Enhance Non-Compete Agreement Legitimacy with Electronic Signatures in Canada

How to eSign a document: electronic signature legitimateness for Non-Compete Agreement in Canada

Jonathan Pollard non-compete and trade secret attorney in downtown Fort Lauderdale Florida and I'm going to talk today about non-compete agreements in the recruiting and staffing industry sometimes I think it is really useful to break things down on an industry-specific basis and let me tell you why I say that I have reviewed hundreds of non-compete agreements I've litigated numerous non-compete cases and I have resolved in excess of 200 non-compete disputes out of court over the past several years these disputes have come out of every industry imaginable I have done a great deal of work in the broader health care space and this involves everything from doctors fighting over patients medical practices breaking up pharmaceuticals medical gas sales medical equipment sales medical technology development I've done a great deal of work in the tech and software space everything from the development of some type of new robotic technology to the development of software to website development and then I have done a great deal of work with sales broadly in any particular industry from from pharmaceutical sales to nutritional supplement sales to to widget sales so I have a very broad perspective on different industries and non-compete litigation within those industries now for the most part the disputes that I've handled in the cases that I have litigated involve Florida choice-of-law because I'm located in Florida but I have resolved the number of non-compete disputes that that called for another states law I've handled non-compete cases under New York law Virginia law Mississippi law Indiana law Illinois law and the list goes on and on so I have a very broad national perspective on on trends in non-compete litigation and I have broad industry perspective or non-compete litigation and that gives rise to today's topic which is the industry specific discussion of non-compete agreements in the staffing and recruiting industry you want my bottom line my bottom line is that nine times out of ten non-compete agreements in the recruiting and staffing industry should be unenforceable put a fork in them they're basically done obviously there are some caveats there are exceptions and I will address those at the end of this discussion but first let's get into the mix and let's talk about why they're unenforceable hypotheticals always make life so much easier we're gonna take a hypothetical we're gonna draw it from an actual case I might get some of the facts a little bit off but you're gonna get the basic story you have two staffing companies one of them is called K force and one of them is called Beacon Hill you have a gentleman named Jim Jim works for K force he handles several accounts that he is given among those accounts are two companies one is called Charter and one is called hospital Corporation of America these are both multi-billion dollar companies publicly traded on either the NYSC or the Nasdaq these are big players they have lots of positions to fill so Jim works at kforce he handles these accounts he has dealings with the account managers he worked in the industry previously for a for another staffing company and he knew some folks at these companies before he came over to K force so he works for K force for a couple years and then he gives the notice that he's going to resign before he resigns he emails himself some outstanding positions that K Force is seeking to fill for these two companies Charter and HCA then he quits last day on the job walks away the next day he starts at Beacon Hill and he immediately begins going after those same companies Charter and HCA he aggressively reaches out to the hiring managers he says guys I'm at Beacon Hill now I want to win your business make sure you keep me on your your email list when you're sending out announcements about new job positions etc so as always happens someone at kforce gets when to the fact that Jim is now at Beacon Hill and that he's going after these same customers in these same accounts kforce Sue's and says this is a breach of Jim's non-compete agreement we're facing a reparable harm we want an injunction how does this go down on the law and why do I say put a fork in it why do I say it's unenforceable there's no legitimate business interest here folks okay number one the big biggest to legitimate business interest is that you hear 1 & 2 confidential information and customer relationships short there are other legitimate business interests that you can you can bring out a non-compete litigation but the two big-ticket items are almost invariably confidential information and customer relationships and you don't have those in this type of hypothetical let's start with the confidential information in the hypothetical and as in the actual case that was recently litigated kforce says he has our confidential information he had access to it when he worked for us at kforce and he emailed it to himself before he left the company and went to work for Beacon Hill he emailed himself the names of hiring managers the names of contacts at these customers the job descriptions for open positions that they were trying to fill right now organizational charts for these companies etc is that confidential no no no no that's confidential the the name in in the modern world the name of the hiring manager one of the many hiring managers at a massive company like charter or like HCA that person's name is not confidential you can easily go on LinkedIn do some due diligence and find that person further there are a litany of subscription services that recruiting and staffing agencies subscribe to where they are provided lists of these hiring managers organizational charts the whole nine yards so number one none of this stuff is is confidential and maybe you have a sort of bad actor issue from a standpoint that Jim emailed this stuff to himself and was you know trying to take this stuff when he left the company and do something unfair but that doesn't convert public information into confidential information so number one you have no confidential information and in fact in many instances the the non-compete agreement the employment agreement will actually contain a provision that says employee recognizes in warrants that he has been given access to the company's confidential and proprietary