Benton_des
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Whirlpool is in the process of rolling out non compete agreements as a 'condition of employment' to fairly low levels in the design organization. While non compete agreements are not necessarily new in corporate design, I have to sign this thing by the end of the month or lose my job. What I am struggling with is the broad interpretation of who is or is not 'a competitor'... quite literally, the agreement is worded that, rather than providing a clear cut list of companies to stay away from, it is 'management discretion' if they deem a company I may chose to join in the future is a 'competitor'.

It is also spelled out that if a dispute goes to court, and I lose, I have to pay all of Whirlpool's legal costs. However, if I win, Whirlpool does not have to pay mine. Peachy.

My question: is this a common practice? Are other companies asking their designers to sign such restrictive non compete agreements? I could understand it if the agreement spelled out LG appliances or GE appliances, etc. but to leave it to 'management discretion' puts me in a position of potentially resigning... then being told I can't leave (or I can leave, but not work and not earn a living...) because someone decided the company I would like to join is a competitor. It feels like they are asking for a huge leap of faith to sign such a restrictive legal document and trust it will be managed appropriately.

I would like to know if this is an emerging trend or if this is just a one off occurance with one particular company.

Thanks for any wisdom, I don;t mean to rant but I need to make a decision soon.
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yo
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What are the terms of the non-compete? 1 year? Who pays for you lack of income in that event?

In my experience, non-competes were not always enforced, and when they were there was typically a sizable severance agreement.... mainly because in many states non-competes are difficult to enforce. It is difficult for an employer to prevent someone from working at their preferred place of work.

Personally, unless I was planning on going to GE, I'd be ok with it. Typically this is in response from someone leaving to go to a competitor. It might be more fruitful to spend this time and money on addressing why a person a person might leave unexpectedly.
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rkuchinsky
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I'm not a lawyer, but it doesn't seem right that they can change your employment contact terms all of a sudden or terminate your contract if you refuse to sign.

I'd suggest 2 things-

1. Have a frank discussion with your manager and/or hr rep to clarify the terms they are proposing, consequences, etc. take notes.

2. Speak to a lawyer and do some research on state employment laws. I've heard that these non competes are illegal in some states.

At the end of the day, you have 2 choices. Sign and worry about it later if/when you are looking at going elsewhere or don't sign, get let go and fight it then in court or otherwise.

I had a non-compete that was broadly worded proposed to me once while working corporate. I wasn't happy with it either, but don't recall they threatened termination if not signing or not. To be honest I can't recall if I signed it or not, but did work after that in the same industry and nothing came of it. It might just be some upper management lawyer or hr person throwing their weight around and the consequences are nothing if nobody follows up or cares.


Best of luck. Let us know what happens.

R
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rkuchinsky
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Ps. You might want to remove the company name. Could be taken the wrong way if they find out.

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pier
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This sounds like typical Big Co. moronic over reaction, always the result of a middle management shuffle with consequent "new direction" to self justify and get noticed for next management shuffle.

In every article I've read the only non-compete contracts enforced by a court were for corporate buyouts affecting the ousted founder. This makes sense as the ousted, well compensated, founder is very likely to start a new venture similar to what he just sold. I've never heard of a non-compete contract enforced by a court on a lowly wage slave, regardless of professional qualifications. They are simply too onerous, and courts have ruled they are illegal as being restrictive of trade, a fundamental requirement for a healthy free market economy.

Also, from your examples, the wording is too open ended. "Managers discretion" is unacceptable, a non-compete should be more descriptive, i.e. "household domestic appliance industry". Also, the clause on indemnification - you pay if guilty, they don't pay if they're guilty - is one sided, which makes a contract legally unenforceable in most jurisdictions.

Of course, this is all predicated on "the courts". Who really wants to or can get that far? Also, I have had numerous lawyers explain to me the reason for these grandiose clauses is "just to see if we can get it".

As Yo said, if Whirlpool is worth it to you, sign it. If you're happy there and plan on many more years then it's no real issue. I would add that first you should find a way to have a meeting with whomever concerned and explain the problems as you feel about them and offer specific changes as acceptable, just as you did in your preamble - listing companies.
Benton_des
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yo wrote:What are the terms of the non-compete? 1 year? Who pays for you lack of income in that event?

In my experience, non-competes were not always enforced, and when they were there was typically a sizable severance agreement.... mainly because in many states non-competes are difficult to enforce. It is difficult for an employer to prevent someone from working at their preferred place of work.

Personally, unless I was planning on going to GE, I'd be ok with it. Typically this is in response from someone leaving to go to a competitor. It might be more fruitful to spend this time and money on addressing why a person a person might leave unexpectedly.

