Published on Wednesday, Mar 18, 2009
Among the first things employers do on hiring a new employee is to get him to sign a ‘non-competition’ agreement. Most often, the new hire is so gung-ho about starting the new job that he rushes through the hiring formalities, signing the numerous papers without a second thought.
That’s mistake number one. A while into the new job, the employee is already looking for a better deal and is quite prone to jump at the sight of a more lucrative offer.
That’s mistake number two. Even as he puts in his resignation papers/signs up with the new company, the management brandishes the ‘non-compete’ clause in the employee’s face, which immediately takes the wind out of his sails.
The end result is a long-drawn out legal tussle that may even finish off the helpless employee as he often has to pay dearly - sit on the sidelines and watch his promising career getting tattered and ruined!
Today’s tough economy is making employers more paranoid about losing their intellectual capital- staff to the competition.
They incorporate cast iron and legally enforceable contracts to guard everything from trade secrets, know how, critical research, customer information, client lists and other confidential information.
So, don’t kid yourself that non-competition clauses are restricted to technology and finance sectors or C-level jobs.
Increasingly, even entry-level employees in varied industries are required to sign the obligatory post-termination restrictions.
Though the constraints vary from industry to industry, they broadly restrict departing employees from working for competitors, setting up a competing business and canvassing old customers for a set period.
So great is the distrust that employers do not hesitate to renege on the job offer at the slightest sign of refusal.
They are also not beyond waving the contract in your face at the first whiff of departure, thus effectively controlling attrition rates.
After all, with most companies in the industry being considered competition, there is no place left to go. You have no choice but to stay!
High stakes: The non-compete clause effectively places shackles on employees, becoming an unassailable roadblock for future employment.
The organisation gets a monopoly on its employees as it can bar them from work and prevent them from earning a living.
Leave alone getting a new job in a competing company, you often cannot afford to moonlight either.
The slightest violation of the contract will entail legal action, which can not only cause you to quit the new job, but also pay monetary damages for the same.
After the monstrous cost and trouble, you end up quite unable to find a decent job, at least for a long while. In other words, you are locked in!
What to do:While you have no choice but to sign and agree to the restrictive covenants, doing it carelessly will only bring untold regret and despair later on.
It makes sense to carefully read and understand the fine print as well as clarify any ambiguities.
It is especially important to realise two factors – the time span and the geography of the covenant.
The specified period of time restraint generally varies from six months to a year, though in some cases, it can extend to even two years. Similarly, it will be applicable in a particular territory like country, state, city or limited areas.
Similarly, even the scope of prohibited activities should be clarified.
While the organisation can prevent you from doing similar work for the competition, it cannot impede you from engaging in other forms of employment even in a competing firm.
If possible, try to negotiate the terms to wiggle in some breathing space by narrowing the scope of the restrictions.
A top employment lawyer suggests, “In lieu of a traditional non-compete contract, try to angle for a ‘non-disclosure’ or a ‘non-solicitation’ agreement”. This is because non-disclosure provisions only inhibit you from revealing trade secrets and confidential details to outsiders while a non-solicitation agreement simply prohibits you from soliciting current clients of the company. In both cases, you can actually start working immediately after you leave the company.
Employment experts even suggest seeking legal counsel to understand the terms before putting your signature to the contract.
Though a costly avenue, it is actually worth it when it comes to safeguarding your future interests. What’s more, the lawyer can even attempt to negotiate more beneficial terms on your behalf.
But, you have to tread with great care as one wrong move can jeopardise the job offer, which none of us can afford today.
As a general rule, keep in mind that the organisation should be able to prove a valid purpose or legitimate business interest for implementing the restrictive covenants.
There should also be adequate consideration for the constraints, though often it can be as simple as the job offer, a promotion, increase in pay or some other perquisite.
Yet, broadly written and unreasonable covenants are not enforceable.
In all other cases, it is advisable to work in a related area as you ride out the restrictive time span without conflicting any of the terms of the contract.
The other option is to face legal charges… Make your choice!
PAYAL CHANANIA
No comments:
Post a Comment