Crazy Non-Compete Contracts? 193
JL-b8 asks: "I've just encountered a (from what I know) strange occurrence. A group of friends who work for a small web design firm are being forced to sign a non-compete agreement with a clause that prohibits the employee from working with a competing company for 12 months, after the date of their leaving. The owners claim it's a standardly practiced clause, but I don't see how the hell a web developer/designer is supposed to find work in a city for a year, without moving to a completely different city. I'd like more input as to how this weighs in to the rest of the companies out there. Is this a common thing? If you've signed something like this, and had to switch jobs, how did it affect you?"
First hit on a google search (Score:4, Informative)
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The last non compete I had to deal with said I wouldn't go after their current clients or people they have interviewed as clients for two years after my termination. This seems reasonable compared to nothing anywhere close to were you live. And their goal of me not taking their customers with me was satisfied pretty good.
Re:First hit on a google search (Score:4, Interesting)
Here in Ohio we have a law called The Blue Pencil Rule. If a person can show that a non-compete clause is preventing them from finding employment a judge can rewrite the clause as he sees fit. There's probably something similar in many states.
Most of the non-competes I've been asked to sign have a term of about one year. They usually specify that they only apply to working for a competitor, although on one occasion I had to get the contract amended to specify what the comapny's area of business was because the clause was so sloppily (or possibly intentionally) written that taking almost any other job could run afoul of it.
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True. One place I worked had a badly-worded non-compete that I can only assume had been written by the company owner
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useful tips about what's worth fighting over.
One thing I'd definitely encourage you to fight over: cause of termination of current job.
It may be reasonable to have to honor a non-compete statement in case you quit a job or are fired with cause - it's NOT reasonable to have a non compete if you're layed off because of downsizing or similar motives.
I've personaly been in the position where the company I was employed with decided to close down a branch office and lay off all employees. The non-compete in my contract would have kept me from working i
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Re:First hit on a google search (Score:5, Informative)
He's not, that's why you ask for full time income for one year (in addition to the standard severance package) to compensate for the time he won't be employable. You can tell your friend this is the "standard" response for this "standard" clause. Either that, or you can tell your friend to strike out the clause, initial it, and ask the employer to initial it as well. Crossing out clauses, or modifying clauses to make them more reasonable, is another very "standard" practice.
Whatever happens, tell your friend to not let this clause slip by untouched (even if he does live in a State where it's not really enforced). If his boss is going to be uncompromising, your friend needs to find this out now *before* he accepts a job from him. For some good reading on this topic, I recommend he takes a look at http://asktheheadhunter.com [asktheheadhunter.com]. I would also suggest "When I Say No, I Feel Guilty" by Manuel J. Smith -- which is the best book I've read on assertiveness.
yes... don't sign it depending on which state (Score:3, Informative)
You sound young and inexperienced... welcome to the real world. Don't sign it unless you are completely desperado for money.
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Alternative: Negotiate the price of your signature. Advise them that you will sign it if, and only if, they agree, in writing, as part of the non-compete agreement, that upon your departure from the company for any reason (to include dismissal and layoff), that you will be paid your salary at the time of your departure plus 5%/year for inflation for the duration of the non-compete
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On the contracts I've seen that have these sort of non-compete clauses, it is sometimes mentioned that the CEO has to sign off on any changes to the contract. So, depending on the size of the company, you're often trying to negotiate with someone who has absolutely no authority to negotiate. Further, the hiring manager is unlikely to want to become the "exception" by requesting such an unusual request of the CEO.
For my current job, I paid a few hundred bucks to talk t
Mod Parent Up (Score:2)
Sadly, a lot of legal paperwork is actually invalid and done to intimidate or make people think that's the law...
Ignore 'em (Score:4, Interesting)
To be a bit more thorough in my answer, I have never flagrantly violated such an agreement. It's usually not that hard to find work for another company that isn't a direct competitor. Plus, (IANAL) I've heard that those sorts of contracts are mostly unenforceable. I could be wrong about that though, which is why I try to avoid flagrant disregard for the non-compete.
