In today’s marketplace, organisations across all sectors are very conscious of the need to retain good talent. Understandably, they worry about their IP walking out the door and going to the highest bidder, or employees setting-up in opposition down the road and taking with them the company’s ‘loyal’ customers.
Anxious employers, emboldened by their lawyers, will try all sorts of things. Enter the overzealous non-compete clause – or as my colleagues like to call it, the overzealous non.
From non-compete clauses covering specific timeframes, restrictions on geographical areas, to non-solicit and confidentiality provisions, employers attempt to shore up their business with all manner of contract provisions.
How practical and cost effective are these measures to uphold, and who is really missing out when a preferred candidate declines an offer as a result of the restrictions on their contract?
Australian law firm Corrs Chambers Westgarth, in A regional guide to ‘restrictive covenants’ reports on the international challenges posed by post-termination restrictions in a global market: “There are few areas of employment law which differ as significantly between countries as the laws relating to post-termination restrictions.” Boston venture capitalist Bijan Sabet is an advocate for getting rid of non-competes altogether. “Non competes stifle innovation because the companies can’t hire the best talent,” he says. Citing California as a model state where non-compete agreements are unenforceable, he observes “Silicon Valley companies hire the best people without limitation. It’s a big problem if you can’t hire the best and brightest.”
It’s true that a small number of people will deliberately go out of their way to cause detriment to a past employer. But the majority act with the best intentions. Sharing market intelligence contributes to the greater knowledge base and benefits an industry overall. “Control is a double-edged sword,” writes Professor of Law at University of San Diego, Orly Lobel, in her book Talent Wants to be Set Free.
Lack of trust and respect are two of the highest ranked reasons for leaving a job, so wouldn’t it be better just to treat staff well in the first place, encourage their personal and professional growth and reward them for their efforts? The overzealous nons don’t think so.
Organisations certainly have a right to retain their intellectual property. They can expect to retain clients and keep their best people too when it’s deserved. So, if you are going to have restraint clauses, be pragmatic, set reasonable expectations, and beware of the overzealous non. It could end up saving you a whole lot of money and dramatically improve your recruitment and retention success.