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Need Employee Non Compete

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Steve Wargo
Need Employee Non Compete
on Jul 11, 2008 at 5:37:05 am

I have an employee leaving the company Friday (today) and I need to have him sign a non compete before he heads out the door. I had one but it seems to be hiding at the moment. Maybe it's written on a baseball bat somewhere. I expect a reply from Nick Griffin and DRW, my favorite mentors.

I need a typical "Don't do any work for my clients" and "keep our business private" type of document.

Next, I'll search the archives for just such a thing.






Steve Wargo
Tempe, Arizona
It's a dry heat!

Sony HDCAM F-900 & HDW-2000/1 deck
5 Final Cut (not quite PRO) systems
Sony HVR-M25 HDV deck
2-Sony EX-1 HD .


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David Roth Weiss
Re: Need Employee Non Compete
on Jul 11, 2008 at 6:12:55 am

Steve,

See the non-compete agreement below that I just drew up especially for you below. Like most non-compete agreements it is normally signed before hiring, when the employer has leverage, rather than at the termination of employment. However, you can probably deal with that. Feel free to modify the agreement as needed.

Hope this helps...

David
-------------------------------------------------------------------------------------


For good consideration and as an inducement for_________________ (Company) to employ _________________________ (Employee), the undersigned Employee hereby agrees not to directly or indirectly compete with the business of the Company and its successors and assigns during the period of employment and for a period of _____ years following termination of employment and notwithstanding the cause or reason for termination.

The term "not compete" as used herein shall mean that the Employee shall not own, manage, operate, consult or be employed in a business substantially similar to, or competitive with, the present business of the Company or such other business activity in which the Company may substantially engage during the term of employment.

The Employee acknowledges that the Company shall or may in reliance of this agreement provide Employee access to trade secrets, customers and other confidential data and good will. Employee agrees to retain said information as confidential and not to use said information on his or her own behalf or disclose same to any third party.

This non-compete agreement shall extend only for a radius of ________ miles from the present location of the Company and shall be in full force and effect for ________ years, commencing with the date of employment termination.

This agreement shall be binding upon and inure to the benefit of the parties, their successors, assigns, and personal representatives.

Signed this _____ day of ________________________ 20____.



_______________________________________
Company


_______________________________________
Employee

David Roth Weiss
Director/Editor
David Weiss Productions, Inc.
Los Angeles

POST-PRODUCTION WITHOUT THE USUAL INSANITY ™


A forum host of Creative COW's Apple Final Cut Pro, Business & Marketing, and Indie Film & Documentary forums.


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Zane Barker
Re: Need Employee Non Compete
on Jul 11, 2008 at 7:17:39 am

Like david said these type of agreements are normally signed BEFORE they start work for you. At this point what is the employees reason to actually sign it for you, after all he is already leaving.

There are no "technical solutions" to your "artistic problems".
Don't let technology get in the way of your creativity!



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David Roth Weiss
Re: Need Employee Non Compete
on Jul 11, 2008 at 7:56:58 am

Steve,

In case you can't get 'em to sign, holding lit candles under an employees feet can be very persuasive... Just be careful not to drip any hot wax on your floors, it's hard to clean up.

David

David Roth Weiss
Director/Editor
David Weiss Productions, Inc.
Los Angeles

POST-PRODUCTION WITHOUT THE USUAL INSANITY ™


A forum host of Creative COW's Apple Final Cut Pro, Business & Marketing, and Indie Film & Documentary forums.


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Timothy J. Allen
Re: Need Employee Non Compete
on Jul 11, 2008 at 2:21:14 pm

Just make sure that it's over a smooth concrete floor - then it's easy to clean up with a razor blade once the wax dries.

;-)

Seriously... thanks for posting that publicly David. It’s just good for folks to see that the elements of any contract are there.

In plain language, you have documented:
1. Who the agreement is between. (The undersigned and “their successors, assigns, and personal representatives”)
2. What – (direct or indirect competition, disclosure of trade secrets and confidential data etc.)
3. When (for a period of up to __ years)
4. Where (radius of __ miles from the present location of the Company)
5. Why – for both parties (for consideration and employment/to protect trade secrets, etc.)


If nothing else, the agreement makes your stance on disclosure of your intellectual property to a third party very clear and the agreement proves that you discussed your stance with the employee. Those elements are extremely important if a problem with the former employee ever arises.




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Todd Terry
Re: Need Employee Non Compete
on Jul 11, 2008 at 2:32:20 pm

[Timothy J. Allen] "Just make sure that it's over a smooth concrete floor"

No, you do it outside, or in a shack by the docks. Work smarter, not harder, people.

But seriously... what are the legalities of an after-the-fact non-compete? A contract would have to have consideration, and unless you are paying him something specifically to sign the non-complete, there is no consideration in this case.

You could argue that you have paid him for years of work in the past, but he would argue that money was for other work that was already done... and he would be right.

I'm just not sure if an after-the-fact non-compete has much legal standing. Perhaps it does, but what is his incentive to sign it? If I were the employee, unless I was leaving on the absolute best best of terms and the employer was a close relative.... I wouldn't touch it with a ten-foot pole.