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The key phrases you'd want to Google are:
"violates reasonable expectations" or
"is unconscionable" or
"overly broad"
The definition differs from state to state, which is why lawyers get paid.
Anyways, assuming you get sued (you may not be important enough to bother suing), the Judge will most likely strike any clauses that would prevent you from making a living in your industry.
Re:Ignore 'em (Score:4, Interesting)
They never did choose to enforce it.
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Yeah, those people who wear costumes can be a real bitch to work with.
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It is now standard practice in the US to claim Constitutional authority to disregard any law, regulation or agreement that you disagree with. It works at the highest levels, don't see why all citizens wouldn't claim to have decided that authority for themselves on the same basis.
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Many contract terms and agreements are dictated to the party who is not in a position of power. The unfairness and abuse that this can lead to is a reason why there are many laws, regulations and judicial rules that limit the so-called "freedom to contract".
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I am a recent law school graduate who did not go to law school to be a lawyer. However, I did pay attention in Employment law when non-compete clauses were discussed. Basically, the enforceability of a non-compete is based on how well it is written and whether the state's employment law thinks the terms of the non-compete are reasonable. For example, in Arkansas a non-compete can say that you cannot work for a competitor for s
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But...
If the contract were declared unenforceable, how did the employer have a legal right to enforce the "ten percent" rule?
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The contract would not be unenforceable, only the non-compete provisions. The provision enforcing the ten-percent rule is a separate contract provision that is only triggered if the non-compete provision fails. The rational is that the ten-percent salary is paid to the employee based on the enforceability of the non-compete provision; sort of like insurance. In the event the non-compete i
it depends. (Score:5, Insightful)
It's probably pretty much bullshit, as non-competes are usually targeted at specific knowledge jobs (CTO, CEO, etc), not skill jobs (web designer/developer). Basically, it comes down to compensation for that commitment. If the firm's paying six and a half figures, go for it. If they're paying market rate, tell them to knob off: There are plenty of other firms that don't require a non-compete for a regular web developer/designer position.
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The rule for years was that you had to be given the confidential information at the time you signed the non-compete for it to be enforceable. A waiting period of even a few hours made them unenforceable.
A recent court decision has changed that. As I understand it,
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I think he meant log10(salary) = 5.5, or his salary is 10^5.5; i.e. about $300,000. (Yes, it's 5.5 when doing the math, as a 6-figure salary is 10^5. It's one of those off-by-one situations.)
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Too common (Score:3, Insightful)
I'm on such a job currently... (Score:4, Interesting)
I know people who work in an "all purpose IT Company" that offers services ranging from outsourcing programs to supplying servers. They got a 2 yrs non competing period, the funny thing (because it's not me) is that my friend can't find an IT job anywhere since it would violate the agreement. He "had" to work in a non-IT related field, I just bid him good luck.
And yes, such things are crazy.
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2 years is excessively long & the job blackout (all of IT) is overly broad.
No Judge would allow the terms of that non-compete to be enforced.
Have your friend read the non-compete wikipedia entry [wikipedia.org]
Then tell him to find a labor law lawyer.
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I wonder what happens in a job interview if you ask to put an according non-compete clause for your employer in the contract. In the EU most non-compete clauses are nullified anyway, because you have the right of free choice
Strange for SW, not for others (Score:5, Insightful)
Non-competes should only be accepted for this sort of reason, where some person working within the same industry for another company would have either proprietary knowledge or influence not due to their skill, but only to their association with a company. If I'm working as a cashier for -insert megalomaniacal chain store here- then there isn't really any possibility of having such knowledge or influence. If instead I'm working in their procurement department and negotiating deals with (and cultivating relationships with) outside vendors, it makes sense for the company to have a non-compete clause. If I weren't working for them, I wouldn't have had the contact with those vendors, it is only due to my work with the company that I would be as successful at another company.
Whether or not you accept the clause, however, is up to you. Do the benefits of working for this company outweigh the problems that a non-compete may cause you?
