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I currently have a one year non-compete contract (ex-pat assignment) with a lot of verbage about not recruiting from my company, not doing business in any location that I am currently "touching".

We were recently bought by a private equity company who is going to combine us with another company in our field they own (logistics). There is a rumor that they are going to ask us to sign 3 year non-compete contracts.

First, what is the general feeling and experience people have with non-competes? Second, based on that what are people's thoughts on a 3 year non-compete.

I understand the company trying to protect itself to some degree, but this almost seems to threaten my ability to make a livelyhood if I ever choose to leave the company.

Marc

wendii's picture

Hi Marc

Non-competes are common in agency recruiting but don't hold up in court in the UK.

3 years sounds very unfair, I think I'd try to negotiate it - once I had an offer!

Wendii

spiffdeb's picture

In my company all "middle manager" and up are required to sign them as a condition of holding those positions. I have found that in many cases if the company decides that you are not a fit or downsizes that they have little issue with you going with a competitor, despite the agreement.

However, if you leave of your own accord and go against the agreement my company has been very aggressive in going after those people.

Once you reach a certain level or in certain fields you have to expect non-competes. But to me, three years is excessive. I've never seen that.

tomas's picture

Marc,

The legal position regarding non-compete or restraint of trade clauses varies greatly from one jurisidcation to another so it would be helpful if we knew where you are based. I couldn't see that listed on your posting. Even then, nothing said on this forum should be construed as legal advice.

In addition, if you are asked to sign something like this you really should consult a qualified lawyer. Your career is, I assume, extremely important to you so you should absolutely understand whatever contracts you sign. Yes they cost money, but it may be much less costly in the long run.

Non-compete clauses can be restricted in a number of ways. Most common is time, where they apply for a given period. eg 3 years. They can also be restricted by area, so it is possible for these clauses to only apply within a very specfic area. eg within 3 kilometers of the company's office.

In some jurisdictions overly broad non-compete clauses may be deemed invalid as an unreasonable restraint of trade. I personally believe that you should not, however, sign a contract that you do not intend to comply with. Non-compete clauses are more common in some industries than others.

If an employer asks you to sign a new employment contract where you are giving up additional rights I would view that as a re-negotiation of your employment contract which opens up the possibility of re-negotiating other conditions as well. This would seem to fit into Mark's definition of negotiation as in that situation you are being asked to give more of something, in this case your right to work freely and unfettered.

corinag's picture

In my country, non-competes must be compensated - the company must offer you a percentage (can't recall if 50% or 70%) of your salary to compensate for your loss of opportunity.

Maybe you can negotiate some form of compensation for such a lengthy non-compete.

Also, look at the clauses. The company must define quite clearly what it means by competition. It is unreasonable to prohibit you from working in your field at all for example.

If a 3-year non-compete is discussed you're better off seeking competent legal advice.

schopp42's picture

Thanks for the feedback, all have been helpful.

It has not been finalized that they will be looking for a three year non-compete at my level, but that is what they have asked the VP's to sign, and as an expat (American living in Shanghai) at a Director level our comapany has a tendancy to hold the expats to what would normally be a higher level of contract.

I have had feedback from other sources that have also indicated there is a wide spectrum of how courts perceive these type of contracts. I.E. in different countries, or in right to work states in the US vs non-right to work states. I'm a bit hazy on which "jurisdiction" I would be under living in Shanghai.... from Michigan, company HQ in Texas. Might depend on whether I look for employment in China or back in the US.

Tomas, you are very correct, especially with all the added complexities it would be well worth it to consult a lawyer. Our company is going through a merger with a new owner (private equity) so I believe they will be looking at contracts in the near future.

Thanks for all the feedback!

Marc

Mark's picture

Marc-

Tomas makes some great points.

And 3 years is EXTREMELY long.

Mark

joolzb's picture

I would be hiring a lawyer to cast an eye over the Non-Compete. It may be an idea to have some specifics written into such an agreement that chunks down the detail a little.. i.e. within 3 years (which I too believe to be excessive, 12mths would be more than enough) you will not seek employment with Competitor A, B or C, in the following capacity and the following territories.

My experience is that the hiring company will leave it as 'legally' open as possible so is the agreement can be manipulated for their needs and you will do well to balance this out. Or at least be comfortable that it is fair and reasonable so if things don't work out you are not un-employable.