My employer just sprung a new contract on us. In it, it prohibits us from working for another company in our industry for 12 months after leaving our current post.
Is this normal in corporate design? Do I take it or fight it?
I have absolutely zero experience dealing with this and every job I’ve had has moved me into a different industry, so I’m not scared to sign, but I want my options open.
I got stung by one of these in the past.
Non-compete agreements are a scare tactic used by companies so they don’t become a training ground for their competitors. They make good business sense, but if you dig deep you’ll discover they’re nearly impossible to enforce.
There are two aspects to the contract.
Preserving company secrets, which is a reasonable request.
Not working for a competitor. In some industries that are “closed”, like footwear, you can ONLY work for a competitor. If you’re a plastics designer you can work for many non-competing companies. This was the paradox in my case. I left a company to work for a supplier and my ex-company whipped me with their non-compete agreement. I got several threatening letters from a law firm. Nasty stuff. In the end, all I had to do was hire a lawyer to send a letter that outlined why the assertion wasn’t legal (saying I couldn’t practice my profession). That ended the situation very quickly. It’s an expensive commitment to sue an ex-employee. If a company thinks they could lose significant market share because of the move then it may be worth it.
If you’re in a small industry and don’t plan to ever work for one of your competitors then don’t sweat it. If you have the ability to jump industries easily, don’t worry about it. If you’re a professional footwear designer (example) and your only possible other career choices include competing footwear companies then be prepared for some fireworks. But in the end, they can’t put you on the unemployment rolls with a non-compete agreement.
Very good insight from One word plastics. I would add that these contracts usually are contested/enforced in cases where malice enters the picture. In other words, companies can’t really prevent people from working, but they have a better shot and are more inspired to prosecute for breach of contract when intent to harm is evident. For example, going out of your way to divulge a secret to a compeitor…
Mark
Thanks for the insight. It follows what I’ve been thinking. For me, it shouldn’t be a problem getting out of the industry when the time comes, because the experience is more in plastic than in heating. I feel sorry for the engineering guys that got the same contract. They’ve spent years researching heating and now told they can’t work anywhere else in the industry. Ouch.
There is a lot of “grey” area, enforcement does not seem consistent. Typically if a company wants to enforce a non-compete, they pay for it… i.e. you’ve worked at Sony for 10 years, and now you want to work for Samsung. Sony wants to enforce a 6 month non-compete, so they pay you full salary for 6 months before you start at Samsung. This has happened to several friends of mine, they basically ended up with 6 month vacations! Several of them started successful freelance careers in this period.
Yo: Was that in the initial contract? Is it something that I should demand now, or wait until it is an issue?
914 -
personally, i’ve only seen non-compete contracts being tendered to the upper-most management people and in very large firms. this, as noted, is done partly to protect the company from people who have the most inside knowledge from being able to turn right around and use that knowledge against them. i’ve never seen a contract given to lower level employees, as it would unfairly constrain their ability to move about.
i guess, thinking about your situation from the position of being an owner, they could be really paranoid about their ability to get work right now (and, more acutely, their ability to compete in the open marketplace). but that may be too cynical of a read. it does sound a bit strange to issue companywide, though…
non-competes are traditionally very industry specific. that is, for example, if you work for a washing machine company as a designer, you aren’t allowed to go to a competitor brand.
I’ve never been subject to one, but do believe they are quite common even for “lower level design staff” depending on the industry (i would guess that more IP dependant industries such as high tech would have it more common than something like housewares.
as Yo notes, usually there is a financial compensation for such a clause. either on the back end (ie. getting paid 6mo. after you leave to cover the non-compete), or upfront, with an additional salary/bonus.
FWIW, I’m not familiar with the legality of such provision in any case…
R
I figure I’ll just take the kook-aid and sign. I’m fairly confident I’m the only staff designer in the industry anyways…so it’s likely that I’m never going to be in a position to break the agreement.
I’m really hoping that Zhongguo just stated that this is a case of evil capitalist bourgeois exploitation. 'Cause I agree.