company told his client that to get his severance check, he had to sign a noncompete prohibiting him from working on that type of software development. The company wanted to apply North Carolina law if there were disputes.
“His question to me was, ‘Is this enforceable?’” Ciucci says. “My answer: I don’t think it is. They’re having a layoff. They’re getting out of that line of business, and they say North Carolina law controls. Good luck getting a Michigan court to apply North Carolina law if that company isn’t even in the business anymore.” As of this writing, his client was still out of work and there was no potential new job on the horizon.
Even in pro-business districts or states, courts aren’t going to blindly enforce noncompete agreements, Joffe says. They look at how long the noncompete lasts, whether the prohibited work is defined and whether the geographic area where the work is prohibited is fair. They also consider how the relationship ended, since they’re less likely to enforce a noncompete against laid-off workers.
“Fairness is a very, very big issue, and courts are looking at just how much companies are trying to restrict someone,” Joffe says. “Even states that enforce agreements want to make sure the employers aren’t taking advantage, because the courts don’t want to keep people from earning a living.”
Can you negotiate?
In theory, a noncompete agreement is a contract negotiated between two parties — both of whom should feel free to clarify terms, Joffe says.
“But in the real world, there are many more pressures when people are out of work and the job market is shrinking, and some employers might be tempted to take advantage,” she says.
So how much leeway do you have to negotiate a noncompete? It depends, Joffe and others say.
The higher up you are, the more you can negotiate the terms, Schleier says. You also might have some pull if you have unique skills or were recruited.
If you’re going to negotiate, you should start by finding out what your employer really wants to protect, says Sargent.
For example, if your boss wants to ensure that you don’t disclose proprietary work when you leave, Sargent says you might get the company to agree to just a nondisclosure agreement.
Even if your employer is set on a noncompete agreement, Sargent says you might be able to negotiate the length or geographic restrictions or even additional severance to compensate for the time you might be sitting on the sidelines.
http://www.computerworld.com/action/article.do?command=printArticleBasic&taxonomyName=Careers&articleId=9131622&taxonomyId=10
