Non-Competes – Five Things Executive Candidates Need to Know
Non-compete agreements are commonplace these days for many packaging executive positions. But what are you actually agreeing to when it comes time to sign?
From low-wage service jobs to highly-trained professionals, more employees than ever are being included in non-competes. It only makes sense - as the cost to hire and train new workers is on the rise and companies want to protect their investment.
So, while it’s not unusual for your employer to ask you to sign a non-compete, it’s important to understand what these contracts are all about.
What is a Non-Compete?
Before we talk about how these pacts can affect your employment, it helps to define what this term means. For that, we turn to Dallas attorney Bryan Collins - a twenty-year veteran in the fields of labor and employment law.
According to Mr. Collins, non-competes are designed to “protect an employer’s legitimate business interests such as goodwill, confidential information, trade secrets and client relationships from unfair competition.”
It serves to reason that companies would be cautious about what employees say and do outside of the workplace. As they are often entrusted with highly-sensitive data or proprietary information.
But just because packaging executives are asked to sign non-competes, it doesn’t mean they need to fear them.
You just want to be clear about what they mean to your employment.
Should I Sign a Non-Compete?
Although a frequently asked question, the answer isn’t always black and white. In most states that enforce non-competes, employers are entitled to require such agreements as a condition of your employment.
However, Collins advises to “ask for a copy of the non-compete before you accept the position and consider whether it will limit your restrictions to non-solicits (employer’s clients and employees) as opposed to broader non-competes (employer’s competitors).”
The difference between the two being significant in terms of who you can contact and what you can do if you decide to leave the position.
What Are the Risks for Packaging Executives?
There’s no getting around it - signing a non-compete can impact future employment opportunities.
“Prospective future employers may be reluctant, because of the possible threat of a lawsuit and significant litigation costs, to hire you” explains Collins, “even if doing so arguably does not violate your non-compete.”
Bryan also advises that while many companies will ask if you have any non-compete restrictions, you should disclose that you do even if the topic doesn’t come up. You never want your new employer to be “surprised” should your former workplace decide to claim you.
After all, besides being a terrible way to build relationships, both you and your new employer could be putting yourselves at risk. With the employer facing possible legal and financial repercussions from the hire, and you losing any severance payments you may have received in your previous role.
How Much Could a Breach Cost Me or My New Employer?
It depends. There’s a lot of work involved in order for your new employer to defend or release you from a non-compete.
Collins says that “litigation costs and expenses for the employer and former employee can be substantial - reaching into the tens of thousands of dollars.”
The Dallas employment attorney goes on to justify these statements:
- Whenever disputes arise over the possible theft of confidential information (or influence on existing clients) analysis costs can quickly escalate. Mostly due to the fact that high-priced forensic experts must be brought in to examine technology assets (like computers, servers, phones, and email accounts).
- In-depth legal investigations must be conducted in a very short period of time. A necessary step to present evidence to a judge who ultimately decides whether temporary restraining orders can remain or must be removed.
Thankfully, Bryan says that most (but not all) of these kinds of disputes are resolved before ever having to go to court.
What About Packaging Executives Who Are Already Employed?
Another great question that arises frequently. Can your employer force you to sign a non-compete after your initial hire?
In most cases, the answer is yes - they can.
For the majority of states that recognize non-competes, they can be enacted at any time during the course of your employment. There are, however, a few select states (such as Montana) where such actions would be unenforceable.
If you have specific questions about a non-compete, your best bet is to speak with a qualified labor attorney in your area.
If Approved, Can I Write in Names of Customers Exempt from My Non-Compete?
Understandably, this is an area that causes a lot of confusion. Packaging executives often mistakenly believe that employers cannot prevent them from soliciting customers they “brought in” at the start of their employment.
Not so says Mr. Collins.
“Courts routinely enforce such restrictions because employers expend considerable monies developing and cementing relationships with customers you brought to the table. Courts refer to this as the ‘employer’s goodwill’ and enforce restrictive covenants to protect that goodwill.”
Bryan goes on to advise that, if your employer approves such a request, ensure that the non-compete “specifically states that nothing in the agreement will prevent you from soliciting - for your benefit or the benefit of others - any of the customers identified in your list of exemptions.”
He says the best way to do this is by attaching an exhibit to the non-compete agreement itself.
While non-competes may seem daunting, don’t let one stop you from pursuing a great packaging opportunity. Keep in mind that it’s not personal - they’re just part of doing business these days.
But, as with any type of contract, you still want to have a clear understanding of what you’re getting into. Regarding both what can be discussed outside of the workplace and with whom. If you’re ever in doubt, consult with qualified legal counsel.
In the end, evolving your packaging career is always a smart move - just be sure to look before you leap.
We suspect Mr. Collins would agree.
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Chase & Associates
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More About our Expert:
Bryan Collins, Board Certified Labor & Employment Law, Clouse Dunn, LLP
Bryan Collins is a second generation Texan, born in Dallas in 1958. After graduating from St. Mark’s School of Texas and Stanford University, he returned to Texas and graduated from the University of Texas School of Law in Austin where he was a member of the Texas Law Review. Mr. Collins was associated with and later a partner in Dallas with Jackson Walker LLP for over twenty years. Since 2006 he has been a partner with Clouse Dunn LLP, a Dallas firm that focuses upon representation of employees and employers in labor and employment law matters. Mr. Collins has been Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization since 1997.