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Non-Competes - Revisited

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walter biscardi
Non-Competes - Revisited
on Jan 21, 2009 at 10:33:30 pm

We've had quite a few discussions about this on here, especially after the recent California ruling. For the most part we have agreed, myself included, that non-competes are illegal because they restrict a person from pursuing their livelihood.

I had a meeting with my legal counsel this weekend about something completely unrelated but somehow we got on the topic of non-competes. I got a good education from him that non-competes are fully legal, BUT they have to be extremely specific. If they are vague in any way to keep you from earning a living, then they are thrown out. He used this example for my own company.

I hire a freelancer or employee to work for me. I already have A, B, C and D as my clients. I am fully within my rights to have a non-compete clause that states my employee cannot hire themselves out for services or contact clients A, B, C and D for a period of 1 year after they are no longer working for me.

This is very specific on the clients and length of time. It cannot be an indefinite length of time and generally anything over 1 year is considered suspect.

So this is perfectly legal.

The following is NOT legal.

I hire a freelancer or employee to work for me. I already have A, B, C and D as my clients. I ask my employee to sign a non-compete clause that states my employee cannot hire themselves out for editing services in the state of Georgia indefinitely.

So now I have been educated that non-competes are legal so long as they are structured correctly. If a potential employer asks you to sign a non-compete, just make sure it is very specific.

Chalk this one up to "you learn something new everyday."

Walter Biscardi, Jr.
Biscardi Creative Media
HD and SD Production for Broadcast and Independent Productions.

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grinner hester
Re: Non-Competes - Revisited
on Jan 22, 2009 at 2:51:56 am

I have had a baaad taiste in my mouth since being sued for non-compete when I started my own company.
My view on em is simple... If somebody wants you to sign one, don't.
If it dawns on you to have somebody sign one, treat them right instead.
If I didn't trust a freelancer wouldnt make a play for my client, I sure would not introduce the,. If I really thought they could, I'd disect my own practices.
I entered this busines TO compete. My very job is to do a better job than those around me. To sign something otherwise would kind of feel like the union without the garanteed check for not trying very hard.



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Nick Griffin
Re: Non-Competes - Revisited
on Jan 22, 2009 at 2:46:49 pm

Grin-
If this was a perfect world you would have the right answer. But, sadly enough, it's not.

As someone who routinely falls on both sides of this -- being the one who hires freelancers as well as the one who is brought into projects AS an outside freelancer -- the realistic answer is that for some people and some companies non-competes are a requirement. I routinely try to avoid people who I don't feel I can trust, but I've been fooled before. Our non-compete language is part of a 20 paragraph terms and conditions on the back of our purchase order.

I believe that Walt's information is correct, but varies by state. I also believe that the term can be extended to two years. The basic spirit of the law is that the non-compete can't deny someone the right to earn a living. What it can do is prevent employees, contractors, etc. from poaching the people and companies to whom they were introduced by the employer. In the case of a really broad sales job where hundreds or even thousands of prospects are deemed off limits, non-compete agreements usually add geographic language. ie.- "...cannot perform a similar service within 50 miles of previous employer."

BUT, as is the case with many other things legal, I've seen non-competes which are entirely un-enforceable. They're used to intimidate and give the employee the illusion that the law would be on the side of the employer. The employer is betting that when push comes to shove the average person won't have and especially won't be willing to pay for the legal counsel which could challenge the agreement.


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walter biscardi
Re: Non-Competes - Revisited
on Jan 22, 2009 at 3:13:52 pm

[Nick Griffin] "BUT, as is the case with many other things legal, I've seen non-competes which are entirely un-enforceable. "

Yeah, you should see one that I was recently asked to sign. Completely ridiculous. It included a clause something like "you shall not operate a competing business, etc...." So the moment I sign it I'm in violation of it because I own a video production company. Makes no sense at all and I'm not sure how the person honestly expected me to sign it.

Non-competes when used correctly can protect your own business.


Walter Biscardi, Jr.
Biscardi Creative Media
HD and SD Production for Broadcast and Independent Productions.

Read my Blog!

STOP STARING AND START GRADING WITH APPLE COLOR Apple Color Training DVD available now!


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Ron Lindeboom
Re: Non-Competes - Revisited
on Jan 22, 2009 at 4:34:33 pm

I have stayed out of this one in the couple of previous go-rounds because I knew I'd be the wet blanket on this one. But, as Walter found out from his attorney and many here were previously aware, non-competes are not unethical and do not have to be tools of the unscrupulous. They can be highly defined and the more specific they are, as some here have pointed out, it makes them all the more enforceable.

I have been under a few non-competes in my time (three exactly) and two I had no issues complying with, and the third? -- well, let's just say that there would be no Creative COW if we had caved into it and Nick Griffin and his attorney had not helped Kathlyn and I. Thanks eternally, Nick.

The spirit of a balanced non-compete says something like: "You are entering into the employ of XYZ Company who currently has dealings with ABC Company, DEF Inc., GHI Holdings and JKL & Associates. As part of this agreement, you agree that these are our accounts and that the relationship is with XYZ Company and you are barred from doing business with these companies for a period of one year from the date of your termination."

