restrictive covenant

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__dan

Senior Member
Yep, it's smoke and mirrors.

The law is generally very unfavorable for agreements that are in restraint of trade or anticompetitive practices. These are usually broadly illegal or unenforceable, especially with no compensation (consideration).

I can certainly see how some would view the effort as unprofessional, one should know the law better.

There's a case to be made that it works as a mind game. A typical shyster would ignore it, right or wrong does not matter, and a typical trusting honest guy who's a little over zealous about his karma, keeping is word, may honor the agreement (his word), even if told that it's not only illegal, but a scam. It's a threat of punishment for an employee thinking of leaving. Quitting incurs damages of forced unemployment for one year.

I did think you were worried about poaching of customers. Not much you can do about that. The law provides competition for the customer so bad practices may be declined for other options, if the customer chooses. Monopoly practices are generally very illegal and prosecuted under the law. You are saying you have a monopoly regarding your former employee within your radius. For current employees, yes, you can pay them for that. If you require they sit on their butts for a year, you will need to pay them for that also.

It's certainly not the worst practice in business, but where is the upside for you. Guys who will take a customer will do so with no hesitation or recourse. Don't threaten me .. do it. Guys who know the law and have high standards of professional conduct may see a tell, something they would like to walk away from, not get involved in. And honest trustworthy rubes may believe your bluff and worry needlessly about hanging on to something they need to let go of, because of the threatened, promised, punishment for leaving employment. So you punish the good guys with unecessary grief, show the smart guys you cannot be trusted to not punish them arbitrarily, and sign a few shysters in the process (they meet your requirements).

Clearly, you need to be organized ...
 

Rick Christopherson

Senior Member
"Upon the termination of my employment, employee shall not, for a period of twelve months from the date of such termination, engage in the business of Electrical contracting as an individual, employee, partner, stockholder, director, officer, principal, agent, or in any other relation or capacity whatsoever within a 25-mile radius of any of employer's facilities and/or office locations."

next we are going to have a non disclosure agreement to protect out intellectual property such ascustomer lists , pricing guides,training material and marketing strategies.

Our state does inforce very narrow and reasonable non competes so this will benefit us.
I brought this up before, but you ignored it. The problem with your proposal is that your restrictions are neither narrow nor reasonable. You cannot block a skilled worker such as an electrician from his trained career. You can take measure to protect your customer list, but that isn't even addressed in your NCA at all. As a matter of fact, you were suggesting that you would do this with an NDA, not the NCA.

You cannot protect your customer base by preventing someone from obtaining their own and unrelated customer base. You can block them from contacting your existing customers, but you cannot block them from establishing their own. This is also most frequently enforcable with sales personnel that have access to a customer list, or frequent repeat customers. It does not cover the one-time customer.

Customer Contacts said:
To determine the reasonableness of a non-compete agreement, Missouri courts look at the quality, frequency, and duration of an employee's exposure to the employer's customers. Healthcare Services, 198 S.W.3d at 611. The purpose of a non-compete is to keep the employee out of a situation in which customer contacts can be used to the former employer's disadvantage. Osage Glass, 693 S.W.2d at 75. However, preventing the employee from seeking out new customers may or may not exceed the reach of the non-compete agreement. Id. The determination of the nature and extent of customer contacts is a factually-intensive process commonly requiring detailed legal analysis.

You discussed the need to protect trade secrets. I highly doubt that you can claim any trade secrets. What you install or how you install it cannot be a trade secret because it is not held in secrecy. It is available to anyone to see who enters your customer's facility. If you have specialized program code for a PLC, then that would be a trade secret. However, if you give your customer access to that program code, then it is no longer a trade secret.

A trade secret must be something that you limit and protect even within your employees, and also must not be something that is already common knowledge to anyone else in the trade. Pricing guides or bidding methods is not considered a trade secret.

Trade Secret said:
In Missouri, determination of whether given information is a trade secret depends on six factors: (1) the extent to which the information is known outside of the business; (2) the extent to which it is known by employees and others involved in the business; (3) the extent to which measures are taken to guard the information; (4) the value of the information to the company and its competitors; (5) the amount of effort or money expended in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. Healthcare Services, 198 S.W.3d at 611.
 

Rick Christopherson

Senior Member
this is a link to the more complete version
http://www.ilrg.com/forms/employ-confid/us/mo
In an earlier posting you claimed that the wording of your original posting came from your "legal service". I pointed out that it was the exact wording from a Google search. Now we're learning that your legal service is an internet website for downloadable forms? :blink:

It is becoming abundantly clear that you are totally winging it with doing some internet searches. If you can't even be honest in how you ask questions here at the forum, how can your employees trust you with more critical aspects such as their livelihoods?
 