T2

__________________________________
Todd Terry
Creative Director
Fantastic Plastic Entertainment, Inc.
fantasticplastic.com






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Timothy J. Allen
Re: Need Employee Non Compete
on Jul 11, 2008 at 4:24:12 pm

True... if the employee is already leaving, you are pretty much at his or her mercy on whether it gets signed.

Are you throwing this employee a "farewell" party? :-)



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Ron Lindeboom
Re: Need Employee Non Compete
on Jul 11, 2008 at 4:29:22 pm

[Timothy J. Allen] "Are you throwing this employee a "farewell" party?"

...and a really nice farewell party?

:)

Best regards,

Ron Lindeboom

Remember: Burt Bacharach lied. What the world really needs now is an undo button.



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David Roth Weiss
Re: Need Employee Non Compete
on Jul 11, 2008 at 5:13:58 pm

[Timothy J. Allen] "Just make sure that it's over a smooth concrete floor - then it's easy to clean up with a razor blade once the wax dries."

Tim is right, working over a suitable hard floor is a lot less painful for the employer.

[Timothy J. Allen] "In plain language, you have documented: who, what, where, when, and why..."

Spoken like a true journalist Tim... The five w's are what gets my blood circulating every morning. Inquiring minds want to know...



David Roth Weiss
Director/Editor
David Weiss Productions, Inc.
Los Angeles

POST-PRODUCTION WITHOUT THE USUAL INSANITY ™


A forum host of Creative COW's Apple Final Cut Pro, Business & Marketing, and Indie Film & Documentary forums.


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Mark Suszko
Re: Need Employee Non Compete
on Jul 12, 2008 at 5:00:37 pm

I dunno. It's a good start on a draft document, but I think it needs more work.

To my mom's eternal regret, IANAL, however, I find that qualifying language on who-what-when-where in the sample document to be less detailed than I'd personally like. I think it still leaves a LOT of wiggle room in the interpretation. Too much so. These things are shot down by a judge all the time for being too broad or restrictive.

Also, in this modern world, it is not impossible to find out after the fact that you've done work for a subsidiary of a subsidiary that's owned by a holding company of the client. Hard to know who owns what in a world of mergers. And small to mid-size agencies are constantly re-combining and changing their names and the principle partners. Plus you have a non-objective measure of how much it takes to be "competing". A good lawyer could easily bust this paper, I'm thinking.

I don't think you can successfully enforce this document. Excessively long restriction periods also get shot down in court all the time.

If it said: You promise to do no work of TYPE OF WORK in NAME OF CITY for the corporation known as NAME OF CORP for one year from DATE ON FORM, that's pretty specific. That's the direction I'd go in, if this kind of protection was important to me.

But here's a different take:

Since you don't know at hiring time which clients the employee will be working for in your coming year, wouldn't it be easier to have them sign a specific NDA/ Noncompete form for each important client they work on at the beginning of the job? Right on the billing sheet? I can see some advantages to that. What do you think?


On a side note, if many former employees are turning around and poaching all your clients on a regular basis, I'm guessing there are more and broader issues going on than a simple legal memo can fix. I'd like to hear from some of you owners about how big a problem this has actually turned out to be for you: a constant battle, or just one rat fink backstabbing you over the history of the company? Did the fink prosper in the long run?




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Tim Kolb
Re: Need Employee Non Compete
on Jul 11, 2008 at 5:20:58 pm

Uh...Steve...my friend...good luck with this.

As has been mentioned...a non-compete is a condition of hire...not dismissal or resignation. Are you not going to fire him if he doesn't sign a non-compete? ...or if he's leaving on his own...is he not going to quit if he doesn't sign a non-compete?

You have no leverage. I'd try a cash bonus or something as a motivator, but if it's just "here...sign this before you leave"...again, good luck.

All that said...very few non-compete agreements stand up in court anyway as the courts or juries usually end up standing just slightly on the "you can't take away a person's means of making a living"...side of the fence.

If this person was at all significant to the client experience with your company and competent, you may have some clients follow him of their own accord...that is certainly not something you can control legally either.

If you have any sort of relationship with this person, I'd be very careful as your personal relationship with this person may afford you more protection than some hastily signed piece of paper signed after a relationship-damaging session of arm-twisting.

My 2 cents...



TimK,
Director, Consultant
Kolb Productions,

CPO, Digieffects


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Mick Haensler
Re: Need Employee Non Compete
on Jul 11, 2008 at 5:50:16 pm

It's to late for Steve. See my post here on the thread "Good books for marketing" right below.

Mick Haensler
Higher Ground Media



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Timothy J. Allen
one more thing...
on Jul 22, 2008 at 3:43:23 am

I feel compelled to add that I agree with Tim Kolb (as usual) when he said "your personal relationship with this person may afford you more protection than some hastily signed piece of paper".

True, so true.



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Nick Griffin
Re: Need Employee Non Compete
on Jul 11, 2008 at 5:59:27 pm

Steve, Steve, Steve. (Said with a heavy exhale.)

