Ensuring Electronic Signature Lawfulness for Non-Compete Agreements

How to eSign a document: electronic signature lawfulness for Non-Compete Agreement

good morning everybody welcome to foster swift what employers need to know for 2022 webinar um we appreciate you joining us this morning we have a very informative session and we'll keep the introductions quite short the other thing i'd like to remind you is today's session is general information only and we do encourage you to always check with your legal counsel prior to taking any action so that you know specifically how the law applies to your particular situation another issue that comes up and it's been continuous but i guarantee it's going to be even bigger in 2022 because i've had more situations with non-competes whether defending them or enforcing them in the last year than i've ever had probably the last 10 years combined people are really worried about their workforce they want to keep their people they want to keep their customers and what's going on is everybody's having non-compete issues they're fighting over employees going somewhere else stealing their clients stealing their customers and it's a big deal and it's going to get even more complicated next year so and kim if you go to the next slide what is a non-compete we hear about this all the time but it's basically really simple it's a contract really it's a contract it's not something in your handbook right it's not good enough to put a clause in your handbook you actually have to have something in writing that's a contract that says it's going to prohibit somebody in the same business to compete against you if they leave their job all right now the point is to protect you as an employer from somebody leaving and taking your knowledge and your trade secrets that they learned with you to go help somebody else and help themselves compete against you very important what it is not and what it should never be is a way to stop competition if you have a non-compete because you don't want competition and that's the only reason it's not enforceable and if you say that no that's going to get you in trouble in front of a judge what you're trying to do is you train people you let them in the inner sanctum you give them all the good secret sauce that you have as a business the contacts you have the business structure the accounting the nature of the business how it runs all these things that you put time and money into as a business and you learn how not to do things how to do things those things are what you're trying to protect you don't want a person to learn all those things you put all that time and value in walk down the street and start their own company walk down the street and give it away to a competitor that's not fair competition that's why they're allowed to be in place so again it's not to stop a person from making a living please go get a job go work wherever you want just don't you take my stuff and take it to a competitor so non-compete is for the purpose of keeping and protecting your trade secrets your knowledge your business acumen all those things that make a business that's what it's for and that's why it's easier to enforce a non-compete against a higher level person than it is a rank and file remember a couple years ago jimmy john's i believe it is was having their sandwich artist sign non-competes that's an awful tough one right because they were saying well you know we we told you how to use the conveyor belt there of all the different tomatoes lettuce and all the meats and again it's difficult right the lower the level the less stuff that they have access to probably would have a harder time enforcing a non-compete unless you're just trying to stop that person from going down the subway and taking that skill so if you have a rank and file employee beware it may not be quite as enforceable because you have to show that there's damage you want to draft it properly you want to make sure you're protecting legitimate interest so kim if you go to the next slide under michigan's law you have to draft your agreement the right way and it has to number one be drawn narrowly in other words you got to make sure you're protecting what it is you want to protect all right and it's got to as we talked about protect a reasonable competitive business interest you can't just say i don't want people competing that's not good enough and it has to be reasonable and this is very important everybody hears about this duration geographical area and the type of restricted employee or line of business so in other words let's just say i own uh i own a watch repair shop and you come to work for me and you're repairing watches and it's a very technical competitive business because there's only so many people that can you know fix a rolex right and i train you and i put all this skill in there and i have you sign a non-compete and i say you can't work anywhere in the world for the next 74 years in anything that has has a clock on the wall well that's crazy you can't do that that's just why it's just it's not reasonable let's talk about geographical area now let's just say there's only 20 qualified rolex people that do what i do and they're all over the world that geographical area actually might be reasonable if i service watches from all over the world but if i only have five customers and they all come from 30 miles around then that would be a reasonable geographical area if i am in a little shop in a mall and i only get people trafficking through you're going to have a hard time drafting up a statewide restriction so again the geographical area is going to depend on what type of business you have who you service and again you could say all the places that my business does business and that might be legitimate all the places we have all the customers and all the areas that you have you may be able to geographically restrict them reasonably to the area you do business or that you solicit business the duration if you get after one year anything longer than a year you're into what i would call the the gray area right 18 months is probably pushing it two years is really pushing it three four five you better have a legitimate reason why you're doing that there could be again some very specific skill set that this person has that is so valuable that it doesn't dilute over time but again if you're just trying to make the person not work that's not fair if a person's got to move outside the area and they've got a rather long duration but it's because they're a high level employee that could be legitimate but again you're mid level to low level person if you're just saying