Non-Compete Laws, the Ugly Part of Contract Work.

Now that you have your resume all ready to be shown off, perhaps you are considering contract work.  With the growing amount of unemployed folks and a bigger desire to become self employed the Non-Compete Legislation is being revised.

In a nutshell, the new law would favor employees who desire to leave or who have left their employer.  With the economy still in the dumps, those of us who are required to sign non-competes find ourselves in a pickle.  Imagine a scenario where you have worked at a company for the majority of your career, and upon leaving, you realize at some point you signed an agreement that states that you are not allowed to work, for over a year, within the industry you know most about.  Seems a little unfair doesn’t it?  Well, luckily this new legislation would protect you, as said company would need to pay for any time, past one year, while you are barred from working for a competitor.

What about self-employment?  A number of people I know are freelancing, or have started their own businesses in an effort to make ends meet.  What if they keep in contact with contacts they have made in their previous job?  Well, your previous employer could potentially take you to court.

In a time where a lot of us may be signing up for contract work, non-competes come into play a lot more frequently.  We are ready to take any job in our field and unfortunately (and even inadvertently) sometimes breach a previously signed contract.

Here are some of the types of provisions that an employer may include in your employment agreement or in a separate agreement:

  • Non Competition Agreement
  • Non Solicitation of contacts developed while employed with the previous employer;
  • Non Solicitation of former colleagues that remain employed by your former employer
  • Confidentiality Agreement
  • Agreement not to Misappropriate Trade Secrets
  • Agreements Assigning Intellectual Property Developed to the Former Employer

An attorney with whom I spoke recommends that where possible; have the contract reviewed prior to the time it is signed, typically upon hiring.  Sometimes, contracts are negotiable, egregious provisions can be stricken, etc.  Not all contracts are provided on a “take or leave it” basis, particularly if an employment agreement was preceded by a term sheet, or oral promises that did not include some or all of the foregoing provisions.

Although you might have signed a non-competition agreement upon hiring, in many instances, you might be in a position to negotiate a favorable severance agreement or separation agreement, depending on the facts and circumstances surrounding your departure.  Where a severance or separation agreement, the employee has an opportunity to supplant the employment agreement and replace it with new terms insofar as non-competition and non-solicitation are concerned.

One more thing to think about if you do contract work, you should clarify whether you are working as an employee of that company or are you acting as an independent contractor.  Your rights may be and typically are very different.  If you are considered an employee (regardless of whether the employer labels you an independent contractor), you may be nevertheless entitled to unemployment benefits, and be permitted to sue under the Wage Act, entitling you to triple damages and attorney’s fees for late payment of wages, among other protections.

If you are looking for an anecdote, here you go: A friend of mine introduced me to a business attorney at a Boston based law firm.  She is currently pending litigation with a previous contract employer who is withholding commissions based on allegations of violation of the non-compete.  My friend shares, “I had been laid off for several months and was frustrated with the job market.  I jumped at the contract offer with little consideration for the legal mumbo-jumbo in the contract.  I will not make that mistake again.  I will not proceed with any employment offer without a proper review of my contract by an attorney.  Many headaches and sleepless nights could have been avoided.”

What’s the lesson, read your contracts!  I am awful at this and need to take my own advice.

I look forward to your personal stories on this issue!

What did you do today?

P.S. Of course you know that I am not an attorney so please consult someone who is, in order to find out more about your particular situations.

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8 thoughts on “Non-Compete Laws, the Ugly Part of Contract Work.

  1. Massachusetts is, among others, a Right-to-work state. This means that the employee, or former employee, cannot be unreasonabally barred for seeking employment. The result of this is that the non-compete agreements typically have no teeth and are unenforcable in this state. If there is a no solicit aggrement in place and you go and work for yourself on a contract basis, you are exposed however.

  2. Pingback: 2010 in Review « Career Advice 101

  3. Pingback: Contract Work-Take It Seriously | Career Advice 101

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