Did you misplace an existing copy of an executed agreement or never have one in the first place?

If it's the former, best not to do anything other than remind the departing employee that he/she signed it and leave it at that. DON'T LET THEM KNOW YOU LOST IT.

If it's the latter, most of the advice below is correct. You MUST have serious consideration for the employee to make an exit agreement worth anything whatsoever. Perhaps one thing you could offer is full use of stuff he/she worked on for their portfolio -- with the implication that without said permission they are NOT permitted to use your copyrighted materials. But you better also have some cash in it to make the contract hold any water.

And because Tim Kolb is one of the smartest guys in the room, it's been my observation too that courts tend to side with the little guy. That said, a lot of this stuff comes down to what one has to lose.

If someone is just starting out and they are threatened with a lawsuit, they could easily shrug their shoulders and say, "So... what are you going to get from me? I rent an apartment and still owe 47 months on a car loan." Yet when they are 40, married with kids, have equity in their house, own a boat, etc. -- they've got something to lose. The threat of a lawsuit will mean a LOT more to them even if they think they will prevail ultimately but had to spend tens of thousands on their lawyers. In this regard, grownups are a lot easier to scare.

Good luck and let us know how it turns out.


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Joe Murray
Re: Need Employee Non Compete
on Jul 12, 2008 at 11:36:45 am

It's actually not unusual for non-competes to be initiated at the end of a working relationship. Usually the situation is one where the company is letting the employee go, but with a substantial severance package which is conditioned on the employee signing the noncompete. If the employee is leaving of their own accord then this "olive branch" becomes more of a bribe, but it could still work.

Joe Murray
Edit at Joe's
Charlotte, NC


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grinner hester
Re: Need Employee Non Compete
on Jul 14, 2008 at 7:33:51 pm

there is no such thing. These things are made up on the fly by people who are paid by people who cannot keep their artists happy.
Please don't have your artists sacrifice their beliefs and your respect by having them sign one of these.



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jon agnew
Re: Need Employee Non Compete
on Jul 14, 2008 at 11:19:30 pm

I have and will always refuse to sign non-competes. I will not allow any employer to have that kind of control over who I can work for and when.

I'm curious, Steve...What kind of production do you do that you feel the need to have an employee sign such a document? The purpose of a non-compete is to ensure that employees cannot run off with valuable trade secrets, not to prevent people from simply being employed by a competitor. What trade secrets could this employee possibly have that cannot be found on any number of websites like the cow?

Good luck getting him to sign it. You'd need a shotgun to convince me.



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Timothy J. Allen
Re: Need Employee Non Compete
on Jul 19, 2008 at 1:51:06 am

I wouldn't give someone access to my client list, budget templates or fee calculation spreadsheets unless they sign one.

Don't get me wrong, it's not that I don't want them to make a nice living after our partnership is over. I've had former employees hire me on jobs and it's important to be fair. That said, I've worked hard to develop certain processes and tools that help streamline and improve my work flow. Things that (IMHO) help make me "more valuable" to clients than my competition. If someone I hire is going to have access to my company's proprietary information, I'm going to try to protect it.

I also have them sign it in order to prove due diligence in protecting my client's proprietary information. This could be knowledge of new inventions or processes, financial data - you name it. When you do work for high-tech companies or the government, you begin to understand the value of information and you owe it to yourself and your clients to protect it.

I don't care if someone uses knowledge they gained while working with me - as long as it's things like "how to edit faster", "how to color grade a sequence" or "how to figure out not to blow a circuit breaker when lighting an office". I actively encourage people taking that type of knowledge and using it. I do not encourage them to use my "budget proposal" spreadsheets.

See the difference?





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jon agnew
Re: Need Employee Non Compete
on Jul 22, 2008 at 3:12:00 am

In that case, I believe you should be using a Non-Disclosure Agreement. An NDA protects the information that you entrust to employees without dictating who, when, and where they can work.

See the difference?



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Timothy J. Allen
Re: Need Employee Non Compete
on Jul 22, 2008 at 3:39:04 am

Jon,
I understand the difference and thank you for pointing out that there is a difference.

In many cases, when hiring new employees, these documents will be presented in the same "package" of documents within the framework of an new employee contract, so I think protecting that type of information is a relevant topic within this thread.

You asked Steve "What trade secrets could this employee possibly have that cannot be found on any number of websites like the cow?"

Technically it's those kind of things that would typically be covered under NDAs. But while an NDA may prevent an ex-employee from disclosing that information to third parties, it could be difficult and costly to prove to a court that someone is using internal processes and systems you developed for their own work. A non-compete clause in the hire contract removes a bit of the incentive to do that.

Of course, the best case is for employees to always leave on great terms and everyone love and support each other in future endeavors. (No shotguns involved.)

But seriously, one thing that is important is that the "non-compete" portion of a contract is enforceable. That means that you not only need "consideration", but that it is within the bounds of logical reason. That's one reason why a non-compete has to have reasonable time and geographic limitations when compared to the "consideration".



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