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A local radio station had a male and female DJ pair doing a show for several years. One day one of the DJs proposed marriage to the other DJ over the air, and she accepted. The radio station promptly fir
I'm not a lawyer but .. (Score:2)
The clauses are presumed to be invalid unless they are reasonable in terms of the scope of work covered, geographical area and length of time. The burden will be on the employer to prove these three in any litigation. There may be specific state statutes limiting these, otherwise look for cases in your state to get an idea of what courts are finding to be reasonable. These tests may al
Contracting clauses (Score:3, Informative)
About the only things they can enforce is that it would be very very difficult for me to switch to a different agency but still work in the same job at the same company (and its probably 50-50 in switching agency to do a different job at the same company) and it would probably be equally difficult to switch to a permanant rather than contracting role while doing the same job here.
Since as agencies go mine isn't too bad I can live with those limitations - and if they happen to be offering the next job I want then I would have no issue with signing with them again - but it certainly won't stop me signing with other agencies/companies if they have a better offer and I highly doubt they would even attempt to enforce it in court let alone have a snow flakes chance in hell of them winning.
Oh, this reminds me of the ol' Freedom Debate.. (Score:2)
I always said we're both for freedom, the big question is just 'freedom from whom?'.. and this question illustrates it perfectly. In Europe, this is a non-issue. I could sign all the non-compete contracts I'd want to, but they don't hold up in court. We have a 'right to work'.
You have the freedom
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I think you are arong that non-compete contracts do not hold in court in Europe. I am under such a non-compete contract, and before signing it I did a bit of legal research.
In Denmark where I live, the law specifically mentions non-compete clauses in employment contracts. They are legal in some circumstances, but there is also a requirement that if used the former employer has to c
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What I meant was general one-sided 'you're totally screwed now' non-compete clauses weren't allowed.. and as seen by your and the other replies here, that does hold.
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In Europe, you work to live. In the USA, you live to work.
Also, 'security' is ambiguous. In Europe, 'security' means that I'll be able to feed my family in case I lose my job. In the USA, 'security' means the ability to apply draconian privacy laws, or side-step them all-together.
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Any sufficiently advanced serfdom is indistinguishable from freedom.
-1 Stupid Meme
Illegal in Australia (Score:3, Informative)
Sounds to me like they're just trying it on. Almost every contract I've received has had something really unreasonable in it. Every one is different too, but they're all "just the standard contract". If you do contracting for any amount of time you'll hear those weasel words a *lot*.
My advice is strike it, explain that it's unreasonable and they'll very likely back down. Good luck.
Strike the clause?? (Score:2)
Oracle (Score:2)
I suggest your friends just sign, but strike out the clauses that don't suit them. Put a signature left of the striked-out clauses for good measure, put them in the in-tray and you're done. If they complain, say you've done all you can. If they keep complaining, quietly look for oth
Not worth the paper they're written on (Score:3, Informative)
I'm a web designer/developer in a mostly print design shop, and we actually ran into a situation where one of our designers quit to work in-house with one of our clients. The effect being that she left, and having no more need of us, the client did too.
So what happens? Nothing really. We chose not to pursue the legal route because the client wasn't worth what we would've had to pay in legal fees, and secondly because no legal ruling would repair the situation. Sure, maybe we could bilk a little extra cash out of the client on the way out, but we couldn't seek an injunction against our designer working for them.
Ultimately, after asking a couple of HR people I know, I found out that these things are pretty much only valid if you're getting something in return. ie: If I ask this of a designer, then right there, in the contract there has to be spelled out some level of compensation for the direct act of denying them this revenue source should they leave. Otherwise you'd get laughed out of court for trying to enforce this, at least to my understanding (and ovbiously, IANAL).
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Ask them to pay for it (Score:5, Insightful)
If what you know is so important that the company will suffer if you work for a competitor, it makes sense for the company to pay you for it. That's fair.
Where? (Score:2)
Simple: Don't Sign any agreement you do not like (Score:3, Interesting)
As far as non-competes go, you have to first look at what the laws of your State are.
If you are in a Right to Work State such as California, you can safely sign an agreement that says you may not compete or work for a competitor who competes.
This is because Right to work means just that, the State recognizes that you have the right to earn a living by your trade and that no entity save the State itself may revoke that right nor confine or restrict that right in anyway. So even if you do sign that document and you do go to work for or against the client later, there is nothing they can do about it.
