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You Can’t Take it With You: Non-Compete and Other Agreements

Recall, if you will, the plight of Seinfeld’s George Costanza. Embarrassed by a co-worker’s snide comment at a big meeting, he spiraled into near-psychosis while fixating on the “perfect” comeback he only thought of long after the fact. Determined to use his confusing “jerk store” retort, he stalked the co-worker even after he moved on to a new job two states away just to induce his nemesis into repeating the original comment in another meeting. When everything fell into place, Costanza unleashed his well-rehearsed insult, only to have it turned back on him by some quick thinking he didn’t expect.

To be hoisted by one’s own petard in a business meeting is one thing, but to have it happen in front of a virtually unlimited international audience is quite another, as one bitter former employee discovered recently. Having been fired by the social network Reddit, the former employee decided it would be a good idea to use the company’s own popular “Ask Me Anything” (AMA) forum to discuss his old job and speculate on what lead to his dismissal, despite having signed a non-disparagement agreement. While things started off civilly enough, the former employee’s musings on why he was fired devolved into several attacks on the company’s policies and culture. That’s when the CEO of Reddit stepped in to clear some things up.

What he had to say wasn’t flattering. While the former employee was under the (perhaps delusional) impression that it was his pushback and challenging of company goals that got him the boot, Reddit’s CEO laid out examples of the laziness and incompetence that were the real reasons. Furthermore, he noted that this was the kind of thing an employer wouldn’t normally bring up if asked for a reference, so as not to ruin a fired worker’s chances of getting another job elsewhere, but that courtesy is a two-way street the former employee forfeited when he broke the terms of the non-disparagement agreement. Fortunately for the former employee, the rebuke was only seen by those in the AMA chat, but many millions more caught the news story in the days following, so it’s still probably fewer witnesses than Costanza’s had in the 15-plus years of syndication. Whether he’s currently working on a “jerk store”-esque comeuppance for any future AMA is unknown.

As it stands, the former Reddit employee probably got off easily if all he was asked to sign was a non-disparagement agreement. Companies are becoming more and more restrictive of transient employees carrying insider knowledge from job to job. It used to be that non-disclosure and non-compete agreements were limited to specialized intellectual property or processes and usually only for managers or above. Today, the common practice of job-hopping has brought with it a greater sense of urgency among employers in rapidly evolving marketplaces to protect themselves when even major competitive advantages can be copied and co-opted in a flash. As they see it, there’s no reason to make life easier for competitors by giving unrestricted access to their best employees, who might otherwise be tempted by an offer to bring insider knowledge where the grass is suddenly greener.

Whether such restrictions are considered necessities or overreach will likely depend on which party is asked, but there is merit to both sides’ perspectives. Differences in opinion are complicated by the different approaches states take to these kinds of agreements. While non-disclosure agreements (NDA) will generally be honored if they protect some form of actual intellectual property, non-compete agreements, where employees are restricted from taking similar opportunities at other companies either for certain durations or within defined distances (or both), can be strictly enforced in some jurisdictions while almost entirely ignored in others. Whereas some states might go so far as to respect things like the controversial Jimmy John’s non-compete agreement for low-level sandwich makers, others, like California, prohibit those kinds of shackles and allow for uninhibited job mobility, even in the highly specialized technical industry of Silicon Valley. Despite the splits amongst states, Congress may soon enact a federal law that would set a more definitive floor by allowing companies greater ability to sue former employees for breaches of trade secrets, although there is considerable pushback by economists and other analysts who believe going too far in that direction would stifle innovation by employees who would no longer have the same incentives to push themselves.

Uncertainty about the direction of the laws aside, there are certain elements that both employees and employers need to consider when entering into any kind of NDA or similarly restrictive agreement. First and foremost, when in doubt, talk to a lawyer who specializes in employment law. As self-serving as this might sound, it’s infinitely more complicated (and usually more costly) to fix problems after the fact than it is to avoid them in the first place. Getting help from someone whose whole job it is to know the ins, outs, and current developments of this area of law is going to help a lot more than relying on some Internet forums or advice from self-proclaimed “experts” who aren’t ethically and legally bound to ensure their knowledge is accurate.

Almost as important is that things be in writing. Oral promises, secret handshakes, pinky swears, and anything less than a piece of paper spelling out the terms of the agreement aren’t going to do a lot of good when scrutinized in a court of law or at an arbitrator’s table. As tedious as it might be, the more specific the terms, the better since it leaves less open to interpretation and litigation later. A great way to reinforce company policies that doubles as an easy reference for workers is a thorough employee handbook, where universally protected procedures can be spelled out in no uncertain terms for everyone, reducing the legitimacy of anyone trying to claim ignorance of the rules.

Lastly–and redundantly–the time to talk to an attorney about conflicts with non-compete agreements is before they arise, so it’s in the best interests of all parties to get advice before they commit to a contract vital to protecting their business or careers. If you live in Georgia or Tennessee and have questions about employment contracts or non-compete agreements, contact our experienced attorneys at 877-986-5529. With offices in Atlanta and Nashville, Mays & Kerr offers a client-centered philosophy and strives to accomplish our clients’ goals as if they are our own.

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