you can't work for any place that does anything we do and again let's just say you work at a a tire uh place and you fix tires and you rotate tires and you say you can't work for any business that does any of the business we do and so they go ahead and get a job as a janitor at general motors in indiana now that's ridiculous again the geographical scope's too long and if you say you can't do it for three years it's going to be too long in the time and again the type of restricted employment and the line of business will sometimes dictate what you're going to do you want to tailor it to what they do because what you don't want is somebody going maybe to an unrelated business but they're giving away your trade secrets because they have another area that they can actually provide the services to so that company where they're working they may not be doing that job but somebody else in that place does do your job and you may impute your knowledge to them so again that could be more reasonable depending on the circumstances so again it depends on the facts it depends on the job and you have to draft it right so that you can get an injunction which means you can make them stop and in michigan you can actually go after not only the person but the company they're working for and you send them a letter and say i just want you to know we've got a non-compete agreement they're bound by it and guess what if you keep uh employing those individuals or that person in violation we're going to come after you for the same damages so it's very important so if you're an employer and you're hiring somebody i don't care about technology you better watch out because that last employer can come after you so be very careful so when you're in the hiring process what i would recommend is you ask somebody because this is becoming a big deal are you under a non-compete agreement do you have any restrictive covenants from your old employer that we should know about then you can review them and take a look and say okay i think we're good or you can sit there and say i'm not hiring you i'm not going to hire you because of that so it's it's an important thing to remember it is becoming big and it has always been something there's tons of cases and they go all over the place on whether they're enforceable and what are the damages the biggest problem is a lot of times sports don't know how much to give like what's it worth if i bring a low-level person over in technical violation i mean how much is that worth a million dollars a thousand dollars the replacement cost of replacing you there's just a lot of different damages out there so kim can go to next slide now the president does not like non-compete agreements he does not like him at all in fact he's saying look i want to get rid of these things all right and he says basically he'd like to have a new standard for enforcement okay to narrow it down to really high level highly paid highly compensated executives maybe you have a good reason for that but your average person he's saying this is not competitive america is supposed to be about you get up in the morning you get a job and if you can find a better job go get it why restrict employees from coming to work you got the best most talented people out there who have got skills they got off their butt they went work for you you gave them something but hey they're the ones that earned it that's why they that's why you hired him in the first place so let's knock it off and he's actually tasked his agencies to go out there to define rules to stop this and he wants to say hey look is there a way that the federal trade commission could say this is anti-competitive behavior so beware they are under attack a lot of courts don't like them some states don't like them indiana for instance if you lose a non-compete case it's almost automatic that if you bring a case against an employee to stop working that the employee may win against you for restricting trade and a tortious interference with their ability to do business some places just outright to say you can't do it illinois california say you can't have them now you can have protections of your confidential information so make sure you have that in any agreement that you have so you can stop people from stealing your secrets and going to a competitor but what they say is you can't stop them from going to work for somebody and that's a fine line because i'm going to work for a competitor but you have all this secret information it's almost like you still have a non-compete just under a different term and again there's other ways you can restrict people non-solicitations non-solicitations can mean two things if you leave don't ask my former employees or my employees to leave with you that's one type or don't come after my in my customers my suppliers my people that i do business with don't take them away for yourself or somebody else under a contract and don't don't solicit them whether they're my customers or people that i had gone after you knew i was going after this person don't steal that so again the administration probably is okay with those type of restrictions because that's stealing stuff instead of taking your knowledge and yourself and going out and getting business so if you go to the next slide kim can you go to next slide please now what's the rationale again you're stifling workers job mobility and wage keen right so what they're basically saying is if i could get a raise and you're not giving it to me to go someplace else why shouldn't i be allowed to go because you're stopping workers from making more money a lot of businesses just hate this idea they think it's not fair and a lot of employee advocates say it's ridiculous to be able to stop you so you're never going to make both those sides understand each other's but just want you to know in 2022 this could be coming down so when you are drafting your agreements the question is going to be you need to know how far how much you want to push on the non-compete but really what you need to do is start taking a look at your confidentiality provisions and agreements um and just taking a look at all the the i would say peripheral issues which is don't steal my customers don't steal my my um protected uh client information my billing my other types of protected you know how do i go out and make my business run those types of things as opposed to stopping the person okay you can still have the non-competes but just know they may not be enforced so draft them broader so that you can have more things protected other than just simply don't go out there and work i'm going to the next slide please so