Me, I'd have no problem whatsoever signing an agreement like that. But some of the non-competes that I have seen bandied about on this forum -- especially those that are shoved under the nose of employees at the time of their termination -- I wouldn't sign.

It is easy to spot the honorable non-competes from the ones designed to destroy a person's ability to work. The courts can see through these destructive agreements too and are likely to throw them out.

Keep a non-compete specific, very specific, and for a short enough period of time that is deemed not excessive and you are likely to have something that can be enforced. Try to make all the benefit fall to yourself, and you are likely to lose any sympathy that the courts may have had with you and your situation.

Best regards,

Ron Lindeboom
creativecow.net


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Mike Cohen
Re: Non-Competes - Revisited
on Jan 22, 2009 at 5:21:22 pm

I try to use contractors with whom I have an existing relationship, knowing that if they were to impinge upon my business with a client, it could jeopardize our relationship.
I sometimes use a "non-disclosure" statement in a contract, along the lines of:

This project is proprietary and must not be discussed while in-development, etc.

I also ask for a conflict of interest declaration, something that is standard in medical education - to see if a contractor does work for a competitor or a sponsor. It is ok if they do, but everything needs to be on the table.

Here is an example. I use a particular animation house to do 3D when it is requested by the client. Knowing who my client is, the animation house could certainly hit up my client for work, if they so chose to do so. However out of respect, they do not. By the same token, if a client asks me for a 3D animation vendor, I will give them the name of my own preferred vendors, who are honorable people to work with, and who do great work.

Speaking of lawyers, although unrelated, we have had a few shoots canceled at the last minute because the patient's brother, who is a lawyer, started asking about royalties and scale pay.

Mike


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walter biscardi
Re: Non-Competes - Revisited
on Jan 22, 2009 at 9:40:01 pm

[Ron Lindeboom] "Me, I'd have no problem whatsoever signing an agreement like that. But some of the non-competes that I have seen bandied about on this forum -- especially those that are shoved under the nose of employees at the time of their termination -- I wouldn't sign.
"


I had an interesting twist on a contract from a former client that wants me to do work with them again. They included a "Change of Plans" clause that essentially stated that if they change their minds or the project gets cancelled at any point, then I don't get paid for any work done to that point.

Hmmmmm, since a "change of plans" is pretty much normal operation in the corporate world, I politely said "thanks but no thanks."



Walter Biscardi, Jr.
Biscardi Creative Media
HD and SD Production for Broadcast and Independent Productions.

Read my Blog!

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Ron Lindeboom
Re: Non-Competes - Revisited
on Jan 22, 2009 at 9:50:49 pm

[walter biscardi] "I had an interesting twist on a contract from a former client that wants me to do work with them again. They included a "Change of Plans" clause that essentially stated that if they change their minds or the project gets cancelled at any point, then I don't get paid for any work done to that point."


What?$#@!? -- you didn't jump at the chance?

:o)

Man, that is one of the most insane clauses I have ever heard of, Walter.

Crazy stuff.

Ron Lindeboom


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Todd Terry
Re: Non-Competes - Revisited
on Jan 22, 2009 at 10:30:32 pm

[walter biscardi] "included a "Change of Plans" clause that essentially stated that if they change their minds or the project gets cancelled at any point, then I don't get paid for any work done to that point."

I think I've had clients before that always just sorta "assumed" that was the case, as insane as it might sound. Those are due for an education.


T2

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






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David Roth Weiss
Re: Non-Competes - Revisited
on Jan 22, 2009 at 10:39:30 pm

[walter biscardi] "if they change their minds or the project gets cancelled at any point, then I don't get paid for any work done to that point. "

So, it would naturally follow that, if you changed your mind and decided not to finish the project, you nonetheless get paid for the entire project. Right? Why not add that as an addendum to the contract and see how they like it.

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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Ron Lindeboom
Re: Non-Competes - Revisited
on Jan 22, 2009 at 11:09:15 pm

[David Roth Weiss] "So, it would naturally follow that, if you changed your mind and decided not to finish the project, you nonetheless get paid for the entire project. Right? Why not add that as an addendum to the contract and see how they like it."

Man, I like the way that you think, David.

:)

Ron Lindeboom


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grinner hester
Re: Non-Competes - Revisited
on Jan 24, 2009 at 4:59:17 pm

eeeeeeh I hate when I have to admit I'm wrong.
I guess what I meant to say is "dadgummit it's a crying freakin shame these things have to exist."
While I often claim or boast a one size fits all answer, it's often comedic only because I was signing something I hated the night before.
I do look at it as certain gigs require them though... not certain intities. Helps the flavor of the gig wonders.
When I look bad at the burning beds I have laid on, they were indeed on fire when I laid down.


heavy.




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walter biscardi
Re: Non-Competes - Revisited
on Jan 24, 2009 at 10:47:12 pm

[grinner hester] "eeeeeeh I hate when I have to admit I'm wrong.
I guess what I meant to say is "dadgummit it's a crying freakin shame these things have to exist." "


Well, heck I've been wrong about this for a while too. Go back and look at my responses to Non Compete threads and I've been on the side of "They are not legal, period." We've never too old to learn....



