The Non-Compete From Hell

At least once a week, readers write to me asking about non-competition agreements. I thought you would be interested in the worst I’ve seen this year. The letter has been shortened and all identifiers have been removed.


The Non-Compete from Hell


Barb:


I am a licensed healthcare professional, and the director of the lab and regulatory affairs for a small privately-owned company. 


I was hired four years ago. I was consulting with them on regulatory issues, they offered me a job. It was less money than I made consulting, but I liked the work and it is close to home. I have been working as an employee for the past four years.


Last week they hired a new lab director, which was a surprise to me. The owner of the company then informed me that my salary was going to be reduced by 50,000 a year. 


This was fine by me. When I was consulting I traveled a great deal, this job is local. It is worth it to me.


I agreed.

Today, I was given a new employment contract and non-compete.


The terms:

1.      I can’t work in my profession for a year.

2.      I must give a 90-day notice. If I resign without a 90-day notice, I am required to pay damages to the company of 1,000 a day for every day during that time that the position is vacant. If they hire, I don’t have to pay. PLUS, when I give the 90-day notice, I can be terminated at any time.


I don’t want to sign this. What do you think?



Jim.


Thanks for sending me the document to review. I think your boss wrote it himself.

I am not an attorney. Do not sign unless you consult with one.


My Opinion


My take is that the president of the company is afraid of you.


I know that this is hard for you, overnight your job was thrown into a state of uncertainty. The uncertainty can cause you to look at this emotionally instead of rationally. Take a deep breath and make your next moves.


1.      Prepare to be fired. This type of insecurity move by management rarely works out well.

a.      Start interviewing immediately.

2.      Think rationally about your non-compete


Is This Real?


The company hired you to consult, they needed your expertise. They hired you as an employee for much less than your consulting fee. Now, they want to keep you from working anywhere else.


Do you think that will fly in court?


I doubt it. You live in a right to work state. You are not indentured to your employer.]


Bullying


There are times when a corporation needs a non-compete to protect against theft of proprietary information. It makes sense that a chemist shouldn’t be able to take the formulas to a new employer. The same for stealing customers away. Former employees with bad intentions can do a lot of damage in many ways.


Your situation is different.


You are being threatened.


Your employer is afraid you will quit. If you quit, he will have to scramble to replace you. The irony is that he can hire a consultant quickly, at about 70% more than you are making right now, which puts him back to where he was four years ago.


Instead of hiring a consultant, and taking on additional cost, your employer wants you to sign a new employment agreement that gives him time to replace you.


What to Do


Let’s look at the human aspect of all of this:


You: Fearful of losing your job and losing the ability to work for a year.

Boss: Fearful of losing you.  

                     “He will quit because of the new director”

                     “He will quit because I decreased his salary”

                     “He will quit because I am acting like a jerk”

                     “If he quits, what will it cost me?”

                     “If he quits, who will he take with him?”

You:

                   “Is Friday my last paycheck”?

His reaction to his fear? “I’ll scare him into staying”

Your reaction to your fear? “I’m doomed financially”

You are both in a reactive state. Someone needs to push the conversation forward. That someone is you. What can you do to take the active role into making this situation better for both of you?


What if you shot the elephant in the room?

               You approached him and offered to work with him in a transparent manner. “I wanted to let you know that the decision to hire the director of lab was a good one. I have enjoyed working for you, and have every intention of staying, unless you want me to leave. You are acting as if you want me to resign. Am I reading you right?”


                            If his response is no. It is your opening to talk about your new responsibilities, your vision for the department. If the two of you can solidify the new responsibilities, he will feel more certainty about you, and help establish a better relationship going forward.


                            If his response is yes, I want you to leave, it is your opening to discuss a 90-day exit strategy. This will give both of you the peace to push forward.


The downside of this strategy:

You are out of a job in 90 days and have time to plan.


The upside of this strategy:

You have time to decide what your next move should be. Do you stay? Do you go? Up to you. At least you can do your work in peace.


Oh, and the $1,000.00 a day payment if you resign without a 90-day notice? When pigs fly.

Any attorneys in the house? What do you think? 

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© 2020 Barbara Goldman