Fulthrotl

~Autocorrect is My Worst Enema.~
It is becoming abundantly clear that you are totally winging it with doing some internet searches.
If you can't even be honest in how you ask questions here at the forum, how can your employees
trust you with more critical aspects such as their livelihoods?

people who are inherently untrusting of people, without good cause,
are inherently untrustworthy, and are defending themselves against
something that is in their consciousness to do. they are attempting
to protect themselves against.... themselves.
 

petersonra

Senior Member
Location
Northern illinois
Occupation
engineer
I think the OP has a legit point in trying to protect legitimate assets of his business from being poached, but he is just going about it in a bad way.

If I were looking for work from him, I would have no problem signing his form because it is unenforceable. It would be like signing a form agreeing to do installation work in violation of the NEC. Such a contract would not be illegal in most states, but can't be enforced either, so there is no downside to signing it.

In any case, how would the kind of contract the OP is considering be enforced by a court in any practical way. A former employee gets hired by a competitor. The court is not going to order the new employer to fire the guy.

Unless you go to a lot of trouble to make it clear what information is considered a trade secret and what is not, and make very serious efforts to prevent people from having access to it that do not need it, the court is going to laugh at you when you try to claim run of the mill stuff like names and contact information is secret when you made no effort to protect it from employees who had no need to know it. In any case, most contact information for potential customers is so widely available these days that it is going to be very hard to convince a court that it is a trade secret. Even lists of customers is tough to claim as a trade secret as it is not real hard to come by.

You can protect things like exact details of contractual arrangements, but again, if it is widely known throughout the employees in your company, it is not a trade secret.

Even things like pricing methods are hard to protect as there really is nothing new under the sun here. Just about anything you are doing hundreds or thousands of other businesses are also doing, so it obviously cannot be a trade secret.
 

Rewire

Senior Member
In an earlier posting you claimed that the wording of your original posting came from your "legal service". I pointed out that it was the exact wording from a Google search. Now we're learning that your legal service is an internet website for downloadable forms? :blink:

It is becoming abundantly clear that you are totally winging it with doing some internet searches. If you can't even be honest in how you ask questions here at the forum, how can your employees trust you with more critical aspects such as their livelihoods?

well et guy I said it was pre written I requested some information from them and they sent this along with several links to missouri spoecific NC and ND
 

Rewire

Senior Member
In this case, A.R.S. Services v. Baker, the plaintiff, a company disaster restoration field, asked the court to enforce a one year non-compete provision against an employee who had resigned from the plaintiff?s firm . It appears that the only argument Baker could make against enforcement was that his former employer had asked him to engage in ?a fraudulent act involving moral turpitude,? and that this was a ?material breach? of the non-compete agreement, rendering it unenforceable. It is true that a material breach by an employer can invalidate a non-compete covenant. However, this case appears to have involved little more than an internal disagreement between Baker and the employer over a cost estimate to rebuild a home. The judge didn?t buy it ? quite rightly, if the evidence in support of this assertion was as weak as the decision suggests. This case was ?plain vanilla.? Preliminary injunction allowed.
 

renosteinke

Senior Member
Location
NE Arkansas
Will the OP please explain his purpose in starting this thread?

If it is to stir the pot, shame on him. Sure, let's toss some more uncertainty into a desperate economy.

If it is to seek information, he is in the wrong place. Does he think we can create knowledge by combining our collective ignorance?

Is he trying to share information? Well he can do better than that. Instead, he's coming off as a know-it all ego maniac who's only asserting he has a bigger set of jewels than anyone else.

Let's back up a moment.

First - what's the problem that's being 'fixed?' Is there a problem with his employees undermining his business? Where would the OP be today, had such strictures been in place -if he even ever was 'in the trade?'

I think this forum very well makes the case that running a business and being an electrician are two completely different skills. Give me the best tennis racket and give Chris Evert a frying pan - I bet she still beats me in tennis!

Instead, it comes down to trust and respect ... concepts that are often ignored, no matter how exhaustive the documentation that these are what separate the 'best' performing firms from the pack.

As for the technical aspects of no-compete agreements .... "A field day in court" says it all. I expect the real purpose of such agreements is to enrich lawyers. You may be right, the court may agree - but you have to go to court, and the lawyers have their meters running the whole time.

"Our courts enforce..." Sure they do. Exactly what did they enforce, when, and under what circumstances? Those are questions for the lawyers, and not us. Perhaps the OP should start over. I might suggest a thread that begins: "My lawyer has convinced me I should have this sort of thing, and here is the actual text ..."

