Be careful of non-compete agreements when hiring

Recruiters and employers alike are asking the same question:

 

How do we handle a potential candidate who is subject to a non-compete agreement from their previous employer?


Until fairly recently, most employers did the same thing - ignored that candidate in favour of what was easier (yes, even some recruiters may have been tempted to do the same thing!). That was ok when non-competes were a rare thing. Or within an expected industry role (ie: sales people) employers and recruiters knew what to be on the look out for AND employees in these types of roles are savvy about what they sign in a non-compete as they are familiar with them. But now more and more employers are utilising non-compete agreements, so recruiters and employers alike need to be aware and need to know how to deal with candidates bound by them! Especially when the potential new employee more than likely did not really know what they were signing and agreeing to!

 

What is a non-compete agreement?

According to Wikipedia a non-compete agreement is:

 is a term used in contract law under which one party (usually an employee) agrees not to pursue a similar  profession or trade in competition against another party (usually the employer).

In simple terms, a non-compete is usually an agreement signed by an employee that they will not leave and take knowledge and/or clients to another employer.

 

What do you need to do about non-competes?

Firstly, you need to ascertain if there is a non-compete agreement in place. IT SHOULD BE ONE OF THE FIRST THINGS YOU ASK A POTENTIAL CANDIDATE! To ensure you are not breaching any privacy or discrimination issues, all you need to know are what are the stipulations of the non-compete agreement. As a potential employer - you can also be held liable, so you have the right to ask the candidate to be honest and forthcoming!

 

There is a FANTASTIC article at www.Recruiter.com which is a great resource about what sort of questions you can ask about a potential candidates non-compete agreement (article here "Candidates with non-compete agreements").

 

Basically the article says you want to ask:

 

  1. What are the terms they signed and agreed to? You need to be aware of specifics, eg: requirements relating to a particular company, their clients, or particular products, etc. General sorts of terms eg: "you can't work for any other telemarketer" are harder for a previous employer to enforce, but specific and measureable terms can catch your potential candidate out.
  2. Did your potential candidate get anything for the signing the non-compete? ie: did they receive a payment? was it a condition of employment? were they incentivised to sign the non-compete agreement? If a non-compete clause was added to a contract AFTER the employee had been working there awhile, it may not be as much an issue as it would be if the employee accepted a bargaining chip for signing the non-compete (I know how that sounds! But yes, if they accepted the "bribe", they want to be careful they uphold the agreement - the "bribe" can be considered proof that they knew what they were committing to).
  3. How is the employer impacted if the candidate leaves? If the previous employer can show they suffered a detriment (eg: loss of a specific client income), the non-compete is definitely enforceable. Be aware if a specific impact can be proven. Everyone has to perform the "tasks" of a job - tasks may not hold up if the non-compete is called into question, but where a specific revenue loss, patent or IP information can be shown to have been impacted the non-compete will likely be enforceable.

 

Be sure to find out BEFORE you employ or recommend a candidate, what their non-compete means both to them and to you/the future employer!

Please remember:

 

  • unless you are a qualified lawyer, you can not give advice about a non-compete agreement, DO NOT BE TEMPTED TO DO SO IN ANY FORM! Make sure you recommend your candidate seek independent legal advice.

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