Now, if you don't live in a right to work state such as Washington, the State will allow a contracts terms to restrict you from plying your trade.
In essence, they see you as the clients little bitch for signing such an agreement and your ability to be employed is now bound by those terms.
Here, you will need to negotiate through those terms. Simply inform the client that while you would like to assist them, you are unable to sign the contract as it is currently written because it would effectively prohibit you from practicing your trade as a means of livelyhood and cause you significant harm.
What do you do if they refuse? Then walk away. Personally, I've never had a client refuse to revise the contract to my liking.
I've sometimes had a few days of ping pong and negotiations, but in the end I've always gotten exactly what I ask for.
But there are other things to look out for as well.
Ownership and Assignment are the first things I look out for, and the areas I read most closely.
Look out for crap like this:
"Subject to the terms of this Agreement, Consultant hereby assigns and transfer to the Client its entire right, title and interest, including without limitation all copyrights, patents, inventions, trade secrets, trademarks, trade names, service marks, trade dress, and all other intellectual property rights, in and to the Deliverables. To the extent that such assignment and transfer may not, by operation of law or otherwise, fully convey to the Client the foregoing rights, Consultant hereby grants to the Client a worldwide, irrevocable, exclusive, fully transferable, unrestricted right and license to use, execute, display, reproduce, distribute, modify, publicly perform, publicly display, sell, lease, license, sublicense, and otherwise transfer, and to authorize one or more third Parties to do some or all of the foregoing, with respect to the Deliverables in any form or medium, whether now known or later developed."
Just a little one sided don't ya think?
What the bolded bit means is that any pre-existing code I may allow to enter the code that comprises the deliverable is now theirs as if they had written it themselves. Additionally, anything I may generate while working on that project, I would never be able to again utilize. Now, enforcing that is a different matter... but I prefer to sign all of my contracts in good faith.
So here is the language I provide as my alternative language if they are to engage my services:
"Subject to the terms of this Agreement, Consultant hereby grants to the Client a worldwide, irrevocable, exclusive, fully transferable, unrestricted right and license to use, execute, display, reproduce, distribute, modify, publicly perform, publicly display, sell, lease, license, sublicense, and otherwise transfer, and to authorize one or more third Parties to do some or all of the foregoing, with respect to the Deliverables in any form or medium, whether now known or later developed."
Essentially, it's theirs to use and abuse with my own interests and entitlements maintained.
Not at all as strong as the GPL, but that's the point, they get the unfettered usage they want, but I maintain my ownersip of my existing code and any new knowl
Re:Simple: Don't Sign any agreement you do not lik (Score:2)
Give and take (Score:3, Insightful)
Just go to work for a California company (Score:3, Insightful)
I've turned down a job because we could not reach agreement over a non-compete clause; it was very broad, and unreasonable-looking, and they insisted on the annoying language. I took this as a sign that they might make trouble if I ever did want to leave (and if I have to hire a lawyer to assert my rights, that's trouble, even if I eventually win). I've signed others that were not so insane, but I generally hate them, and wish that other states would follow California's lead.
Don't sign it or any other unreasonable contracts (Score:2)
Even if they say it's "nothing" or not enforceable, it's still stupid to have it in.
Or do they prefer to select employees whose signatures/words are worth _nothing_, while eliminating potential employees who actually are diligent (to read fine print in contracts) AND have integrity?
It can't be acceptable practice, otherwise what do you expect a baker to do if he leaves a bakery? Do web design?
Request that the clause (and other u
Specifics. (Score:2)
The contract I signed is a little overly broad, but it doesn't stop me from working in IT altogether. Just a very small subsection. When I read that portion of the contract, I thought, 'Would I consider working for someone this might affect?' The answer was 'No.' Besides the legal obligation, I would not feel right taking their methods and practices to a comp
I call BS. (Score:2)
That's what NDAs are for. You could spill trade secrets all you want without ever violating a noncompete agreement, since you don't have to work for a competitor in order to reveal the information to them.
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The two often work in tandem, so employers have all angles covered.