The length of the enforcement is 12 months. The employee has to take care of all expenses, there is no ongoing support from the company during this time. I honestly can't think of too many people that can take a year off without a paycheck, but that is what is in the non compete. I hear you about going to GE, etc. but it is still a big risk to take if somehow a new company were deemed a competitor.
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rkuchinsky
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One thought. Maybe better to leave it vague and unenforceable than to list companies and further limit your options.

R
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Benton_des
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please see repost below
Last edited by Benton_des on July 12th, 2013, 8:32 pm, edited 1 time in total.
Benton_des
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Benton_des wrote:
rkuchinsky wrote:I'm not a lawyer, but it doesn't seem right that they can change your employment contact terms all of a sudden or terminate your contract if you refuse to sign.

I'd suggest 2 things-

1. Have a frank discussion with your manager and/or hr rep to clarify the terms they are proposing, consequences, etc. take notes.

2. Speak to a lawyer and do some research on state employment laws. I've heard that these non competes are illegal in some states.

At the end of the day, you have 2 choices. Sign and worry about it later if/when you are looking at going elsewhere or don't sign, get let go and fight it then in court or otherwise.


I had a non-compete that was broadly worded proposed to me once while working corporate. I wasn't happy with it either, but don't recall they threatened termination if not signing or not. To be honest I can't recall if I signed it or not, but did work after that in the same industry and nothing came of it. It might just be some upper management lawyer or hr person throwing their weight around and the consequences are nothing if nobody follows up or cares.


Best of luck. Let us know what happens.

R


I have an attorney looking this over pro bono (thank goodness, I don't have a lot of money to cover attorney fees) and hope to get her take next week. I like your idea of the frank discussion, thanks for that. I beleive this is a good path to take, thanks!
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Scott Bennett
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My experience with the law and lawyers is that the actual "law" doesn't matter nearly as much as who can better afford to litigate. I can't imagine why they would attempt to enforce a non-compete on a rank and file employee, but if a Fortune 500 company decides to sic their internal legal department on you, you're in a world of hurt. Their lawyers are paid an annual salary, and yours bill $250/hour in 15 minute increments. You lose.

My personal policy, one which I cannot recommend highly enough, is: I do not sign non-competes. An NDA is all the protection they need against you going to a competitor and revealing new product plans or whatever.

Depending on where you live, you can probably be fired without consequence for not signing this. I would still not sign it.

Let us know what your lawyer says, I'd be very curious.
Benton_des
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Scott Bennett wrote:My experience with the law and lawyers is that the actual "law" doesn't matter nearly as much as who can better afford to litigate. I can't imagine why they would attempt to enforce a non-compete on a rank and file employee, but if a Fortune 500 company decides to sic their internal legal department on you, you're in a world of hurt. Their lawyers are paid an annual salary, and yours bill $250/hour in 15 minute increments. You lose.

My personal policy, one which I cannot recommend highly enough, is: I do not sign non-competes. An NDA is all the protection they need against you going to a competitor and revealing new product plans or whatever.

Depending on where you live, you can probably be fired without consequence for not signing this. I would still not sign it.

Let us know what your lawyer says, I'd be very curious.


Thanks Scott, I appreciate your input on this (and everyone's feedback, you all have been great). I think you have put your finger on my concern, which is if there is an issue - again, open to very broad interpretation - I simply do not have the means to go to court and fight this out. I will either need to get comfortable that I will potentially have to work here the rest of my career, which I honestly do not want to do, change careers (and I don't want to that either!) or find a way to be able to support myself for a year if needed. This is simply a terrible position to be in, and I am frustrated I'm even having to deal with this.

I will let you know what I hear from the attorney next week. Hopefully it will be good news.

Thanks again for your help and advice.
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Personally, my advice is to remove the names of the companies listed here for your own good. If I were your boss casually reading the forums and came across this, I'd be less than pleased.
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Kershaw
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sounds like layoffs are on the horizon......
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Modern Man
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Modern Man would sign the non-compete clause only if he somehow magically knows with 100% certainty that his next job will be in California.
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I was asked to sign one at my last employer, and they were also very vague. We had to sit down with the lawyers to clarify what they were doing with this new document. They wanted to claim anything that we do creatively at any point as thiers (even stuff done after hours). The lawyer basically said that they wouldnt be coming after us, unless something was blatantly obvious. The main reason for concern was more with the computer programers taking code to another place than with our department. However, they write the document vague enough to cover everything, which to me seems lazy and a cause for problems later.

Here is a lawyers take on it:

Likely, all of their employees are "at-will" and they can be terminated with or without cause. So, yes, they can be terminated for not signing a non-compete. You cannot unilaterally change a contract. But you can change a contract with consent from both parties. Without seeing the non-compete it's really hard to say whether it would constitute an unfair restriction on trade.