Walter Biscardi, Jr.
Biscardi Creative Media
HD and SD Production for Broadcast and Independent Productions.

Read my Blog!

STOP STARING AND START GRADING WITH APPLE COLOR Apple Color Training DVD available now!


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Mads Nybo Jørgensen
Re: Non-Competes - Revisited
on Feb 3, 2009 at 4:03:23 am

Hey Walter.

Can I throw into the mix by suggesting that non-competes are not only about clients. I know of a couple of very "advanced" people that also get freelancers/assistants to sign that they wont use or pass on any of the techniques that they are taught or shown whilst in their employment/under contract.

Obviously this a very grey area, but if you have spend years perfecting a certain process or filming technique etc - why not?



All the Best
Mads
London, UK

Mac Million Ltd. - HD Production & Editing
Please watch our latest video on Data Protection at




Blog: http://blog.myspace.com/bigflopproductions


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Todd Terry
Re: Non-Competes - Revisited
on Feb 3, 2009 at 5:30:41 am

[Mads Nybo Jørgensen] "I know of a couple of very "advanced" people that also get freelancers/assistants to sign that they wont use or pass on any of the techniques that they are taught"

I think yes, that happens to some degree.

Quite a few years ago I developed a film simulation process that I called FauxFilm. Now, mind you, this was long before the days that 24p cameras even existed, or Magic Bullet or any of the early film simulation software. It could be used live, or with NLEs (which were just coming into play). It put a perfect 3:2 pulldown into 60i footage, pretty much exactly like the company FilmLook did (anybody remember them?). The thing is, it was actually a painfully simple process, I actually just stumbled upon it by accident. On a couple of occasions I did have to have other editors in working, and it was impossible to hide the "secret" of how it worked because of its simplicity. I didn't make them sign anything, but I did make them swear on their grandmothers' graves that they wouldn't take the technique elsewhere, and as far as they know, they didn't. In hindsight, I might have been overly-trusting.

Today, we don't exactly do anything that's super-secret, but we are sort of known as the "McGuyvers" (or some might argue "McGrubers") in the market, with lots of little tricks, gimmicks, and processes that make things look better and cost less. We'll sometimes get the calls from freelancers saying "Put me on your crew call list, I know you guys would be fun to work with." What is pretty easy to tell is that some of them simply want to get onto set or location not so much to work, but more just to see how we do things and take that knowlege elsewhere or to their own companies, which are sometimes our competition. Well, we generally don't hire these guys. Some are blatent enough to say "I really wanna learn to light like you do" or "I want to see how you direct," or some variation of that.

Sorry, I'm running a business in a competitive market, not a film school.

And I really don't think there is anything wrong with that position.

I'm glad to share my limited knowlege with the great folks here in the worldwide COW community, and learn much from all your wisdom as well. And I'll help out college or high school kids in their production classes all they want, and more. We do that all the time. And I've happily taught a few tricks to eager freelance crews when we were shooting on location in other states or across the country. But other companies in my area who are going after the same client base as ours?... or even after our current clients? Nah, not so much.


T2

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






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Randy Wheeler
Re: Non-Competes - Revisited
on Feb 8, 2009 at 3:47:59 pm

Judge Orders Apple's New iPod and iPhone Chief to Stop Work Immediately

Mark Papermaster, a former IBM executive who's replacing retiring iPod chief Tony Fadell, came to Apple with some heavy baggage—namely a one-year no-compete clause that IBM said he was violating by working at Apple. U.S. District Judge Kenneth Karashas sided with IBM for the time being in their lawsuit, ordering Papermaster to "immediately cease his employment with Apple Inc. until further order of this court."

http://www.gizmodo.com.au/2008/11/judge_orders_apples_new_ipod_and_iphone_c...

Randy


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Chris Blair
Re: Non-Competes - Revisited
on Feb 8, 2009 at 5:11:54 pm

Interesting thread. We've discussed this internally in our company just recently after I stumbled across the websites of a freelance producer and a freelance videographer, who both have dozens of samples of work they've done while working with us posted.

They describe the work and the client as if they are their own, with no mention of our company.

I was quite surprised, as these are people I've trusted for years. I couldn't believe they would take work that we gave them and pawn it off as their own...especially when we were the primary creative and technical force behind the finished work. What bothered me even more was to describe the client as if it was their own!

BUT...it made me examine some of our own practices. We use a freelance graphic designer for most of our print layout and design, including logos, brochures, billboards, annual reports etc. If you view samples on our webpage or look at our hard-bound portfolio, we promote that work as if it was our own.

So...the question becomes, should we give the freelancer credit on our website and in our portfolio when presenting this work as a sample to potential clients?

How is what we're doing any different than what the freelance producers are doing on their websites?

For me the difference is that the clients are OUR clients. But beyond the suggestion on the websites that the clients were their own, for me there's little difference. But it's made us consider asking freelancers to sign a very specific non-compete agreement that at the very least bars them from promoting OUR clients as if they are clients of the freelancer.

What are thoughts on this??

Chris Blair
Magnetic Image, Inc.
Evansville, IN
http://www.videomi.com


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