Current non-compete lawsuit (Score:5, Informative)
http://www.desmoinesregister.com/apps/pbcs.dll/ar
Bad even if unenforceable (Score:2)
Table Turning (Score:2)
Usually it's more specific (Score:2)
I have signed non-compete clauses, but they were specific. For example, when working at an online shopping portal, my non-compete clause prevented me from working at another online shopping portal for a year. Not really a problem.
A non-compete clause for "web design" is too broad. What aspect of web design -- conceptual design? layout? integration? sales? Is there a specific industry or set of industries your clients come from -- financial, medical, etc.?
Don't ignore it! (Score:2)
The Important Thing (Score:5, Informative)
Read the contract. Take it to a lawyer. If you are in california, tell them straight up it's unenforceable and tell them you want it out of the contract because it could be damaging to the rest of the agreement should legal actions arise. Elsewhere, if you absolutely cannot find a lawyer, agree to the non-compete if you can get one of the following:
1) Specific mention of area of effect of the clause. Overly large areas are unenforceable. Look around your area and see if there are other places you could go to more than X miles from the employer.
2) Specific mention of specific competitors in the contract that you could not work for. If the contract has a completeness clause ("this agreement is the complete and final agreement between the parties," if I remember the wording close enough, which bars extrinsic evidence, such as a list), make sure it is in the contract itself, and not just an oral agreement or a typed-up list. Remember that what is said during negotiations likely will not have any effect upon how the contract is interpreted by any court at some (unfortunate) later date. The contract must be ambiguous for that, and non-specific does not mean ambiguous.
The larger the area/more employers, the more money you can ask for in severance during your noncompetitive period. If they try to get you to sign away longer than a year and a half or a couple counties of area, tell them up front that you can't agree to that and it is likely unenforceable. If they disagree, grab a lawyer for an hour and have him call them to tell them that it probably is. Generally, however, these clauses are allowed, and you have to be careful what you sign. Do not agree to a bad covenant not to compete in exchange for a lengthy period of "gauranteed" employment, because the gaurantee is... well... not a gaurantee. Even with a contract, unless it is worded extremely carefully, you are still an employee at will (to forestall questions: contractors are different, as they are not employees).
DO NOT, EVER, just cross out parts of a contract. That will not modify the contract unless the other party specifically agrees to the modification. The physical appearance of the paper is meaningless, as the contract itself is metaphysical. At best, you don't have a contract. At worst, you have a counteroffer that was not accepted by the employer, which may revert to the employer's version. Feel free to cross things out, add things, or whatever on your copy, but you ABSOLUTELY MUST go and specifically bring your concerns to the person you are negotiating with, draft a NEW copy of the contract for you to both review and sign. That is the only right way to do it.
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Hm.. (Score:2)
What?! (Score:2)
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read up on contract law (Score:2)
My preference with these is to modify the contract AND put a condition on the acceptance. I've never been challenged on either, and I've handed in 5 such modified contracts and never been challenged about it (either about the modifications/acceptance, or after changing jobs), in spite of otherwise violating the language of the base contract.
"1. COUNTER OFFERS
If in his reply to an offer, the offeree introduces a new term or varies the terms
Who are the competators (Score:2)
As a software / web developer, many of our potential employers are NOT in competition with each other. Who are the competators? For example, I've signed similar non-compete clauses where there were only 4-5 "competators". Likewise, if the company is selling trinkets, the non-compete clause may not consider a company selling widgets to be a competator.
Thus, it's a good idea for your friends to understand who the competators really are. My guess is that the competators are a very narrow range of companie
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The only time this really occurs is when a business is bought out and the owners are payed a stipend to not compete in the same business, idiot lawyers just dragged that across into employment contracts not because they though it would work but because they knew it would fail and crea
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Which begs the question: why have you sign it? Good thing you held out for more money, at least.
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I currently have one that states that I can't work for a competitor or start my own company OR even talk to other current employees about starting a company for 1 year.
Interesting thing is, we all sign it, then we all break it.
It's all about how far you bend the rules. If you piss off management on one side, they might zap you in the butt on the other side - I've seen it happen.
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Just realize, the non-competes are not to keep you from working, they are to keep you from taking stuff from your current job to your new job. Your company has to enforce them, and in most cases they won't. But in a few cases they might.
