The Fear Factor of a Non-Compete

February 1, 2017 Tony Misura

COMMENTARY

As humans, there is nothing that grabs our attention and controls our behavior like fear. Our 24/7 news cycle has leveraged current events and fear with great success. Sadly, fear is also a tactic some companies use to control their employees. We see companies abuse the prospect of litigation to inject fear when the topic of non-compete agreements is approached.

The root of fear is a lack of understanding.

Non-compete laws vary significantly from state to state. It’s no accident that highly competitive Silicon Valley thrives in California, where non-competes are not allowed. At the other end of the scale, Michigan has the strictest pro-corporate non-compete laws, and we have the beleaguered automotive industry anchored in that state as a likely result.

For street-level insights into non-competes in the LBM industry, we spoke to attorney Teresa Thompson and LBM pro Russ Kathrein. Teresa is a shareholder and lawyer with Fredrikson & Byron, and has more than 20 years of courtroom experience in non-compete and trade secret law. As CEO of Aurora, Ill.-based Alexander Lumber, Russ has been on both sides of non-compete agreements, as an employee and LBM leader. He has hired Teresa to represent him, and below they share suggestions on how you can protect yourself and your company.

Slow down, think it through. The anxiety that surrounds career moves often leads people to move too quickly. It’s important to read and understand non-compete clauses in order to understand what the company is trying to protect, and to know what is covered by applicable state law.

Does an employment separation agreement apply? The professional prenup. It’s ironic that the idea of a prenuptial agreement in a marital relationship is a known and accepted practice, but the same concept for an employee and employer relationship is not. After all, odds are 50/50 with the marriage, but 100% that at some point you will leave your current employer.

Control your ego, seek council. Money invested in understanding what can be complex laws and agreements prior to signing any legally binding document is a wise investment. It’s difficult to become excellent at non-compete law when you address it only a few times in your life. The key is not to forget the value of having an objective third party to keep you from negotiating against yourself. Teresa Thompson said, “One of my first questions is whether or not there was consideration for the agreement while understanding the circumstances around signing it. Because no matter what state we are in, the court is going to look at when you signed the agreement, and what the new employer gave you to sign it. Did you sign it before you started? Did they give you a signing bonus? Did they agree to provide you with training or relocation expenses? What sort of tangible thing did they give you in order to the sign the agreement? In many states, the offer of employment is not enough.”

Take nothing when you leave. Wrap your company cell phone, laptop and every flash drive in a bow and present it as your last gift to your employer. Russ Kathrein states: “People make the mistake of saying, ‘Before I quit, I’m going to download a bunch of files then erase everything.’ Understand these three points: If you downloaded files 30 days ago on a thumb drive, we will be able to tell. It’s a federal crime to delete any information from a device that is company property. And it’s a real easy claim for a lawsuit even if we don’t have an agreement.”

Ethical action under pressure. Russ counsels: “Leave honorably. If you are leaving because you are confident in your abilities and think you can do better elsewhere, then go for it. But if you think your worth is defined by your customer relationships and some secret competitor information, your career could be short lived. Your customer relationships are likely valuable to the company you are leaving, and a pricing war may redefine your perceived value. Also, competitive information usually has a life for 30-60 days. So now you have taken significant legal risk for little short term return.”

From my experience working with some of the best companies in our industry, top companies do not feel the need to repress their people with one-sided agreements. The best companies are confident in their business model and ability to compete for top tier talent and customers. Professionals remember: Life is not about being comfortable, it’s about being honorable and being free. Know your best career opportunities.

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