I just did a quick search and here is a little information….:

§3.5 During the litigation of a noncompetition agreement, a question may arise as to whether the agreement is supported by sufficient consideration or, conversely, whether it can be attacked on the ground that it lacks consideration. A noncompetition agreement made in connection with the sale of a business will seldom pose an issue as to consideration; such issues usually arise in connection with employer-employee agreements.

Most jurisdictions that have faced the question have held that, where an agreement is signed by a new employee in connection with his or her hiring, the fact of employment is sufficient consideration for the noncompetition commitment. But where the covenant is extracted from a current employee in exchange for nothing other than continued employment, there is a substantial split of authority on the agreement’s enforceability. See Annotation, Sufficiency of Consideration for Employee’s Covenant Not to Compete, Entered into After Inception of Employment, 51 ALR 3d 825 (1973 & Supp).

The Michigan Court of Appeals addressed this issue in the context of at-will employment in Camshaft Mach Co v Rose, No 114314 (Mich App Mar 7, 1990) (unpublished). Although an unpublished opinion has no precedential effect (see MCR 7.215(C)(1)), this case warrants discussion because it is the only appellate treatment of this key issue by Michigan state courts. In Camshaft, an at-will employee was required to sign a noncompetition agreement and received nothing other than continued employment in exchange for signing. One year later the employee resigned and joined a competitor.

The court noted that (1) MCL 445.774a does not state that consideration for a noncompetition agreement is required; and (2) the statute of frauds (as codified at MCL 566.1) provides that consideration is not required to change or modify a contract where the change or modification is in writing and signed by the party against whom enforcement is sought. Thus, “continued employment of an at-will employee is sufficient consideration for his signature on a noncompetition agreement.” Id.(citing Bullock v Automobile Club of Michigan, 432 Mich 472, 479, 444 NW2d 114 (1989) (“a right to amend employment policies is fully consistent with the presumption of employment at will”), cert denied, 493 US 1072 (1990)); see also Hayes-Albion v Kuberski, 108 Mich App 642, 311 NW2d 122 (1981), aff’d in part and rev’d in part on other grounds,421 Mich 170, 364 NW2d 609 (1984) (relying on statute frauds; rejecting defendant’s argument that nondisclosure agreement he signed one week after beginning employment was invalid for lack of consideration).

Shortly after Camshaft was decided, the United States District Court for the Eastern District of Michigan addressed the adequacy of consideration defense in Robert Half Int’l Inc v Van Steenis, 784 F Supp 1263, 1273 (ED Mich 1991). In Robert Half, defendant former employee signed a noncompetition agreement the day he started work for plaintiff, after he had accepted the employment offer. In upholding the noncompetition agreement, the Robert Half court recognized that “continued employment constitutes sufficient consideration for the Defendant’s execution of [a noncompetition agreement] … where … the Defendant’s employment is otherwise ‘at will.’” Id. at 1273. The court noted that it would have reached a different result if defendant had been employed for a specific term. Id. (distinguishing Insurance Agents Inc v Abel, 338 NW2d 531 (Iowa App 1983)) (employee already had right to employment for at least three years under previous written contract); see also Sherrod v Genzyme Corp, No 05-1217, 2006 US App LEXIS 5381 (6th Cir 2006) (MCL 408.478 and MCL 750.351 do not preclude enforcement of noncompete where employment at will was sole consideration); Lowry Computer Prods, Inc v Head, 984 F Supp 1111 (ED Mich 1997) (successor entity entitled to enforce noncompetition agreement because plaintiff was at-will employee); RAM Prods Co v Chauncey, 967 F Supp 1071 (ND Ind 1997) (applying Michigan law; holding that continued employment is sufficient consideration for employee’s execution of restrictive covenant).

Reasonableness
The statute that now governs employer-employee covenants, MCL 445.774a, mandates reasonableness in four respects. The agreement must
1. protect the employer’s reasonable competitive business interest,
2. be reasonable as to its duration,
3. be reasonable as to its geographical area, and
4. be reasonable as to the type of employment or line of business covered by the prohibition.

A reasonable noncompetition agreement should interfere minimally with the employee’s ability to earn a living and should be no broader than necessary to protect the employer’s legitimate business interest. I don't see anything about vagueness in the description of competitors. But I'm not really looking very hard.


You should consult your personal lawyer about this matter. This was just a quick 5 minute conversation, so there could be other considerations Also, if you email your corporate dept, Im sure they will gladly sit down with you and go over what you can and cannot do. Im guessing it is the same situation i was in where they used a more general document to cover several departments of workers.

At the end of the day though, Scott is right. Can you afford to bring this to litigation if it happens? Whirlpool has in house staff, so the cost is minimal to them compared to what you are going to have to shell out.
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