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Recently, I've found a candidate for one of my clients, he is a R&D guy.
After all the negotiation finished. We found a new problem: my candidate has signed a Non-Competition Agreement with his current company, and he will probably be taken to the court if he works for the new one.
How you guys deal with this kind of issue? Any good suggestion?
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Perhaps this should have been disclosed earlier, but it is not clear to me exactly when. I am a software analyst, and one of my pet peeves is AT systems that include some kind of non-compete question, way too early in the process.
Consider the quandary of a friend who was recently asked this question in an online application. Both companies involved are large and well-lawyered. The question was, basically, "Do you have a non-compete?"
It was a simple question, but it didn't have a simple answer. Yes, there was a non-compete. But it was not at all clear whether it applied. She worked for a division that did not compete at all with the company that she was applying to. But another division did. She lived in a state that enforces non-competes, but the job was in a right-to-work state.
She knew and I knew and you know that if she answers, "Yes," she'll be rejected out of hand, and if she answers, "No," she wil be nailed later for lying. But she couldn't get through the application without answering.
What would you do?
I would like the have a copy of a hold harmless agreement also, if someone would care to share this. Please send to sburke88@comcast.net
Shari
<p>Yes, whether a candidate has a non-compete should be an initial screening question, not something that becomes known on the brink of an offer. I know I have not signed on with certain companies because I did not want to get tied into a non-compete clause even though TX is a right-to-work state. </p>
Allan, it's time to move on. Tell the candidate he's done. Withdraw him immediately. Nothing good can come of this situation. Save the relationship with your client.
FYI, the candidate was probably looking for a counteroffer to begin with and never seriously considered leaving. He didn't inform you of the non-compete until the offer came out. That's straight up deceitful. Apologize to your client and tell them you've begun searching for new candidates or better yet present a candidate now.
Sorry this didn't go as you'd planned. I know how frustrating it can be! The good news is that you'll never forget to ask the non-compete question again. Chalk it up as a lesson-learned and move on.
Ask the candidate if he has any other agreements (non-disclosure, etc.) or concerns before accepting this position.
Ask for copy of NCA and forward that to client's attention. Let their lawyers decide how enforceable the agreement is. They will not be impressed by the candidate's delay in presenting this information so do your best to manage maintaining your firm's credibility.
For your own education, research your state's record of courts upholding these agreements.
Thanks Ann, I've sent the hard copy of the NCA to my client and it seems all the terms are well covering any possibility, that means my candidate will sure be taken to court if he jumps, that's what the lawyer said. I am working with my client and waiting for a solution
Yes, the non-competes seem to be anti free enterprise, but there must be some company information "property" that is protected. BUT, this should have been discovered earlier, but let's not beat that dead horse.
Contact the company and see if it can be neogiated or reduced. Many times, lawsuits aren't filed to be won, but filed to drain the finanical resources of the parties.
I have to say it's my fault that I didn't check him on other non-disclosure agreement. Things are becoming tough now.
The existence of a non-compete should have been discovered before the person was ever submitted to your client for consideration. Qualifying is a never ending process. Once uncovered, this individual should have consulted their personal attorney. Only then would I submit them for consideration.
Since your candidate, in this case, is in R&D my guess is that he may in fact have trade secrets in terms of product development, proprietary information, intellectual property, or knowledge of processes that could potentially cause his current employer to suffer some degree of loss. It seems to me that they would be almost obligated to file suit to protect their business interests and interest of their investors/share holders.
Remember, best-case scenario is that the non-compete is not upheld and your applicant/candidate shoulders the financial burden for defending themselves against the suit. Worst-case a judge orders a temporary injunction barring your candidate from taking the position or working for your client until the non-compete is sorted out. Then, if upheld the court can/will award damages that could cost your client and your candidate a considerable amount of money and time. Not to mention that it may cost you a relationship with your client too.
An executive I have worked with in the past recounted his experience fighting a battle over a non-compete, "I won, but I still had to spend $50,000.00 to prove I was right."
I'm wondering why this was only discovered "after all the negotiation finished." What's up w/ that? Is there something a candidate should be signing before negotiations are embarked upon on his behalf? Language?
This is an interesting concept: "...perhaps your client can simply pay the penalty to the "host company" to realease the candidate [provided that they find it reasonable]. And the whole issue ceases..."
