Non-compete agreements used to be used only for positions that involved direct client relationships like account executive roles. However, non-compete agreements are now used for many different types of positions – even entirely internal positions like software development or analyst roles. Don’t leave a non-compete discussion until the last minute and ruin a placement!
The first thing to know about non-compete agreements is that enforceability varies greatly based on the state in which your candidate works. If your recruitment practices or hiring area is confined to a particular state or a states, do some legal research into recently decided court cases involving non-competes. The states themselves also “swing” on how tightly they will hold employees to non-competes. The current legal “climate” matters greatly – so be sure that the cases you look at are recent.
Many candidates that you speak with now will have non-compete agreements, so be sure to ask about them as part of your initial qualification. (Some candidates may not even know if they signed a non-compete, in which case ask them to check.) If they do have a non-compete, be sure to get some clarification so that you don’t waste your time.
One item to note – when talking to a candidate about a non-compete agreement, be sure not to provide legal counsel. Ask questions and if it seems like the contract might be an issue, it’s a good practice to tell the candidate to speak with a lawyer.
A few general questions to ask the candidate about their non-compete:
- What are the terms of the non-compete? In general, the more specific the contract is, the more enforceable. For example, if the contract dictates that the person can’t work within 100 miles performing their core job skill, the contract is probably over-reaching. If the contract mentions one particular company or a very narrow and specific industry, the contract is probably good. To apply it to recruiting, your employer likely can’t bar you from “being involved in the recruiting industry,” but can likely bar you from “working with a direct competitor involved in recruiting accounting professionals.”
- Did the candidate get anything for the signing the non-compete? In general, non-competes hold up if the candidate received something (called a “consideration”) for signing the document. If the contract was done as an afterthought, years after the employee signed it and the signature was a condition of employment, the contract might be void. The extreme example on the other side is an advertising account executive that receives a $50,000 check to sign the non-compete agreement and bring over specific clients.
- How is the employer hurt if the candidate leaves? Employers have to be able to prove that they have a legitimate business interest in barring an employee from working at a competitor. Contracts with salespeople (and recruiters for that matter) are usually easily enforceable, because the employer can show a very specific impact to revenue if the employee leaves. If the employer simply uses non-competes as a general practice with all of their employees and cannot show a very specific business impact, the contract may not hold up. For example, if you recruit software developers that are working on a mission critical patent for the company, a non-compete might hold up. If a software developer is simply performing a job function that can be replaced, a non-compete would most likely not hold up.
The most important aspect of non-competes in the recruitment process is simply fleshing out the issue and managing it early. If you ask about non-competes as a routine part of your qualification process, you and your client won’t ever be surprised.