The fact is, courts are going to exercise a great deal of discretion in deciding what is 'reasonable' or not. The more one-sided an agreement, the less likely it will be enforced. Add to that the prospect of a jury trial, and all bets are off. A man is no more 'your' employee than it's 'his' job.
 

fmtjfw

Senior Member
WV

WV

I looked at non-competes in WV. The are legal, but not necessarily enforceable. In court, where the rubber meets the road, I could find instances where they were enforced against Doctors and Outside Salesmen. No instances of them being enforced against tradesmen. To prevail in WV:

www.imidatasearch.com/Documents/WestVirginia_Guide.doc:
A West Virginia statute, as well as court decisions, govern this area of the law. If a restrictive clause in a written employment contract, e.g., a provision saying a former employee cannot compete with the former employer for a certain period of time, is supported by adequate consideration, West Virginia courts likely will enforce it if it is reasonable. Such clauses are often enforced if the restraint is confined within limits which are no greater as to area and duration than are reasonably necessary for the protection of the business of the employer (e.g., geographic limits or reasonable customer base limits) and do not impose an undue hardship on the employee or disregard the interest of the public. A noncompete clause cannot be used solely to prevent competition, but must protect a legitimate interest of the employer such as trade secrets, unique services provided by the employee at issue, confidential information and/or goodwill.

WV is also a "blue pencil" state. If the judge/jury decides the non-compete meets the above requirements, then the judge can rewrite the agreement to remove anything he/she finds overreaching. If the court finds the main purpose is to reduce competition (raise prices for the public) then they throw it out.

Here's a Harvard Business School article on how non-competes drive away good employees:
http://hbswk.hbs.edu/item/6759.html

My daughter-in-law is an attorney who has worked both sides of the street in labor law (employee and employer). She is very good, but you'd have to run miles of Romex? to pay her daily fee. My son is the news director at a local TV station. They have their reporters (with college degrees) sign non-competes. They've had about five former employees violate them as far as he recalls. None taken to court. One guy said "Sue me!" they didn't.
 

jzadroga

Member
Location
MA
I think that there is one main question here. Are you asking us for legal advice or professional opinion? If it’s legal, then you know the answer is talk to a lawyer. If its professional opinion, then most here seem to think it’s a bad idea and your energy is better spent on other things.

As far as the non-compete part of your question I think that trying to prevent someone from working in their trade in the same area as you is wrong and probably unenforceable. Consider this: let’s say that you can enforce the 25 mile limit. What if the only work available in in this 25 mile limit? Do you think any court would enforce your agreement that prevents the man from feeding his family? Are you trying to just prevent competition or just hurt the guy?

As far as your non-disclosure part, you seem to think you own the clients on your list. You should check with your clients to see if they like being held to your services exclusively. Consider this; a client sees an advertisement by your former employee in the phonebook. The customer has no idea that he is tied to you in the past or by a non-compete/non-disclosure agreement. The customer calls and requests service from him. Now, according to your agreement the former employee must turn down the work. So now the customer moves to the next contractor in the book. What did you gain? Just because they call all your customers and tell them that they are on their own does not get them the job. They still have to convince the customer they are better than you. Just like we all have to convince our customers we are better than the competition every day.

Then there are the pricing guides you refer to. How many posts have we seen that involve what to charge for stuff and services? There is no answer that applies to all. Every one of us has a different cost of doing business. Yes they may have what you would charge to do a job and can under sell you. But if they are using your price guide to get work how are you going to prove it anyways short of having a cop pull it from there van before they have a chance to hide it? And try to get a cop to get involved in a contract dispute over this! If this guide is so important then the employee should not have access to it. That would solve that problem.

Training material? What have you written that is a secret? Actually what have you written that you did not read somewhere else? And let’s say they do take your training material, they will probably modify it in some way that will no longer make it identical to yours.

Marketing strategies? Why would you share this information with an employee that drives a van and performs service/electrical work? I would think a court would say you didn’t protect your strategy very well. By the way, what new and novel way have you come up with to get work that nobody else has thought of? And how long do you think before your competition starts doing the same without hiring an ex-employee if it’s a successful strategy.

I’m not trying to stir it up just offering an opinion. Also I considered this exact policy for my company a while ago and thought better against it.
 
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roger

Moderator
Staff member
Location
Fl
Occupation
Retired Electrician
I think that there is one main question here. Are you asking us for legal advice or professional opinion? If it?s legal, then you know the answer is talk to a lawyer. If its professional opinion, then most here seem to think it?s a bad idea and your energy is better spent on other things.
And that sums it up.

Roger
 
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