Debunking the Non-Compete Agreement
By: Mick, March 21st, 2007
There is a great post from YourHRGuy.com about how Non-Compete Agreements are Bogus that I think hits the nail right on the head. If you’ve ever been lucky enough to be on the receiving end of one of these agreements, I think you may understand what we’re saying. These agreements are most often entirely too broad, too restrictive, and generally unnecessary to be applied as often as they are in employment situations and others.
Personally, I’ve been involved in a non-compete situation after the sale of a business, ensuring that we would not emerge as a competitor in the same industry until 3 years had elapsed. Was that necessary or even of any real value to the acquiring firm? No. In some instances, it certainly could be, but it wasn’t the case in our situation. Rather, it would have been more appropriate to simply state that we could never target the clients that were passed along and leave it at that. Anything beyond that was overkill and just created unnecessary restrictions. We didn’t fight it because we were ready to explore new models, but it doesn’t change the fact that it was pointless. I am certain that the non-compete was thrown in because it is an accepted component of the standard BS that goes along with most transactions (employee hirings and severance packages, mergers, acquisitions, etc.) where it has any potential relevance.
As a result, we’ve got many people and businesses bound by non-competes intended to protect other entities from threats that simply do not exist. There are many times and circumstances that require non-compete agreements - I am well aware of that. But I am also aware that they are currently applied far too often and to the detriment of would-be entrepreneurs and overall business innovation.
Tags: business innovation, employment contracts, hiring stipulations, non compete agreements
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April 16th, 2008 at 6:41 pm
I was recently let go by a recruiting firm with whom I had a non-compete agreement. I was let go for spending too much time with a large client. That client has reached out to me and would like to work with me in the future. They weren’t huge fans of my company and won’t send any more business at them either way.
If I don’t initiate the contact, am I able to business with old clients?
April 18th, 2008 at 4:25 pm
Hi Scott,
It’s my understanding (admittedly limited) that it wouldn’t matter who made the initial contact, you’d still be prohibited from engaging any “old” clients for the duration of the non-compete. But I would certainly refer to the agreement and then your attorney before making any moves of consequence.
Good luck!
Mick