Shackled to a Non-Compete?
Celebrate the freedom to work like a damn dog wherever you please
“The three most harmful addictions are heroin, carbohydrates, and a monthly salary.” ― Nassim Nicholas Taleb
Non-compete, non-solicitation and confidentiality clauses are common in professional services such as accounting and consulting and also in the technology industry. Many of you probably agreed to them without blinking when you signed the offer letter to accept that job. You may be asked to sign again to get a severance payment if you’re part of a reduction-in-force or terminated without cause.
Non-compete and non-solicitation clauses restrict your ability to go to work for a perceived competitor or related business for a period of time (often 1 to 2 years, sometimes more.) They also attempt to prevent you from soliciting business from former clients or luring staff away from your former employer for your new employer or firm. Confidentiality clauses give firms the right to protect certain company information and bona fide trade secrets. In accounting and consulting firms, for example, this means client lists, methodologies, price lists, and contract copies. Proprietary documents such as engagement letters and proposals are tempting takeaways.
Professionals who’ve left firms involuntarily – some of the thousands cut during the financial crisis or after mergers – worry about the legal issues associated with working for former clients, for example, as employees and consultants.
Let me get the easiest part out of the way first. Contract or not, professionals like lawyers and C.P.A.s have an ethical obligation, as well as often a contractual one, to keep confidential information to themselves. Taking client lists, sales and profit data, price lists, fee data or methodologies to a new employer or your own firm and passing the information off as your own, or using it against your former employer, is just not kosher.
On the other hand, a big reason many of you work for big firms is to learn big. Once methodologies, competitive strategy, rates and revenues are in your head, there’s no preventing that information from informing and illuminating your future strategies and decisions. There’s no “Eternal Sunshine of the Spotless Mind” machine that erases the indelible mark a big prestigious firm makes on a thinking person’s psyche.
My advice: Don’t do evil. It’s bound to generate bad karma.
When it comes to non-compete and non-solicitation clauses, judges often favor the employer and a contract signed by what is assumed to have been an otherwise lucid and sane individual over any of your whining about unfairness. That’s unless your arguments are strong and, in particular, if your former employer is trying to prevent you from earning a living. You may have signed an overly broad, onerous list of conditions that purport to shackle you to indentured servitude indefinitely. You may get lucky and your former firm won’t bother enforcing them or may not be able to when they hit a court of law.
Some states are more understanding than others. California has pretty much decided that, with very few exceptions, non-compete clauses are unenforceable.
“In a widely watched decision involving the now defunct accountancy practice of Arthur Andersen, the Supreme Court invalidated any agreement that seeks to restrict the right of an employee to go to work for a competitor or solicit a former employer’s customers using non trade secret information.”
In New York, non-compete clauses are often enforced if terminated for cause. For example, if you stole from your employer or violated a very important policy you won’t get much sympathy from most judges. If you were laid off or left voluntarily, non-compete clauses are generally unenforceable, often for local legal reasons. States like Pennsylvania can use a “blue-pencil” to weigh the pros and cons of such disputes in court, striking out parts of the agreement that are too restrictive and leaving others in that clearly follow the law or are reasonable under the circumstances.