RonB
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Monthly?
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My advice (and no, IANAL, but I have done this before) is simply to strike out the offending clause, put your initials against the deletion and leave it at that.
More likely than not, they won't argue, but be prepared to tough it out if they do. All it really needs is to be handled with confidence. If they argue that the clause isn't intended to be enforced to your disadvantage, all you have to do is ask "in that case, why is it there, and in tha
Re:Pretty standard (Score:4, Insightful)
In fact I can't understand how can US workers comply and go away with such a draconian practice like a "non compete" clause. What do they think you are supposed to do for a year? Washing cars?
I can understand not copying your previous employer IP property to paste it in your new workplace. But if, for example, I'm a software engineer that worked on PageRank at Google, I understand not re-implementing PageRank at my new workplace, but why should I stop working in search engine technology? Why should I restart from (almost) scratch, doing something I'm not expert in, having probably lesser opportunities and wages, etc.?
What I find more amazing is the "oh well it's pretty standard" attitude. Do you really think such clauses are fair clauses?
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I'm a software engineer, and I've seen plenty of those clauses. While they might be enforceable, I don't see how them as overly restrictive. Unless you are qualified to do only
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Of course I could adapt, but why should I ? Adapting to a different job where my "special" expertise is worthless generally means making less money.
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OR, as an alternative, take the job, but factor the crazy non-compete into the compensation negotiations. Tell them "What you're
trying to do goes beyond simply hiring me as an employee for X duration. In return for the extra consideration I'll be granting
you, I expect commensurate consideration." If you can't reach an agreement that both sides find equitable, don't take the job.
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I believe many US jurisdictions will hold non-competes unenforceable if it prevents you from being able to effectively work at all.
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And I don't mean in the IT department...
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No, living out of the surplus wages. It's easy: they add a 12 months non-competing clause, you add a 12 months wages should be payed.
On the other hand, I don't know in the USA, but where I live such clauses wouldn't be enforceable.
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They're almost meaningless in the jurisdictions I've worked in, and courts almost always side with the employee, so it's rarely worth the time to argue against them. I'll usually negotiate them out, but sign and ignore isn't actually as dangerous here as it is
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I'm sure the local burger joint / xyz-Mart wouldn't really care. In fact, that's one less employee who'll want a raise next year.
And I'd consider them fair, since the entire purpose of a contract is to come to a fair agreement.
I'm just glad that where I live, the right to chose your employer is embedded in the constitution and you are prohibited from peddling
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Um, just to ask a (seemingly) dumb question:
Isn't *EVERY* company on the web a competitor??
Not to mention this applies to any internet based job. Seriously, this isn't a job locked down geographically...every design firm on the net is a competitor, or an I missing something here?
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I would tell the company that if they want to keep you from working for a competitor for a year, you expect an appropriate severance package if you are terminated.
I would also clarify that if you choose to leave on your own, your non-compete ONLY applies to projects/customers you are currently working on, not future or potential projects. MAKE IT CLEAR that you retain the right to work for a competitor if you choose,
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That is correct. Assuming this is in the USA, every state in the union has laws prohibiting such contracts from preventing an employee from earning a living in their field. So they can have pretty onerous NDAs, but they can't stop you from telling them to shove it and going to work for their biggest competitor the very next day.
(The one about starting your own competing company is enforceable though, so if you want to do that make sure
Standard? depnds on what "competing company" means (Score:2)
Basically, it's normal for the co. to protect themselves against you going in there, learning how they do everything, then duplicating their business/technology models for their competitors. Not unfair, as far as that goes.
But the contract I was looking at overreached by a *shocking degree, claiming "exclusive ownership" of any *idea "capable of being used in, or in conn
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IANAL, but I can spot a bum deal. Your attourney advised you poorly.
Anticompete agreements, whether enforceable or not (usually not), amount to a two-way exchange of services - You get a job, and they get your signature.
Now, if enforceable, you mig
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Secondly, depending upon how the contract is structured, they could probably withhold the extra money anyway. If I were the employer I would make the full contract, the
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DIAF