information such as bla bla bla bla bla that's nonsense that the mere fact that an employment agreement that a contract says an employee has been given access to confidential information likewise that cannot transform non-public non proprietary information into confidential information it doesn't work that way Latin squad nipsey Dixit your MC Dixit assertion that it's confidential does not make it so that's not how it works so no confidential information that's completely off the table now let's look at the customer relationships again a lot of people are confused about customer relationships yes you can protect sunny customer relationships through non-compete agreements but you cannot protect all customer relationships in Florida under Florida terminology we refer to the protectable relationships as substantial customer relationships a special customer relationship is protectable from my perspective when you're in an industry where there's fierce competition everything is public people are vigorously competing to win the work to win the project to win the job you're unlikely to have substantial or protectable customer relationships and you see that play out in the staffing industry context and in this case in our hypothetical involving kforce and Beacon Hill let's go back to that so so KFOR says these companies these customers who we were trying to fill positions for these are protectable relationships and that's why this person should be enjoined that's why beacon should be enjoined that's why we have damages let's take a closer look at that the customers themselves charter and HCA they're not exclusively working with kforce in fact the record in many of these staffing and recruiting cases and I've resolved resolved certain disputes in this industry as well and I've reviewed a number of non-compete agreements in this industry and it appears to me that the usual the usual protocol is a big company like a charter like an HCA blasts this position to everybody in their mother so the hiring manager at HCA sends out an email two to twenty or thirty staffing agencies and says we need an IT manager go and get me some candidates and then whatever company comes up with the best candidate they win so in this context and the staffing and recruiting context you are unlikely to see substantial or protectable customer relationships the the decision in terms of where to buy and in this context by means which staffing agency to pay that decision is not bound up with customer goodwill or world with the customer relationship with a particular vendor it's not bound up with that at all it's entirely based upon who can produce the best candidate nobody at HCA nobody at charter is saying well you know kforce or Beacon Hill we like your staffing agency better we don't like the client you brought us or the candidate you brought us as much as we like the one over there but we're gonna hire the guy you brought us just to do you a solid nobody's saying that that's absurd this is a fiercely competitive industry by and large these positions are not being filled on an exclusive basis numerous staffing companies are in the mix for the work they're vying for it fiercely those customer chips are not protectable and in fact in in the recent case where this this issue was litigated involving Kay Forbes and beacon where Kay force took the position they were protectable the court said nonsense hogwash there are emails in the record where the the account manager at the company at the client at the target at charter a HCA is blasting it out to twenty or thirty staffing agencies saying fill this position so the customer relationships are not protectable the upshot then is if you don't have confidential information if you don't have protectable customer relationships and you don't have any other interests there you have no legitimate business interest and therefore you have no basis to enforce a non-compete agreement a lot of people get it twisted where they think that just because a non-compete agreement exists in writing that it's automatically going to be enforced oh you've signed this contract nonsense non-compete agreements are restraints of trade before a lot of these things were codified in in state non-computer state antitrust statutes that's what you're looking at any trucks so these things have to be scrutinized and if you have no legitimate business interest its unenforceable and then the staffing and recruiting context I believe 90% of the non-compete agreements are likely unenforceable and easily subject to challenge now for the caveats number one if it's an exclusive position for instance say an elite staffing company same akin or whatever it is major Lindsey or whatever let's say that that staffing company is recruited to find the next college president of such-and-such a college or to find you know the general counsel for a major fortune 500 company and it's an exclusive agreement for them to be the exclusive company working on sourcing the candidate that's a much different ballgame if a recruiter in that context is working on an exclusive deal jumps ship takes that exclusive with him and then fills it at his new company and they get a big Commission that's a different ballgame in that instance there would be a legitimate business interest because you probably have both right confidential information from a standpoint that the position is probably confidential it's probably not been publicly announced if it's an exclusive so that's confidential information and then to you would have the customer relationship because it was an exclusive relationship it wasn't sort of put out to bid to everybody in their mother so that's caveat number one caveat number two somebody who is high up the food chain in a staffing and recruiting agency so people who are actually doing the recruiting you know ninety percent probably not not so much in terms of enforceability but say you have somebody who's the vice president the CEO etc and they've been privy to a great deal of you know corporate secrets strategy long term projections financials etc then you arguably would have confidential information and there it would likely be enforceable as well Jonathan Pollard non-compete and trade secret attorney in Fort Lauderdale Florida man I love this stuff if you have a question about a staffing agency non-compete agreement or any non-compete agreement please feel free to call my office I'd be happy to talk thanks for watching have a good day