I just read that every engineer a company has on staff adds half a million dollars to its (the company's) value - if this is so - what would a reasonable penalty be?
It's my fault that I didn't check. But I highly doubt his motivation, I mean, he should had told us before he went to the interview. Everything came out when he got the offer letter. He is facing a huge amount of penalty if he changes the job now, and also means we have to find another guy like him to fill the position.
@ Maureen -> I agree that it's good to know PRIOR to recommendation that the candidate has the NCA.
-> I did not say "reasonable penalty"; the penalty is stated in contract.
BR
Noted. I'm not trying to put words in your mouth. I was asking what the community thought would be a "reasonable" penalty. Is the penalty always stated in the contract or does it need to be?
Hi Allan,
I do see your concern here. I would recommend to analyse the contract with some bright :) lawer to seek the solution.
There are several areas that can be taken into consideration if you wish to find the best way out. First, is the formal side of the clause correct? There are cases that some of the elements are missing and the whole NCA is not binding. If it is ok, you dig on :)
It may be the case that the candidate cannot be employed by the competior. Than, it is possible for him to launch his own micro-company. It's not employment any longer but b2b service.
It may be the case that he/she cannot work DIRECTLY for a competior. How about hiring him/her via some 3rd party company (like your agency) and sending over to the client to do the job?
These were just very simple / obvius ways to move out of the trap. I do recommend to see a contractual / employment lawyer to see all the clauses and figure out the best / least complicated way out.
At the end of the day, perhaps your client can simply pay the penalty to the "host company" to realease the candidate [provided that they find it reasonable]. And the whole issue ceases...
Warm regards,
Konrad
Thanks Konrad,
We've considered different way to get the solution, and I've asked some lawyers of course. But the bad news is that contract seems very well covered, and the penalty could be a huge amount. My client is willing to pay it but the not the huge one. This guy works for the R&D dept in the host company that means he probably grasp some key tech of it.
The interesting thing is, my candidate had chatted with his HR manager wants to pay a little money to get free, but failed. The HRM said they will start the penalty process as soon as he works for the competior.
Fussy...
What state is this? It sounds like they are trying to violate his right to perform his true profession. WI is a right to work state and rarely upholds non-competes in excess of 6 months and normally does not allow those where what the contract is trying to prevent is the workers ability to use their skills. The non-compete may prevent them from using any company knowledge or pursuit of new business/product ideas. In some cases I have seen documents written stating that employee x can leave but they cannot perform research on products x and y. I think that type of language would be upheld, at least here.
I would be careful if I was the candidates current employer too. If the guy really wants to leave he could file erroneous claims against them for harassment, discrimination etc....
Also, if the company the candidate is working for now is in financial trouble or has laid off workers your candidate may also have a case in getting out of his non-compete since they have put his livelihood at risk.
Regardless, everyone is right that this is something that should have been discussed upfront and through out the whole process. I would have envisioned that if the candidate was really interested in leaving company X he would have even provided a copy of his non-compete to his perspective employer to have their legal team review. So either your candidate is a quirky, brillant, forgetful R & D guy or something is fishy.
Any chanced you were played so his current employer could gain intelligence on the competitor?
Yes, whether a candidate has a non-compete should be an initial screening question, not something that becomes known on the brink of an offer. I know I have not signed on with certain companies because I did not want to get tied into a non-compete clause even though TX is a right-to-work state.
Research and more research--Is this a truly enforceable Non-Compete, or are these upheld and allowed in the jurisdictions where you're working? Is it just part of the standard corporate boilerplate your client signed at the start of employment? Also, who does the agreement name liable for any "violations," the individual, the new employer, or even your firm for being involved?
Negotiate--Depending where you are in the placement process, someone should be contacting Counsel, Management or HR regarding releasability and/or intent to move forward. If it's early enough, this is work your candidate should complete. If the agreement is not enforceable, the candidate can work with his own counsel to send a letter of intent or something similar.
Document--Going back to who's liable, cover your back with a signed "hold harmless" agreement reviewed or created by your Counsel.
Proceed--either with a new candidate or with this one. You don't make money on open orders!
Best wishes.
Do you have a sample of a "hold harmless' agreement?
Regrettably, I do not. During my agency days, these were part of the contracts signed by employee and client. In my corporate experience, my legal advisors provided the agreements and reviewed vendor contracts.
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