ing to the president he says a simple company should have to you know compete for workers just like they compete for customers and so that's it now this is where we get into a completely different issue and i want to make sure everybody here they leave one thing that's very difficult to get it is the difference between a no coaching agreement and a non-compete cause because they are different and this is criminal behavior and it's it's very troubling sometimes when you see employees or employers getting into these agreements because it could it could spell serious consequences for you if you go to next slide kim now what he wants to do the president i'm talking about is eliminate non-compete clauses but he is right now trying to ban no poaching agreements through the use of the department of justice in criminal complaints next slide please a no poacher agreement is different that's where employers agree between themselves not to hire each other's workers it makes it hard for workers to get a job with a competitor in fact department of justice and federal trade commission any trust guidance says it's against the law for employer wages or not to hire another's workers so you can't set wages between two employers saying you won't pay more than this and you can't say you won't hire each other's workers sometimes what'll happen when you get in a uh a non-compete case employers will want to settle by saying okay well i won't take your employees for so long you won't take my employees we'll all be happy that's actually criminal and i want to repeat this two employers agreeing they won't hire each other's workers if they leave is potentially unlawful criminal behavior be extremely careful not to be setting a standard in the industry to not take each other's people you can abide by non-competes which is between an employee and the employer i agree i won't work for somebody else after i leave whether you fire me or i quit is between me and my employer but if an employer reaches out to a competitor and says we won't take any of your employees that's different so let me give you a scenario i sign or not compete with you i leave i go to your competitor you write a letter to the competitor and say i just want you to know that person signed a non-compete you need to fire them or assure me that you're not using them the wrong way and you say you're right i'm not hiring this person anymore i didn't know about this i'm firing that's okay as long as a non-compete is legitimate that's okay and not non-poaching that's not a no poaching agreement what that is is an enforcement of a non-compete what's not okay is i notice i have 15 people that went from my place to your place i can't find employees i call you up and say i've had about enough of this nonsense now you need to stop hiring my employees in the future what do you need from me and we make a pact where we're not going to you know hire each other's employees that's a no coaching ring fine line it's extremely fine line because it sounds like very similar behavior but just be careful okay um and if you go to the next slide please kim so you don't want to expressly do that number one so if you're an hr professional you got to take steps to ensure the interactions with other employers in the competitive business does not result in in uh in a problem where they're not competing okay so you just have to be careful when you're out there socializing or your you know events like that just be careful you're not creating a no poached situation even if it's not in writing so that situation doesn't arise and next slide please an individual is likely breaking the law if they agree with individuals in another company so again it doesn't have to be in writing okay about the salaries other terms of compensation because you're now fixing how much people are being paid or agrees with individuals at another company uh not to solicit or hire somebody so sharing information with competitors about you know how much people are making how much money and what the benefits are to get you in a position where you're fixing the market or you're having a problem so be careful there are different ways that you can do this but sometimes you'll get industries uh solicitations to say what's the general wages that's you know that's different but when you're just sitting there talking hey how much you pay 15 oh me too or i better raise mine so we can all be in the same ballpark uh be careful just just be careful with that and i know right now it's very tempting because we're having a hard time attracting talent and everybody's going around so be careful not to price fix not the salary fix not to get into a situation in 2022 where you're doing everything you can to make sure you're at market including um setting the market okay so going to the next slide please um an individual that thinks that they've actually you know been violated can get a civil suit as well as the criminal suit and get triple damages triple damages uh if they believe that you price fixed or you've got a poaching agreement so be very careful and the department of justice could bring a criminal prosecution against people okay so it's very important in fact right here uh in michigan uh you've got one going on right now um in addition to these ones in texas and we'll talk about here but um in texas and last year they had an indictment for charging former owner of physical therapist staffing company for fixing he got another one indictment uh obtaining charging three outpatient medical care suppressing competition through no poached agreement so they're out there they're coming after people uh next slide please and this is the one in michigan this is a crna uh filed class actions so saying that hey there they were um doing unlawful posting agreements between other uh you know businesses anesthesiologists so so you got to be careful because they're asking for trouble damages there's a current motion to dismiss pending but we don't know if that's going to win and it's going to be tough to win those kind of cases now i don't know all the facts and factors because that case just started so i can't say that they're going to win or lose or whether it's true or not i just know there's a case out there right now so just a significant civil and criminal case that's out there in 2022 so be careful on how you draft your agreements be careful how you interact with your competitors and just understand that in addition to covet there are restrictive covenants when we're starting to fight for employment talent uh that are out there so that you don't do everything um that you can to get people including breaking the law