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Non-compete clause

B. Newman

SGF, Supreme Grumble Framer
We've talked a lot about employees starting their own businesses, and the advice has even been given to new folks to work for an established frame shop before starting your own. But on the other side of that coin, if you're the owner, first of all, how do you feel about that? And second when you hire someone that you can tell right away is a very good employee and ambitious enought that they might have ownership in mind, do you write up a non-compete clause. And if so, how do you do it?

Betty
 
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Framerguy

PFG, Picture Framing God
Hi Betty,

Hope you'r stayin' dry and out of the tornadoes.

Regarding new employees, if I hired a new employee and we started from scratch to train him/her, I would expect that employee to gain experience and knowledge through his/her employment.

As the knowledge and skill level increased so would the wages. If this employee got to be really good, good enough that you have fears that he/she may go into competition with you, then I would sit down and look over what I had in this employee, what his/her overall potential is, and I would take pains to pay this person enough to keep him/her in my employ. There is no substitution for a well trained, loyal, satisfied, happy employee. If this employee were good enough to go out and open a competitive shop my question would be "why would you risk losing him/her?"

If, on the other hand, the employee wasn't the caliber that you expected, why worry about losing business if he/she decided to strike out on his/her own and compete against you. The majority of the quality work will go to the best around, not the 2nd or 3rd best. People will be loyal to the frame shop that does the best work historically. The "new guy" in town may draw some of your business away but, if you are doing the best work, you will see the majority of those clients come back eventually.

If the applicant for a job had much experience coming into your shop I would ask point blank what their plans are for the future. Sure, they could say anything they wanted to but you could get an idea by face to face questioning whether they are trying to pull the wool or not. I am not sure that a simple non-compete clause would hold any legal water if they simply walked out one day and opened up their own shop down the road.

Isn't the Free Enterprise system great??

Framerguy
 

B. Newman

SGF, Supreme Grumble Framer
Yeah, I agree with that completely. I believe in "paying as much as you can to keep a good employee, not as little as you can to keep them". (Did you read your last Decor???)

What I'm worried about is my customer list, and my "marketing methods". And there are people who don't want to be "employees" forever, no matter how well they're paid to be an employee. I've been self-employeed so long, that I think I'm "hard-core unemployable"! I'm not sure I could work for someone else.

I dunno, I guess I've just got "detail-itis". I try to cover all the bases, before the ball is even hit!

Betty
 

ArtLady

SGF, Supreme Grumble Framer
Two of the questions that I always ask during an interview are "What are your long term goals?" and "what are your short term goals".

If the prospect states their long term goal is to open a frame shop of their own, I do not hire them. Because from that point on the attitude could be "I told you up front, I wanted my own shop". This is a license (or possibly a flag) for self serving behavior.

I agree with framerguy on the other issues.
 

Meghan MacMillan

SGF, Supreme Grumble Framer
I have been asked to sign non-compete letters and have done so cheerfully because I would never open up across the street and I would never take a customer list with me or anything like that. The ones I have signed didn't prevent me from opening my own business, just from opening up within 5 miles, with other conditions. Anyone who needs to open up on your block to be successful won't be.

I like to think (like Anne Frank,)that people are basically good so as an owner I would probably not ask for a non-compete letter, but have heard enough stories of owners getting burned that I understand why people want them.

As an employee I wouldn't feel great about being asked to sign such a thing except at the very beginning of my employment.
 

Mic

Grumbler in Training
We have a very basic Non-compete clause we have used since last summer when I had a part-time employee start a custom frame dept at her other part-time job (a local bakery/coffee shop). :mad: Needless to say, she refused to sign and quit on the spot. The other shop went out of business in October.

Anyway, I found the "clause" on the Hitchhikers forum and reworded it to fit our shop. Even though we realize it probably would not hold up in court, it does make potential employees think when asked to sign it.It basically just deals with situations while someone is still employeed. I don't think any of us can control what happens when an employee leaves, just stay on top of the situation and try not to let any valuable info, other than knowledge and training, leave with employees.


Michelle Fishback
Art and Frame Outlet
 

B. Newman

SGF, Supreme Grumble Framer
Michelle, I looked in the HH archives, but couldn't find it. Maybe I worded it wrong in the search. Would you have something generic that you could e-mail me off forum?

I did see some posts about putting it in the Employee Handbook. Is that where your's is, or is it a separate thing? I do need to do some rewording of things in mine, and this would be a good time to include that.

Thanks for all the great suggestions and thoughts. I especially like asking for their long-term and short-term goals. When I was interviewing my present employee I asked what her's were, and she said "to get married and be a housewife." (!) I guess I broke the law, but I said, "Well, got any prospects?"

So far, so good...

Betty
 

Frank Larson

CGF II, Certified Grumble Framer Level 2
About 8-9 years ago I went to work for a corporate art outfit and I had a non-compete clause in my contract but other workers didn't. It laid out a specific amount of time and coverage area that I was not allowed to compete in after my employment there. One of my coworkers ran it by a lawyer (the corporation's actually) and was informed it was uninforcible unless ALL of the employees had it in their contracts. You can't pick who you want to compete with and who you don't. So if you decide to have your new employee sign a no compete clause be sure ALL of your employees sign the same contract or it's pointless.
 

ERIC

SGF, Supreme Grumble Framer
CAUTION - also check with your CPA ! There are IRS guidelines as well. You don't want this to cost you money.

You may wish to have a “confidentiality” agreement instead. This could cover client lists without any time limit.
 

Jim Miller

SPFG, Supreme Picture Framing God
My former principles (manufacturing employers) all had non-compete clauses for their independent agents, which I was until the late 80's.

In Ohio the problem with those agreements is (was) that they usually contradict our right-to-work laws. I know of several cases where employers tried to enforce them unsuccessfully. The former employees always won, because they have a right to work in Ohio, and the laws don't specify any restrictions such.

Maybe other states don't have such laws, and maybe Ohio law has changed in the past decade.

Confidentiality agreements are another matter altogether. They are vigorously enforced here, and are airtight if properly written -- no loopholes for violators.

So, if it can be proven that a former employee takes a mailing list or other such proprietary information, then he/she may be nailed to the wall.

If you're considering any kind of legal agreement, have it written up by a good lawyer. Sometimes the perception of legal strength is more important than the reality.
 

Jerry Ervin

PFG, Picture Framing God
Originally posted by Jim Miller:
My former principles (manufacturing employers) all had non-compete clauses for their independent agents, which I was until the late 80's.

In Ohio the problem with those agreements is (was) that they usually contradict our right-to-work laws. I know of several cases where employers tried to enforce them unsuccessfully. The former employees always won, because they have a right to work in Ohio, and the laws don't specify any restrictions such.

Maybe other states don't have such laws, and maybe Ohio law has changed in the past decade.

Confidentiality agreements are another matter altogether. They are vigorously enforced here, and are airtight if properly written -- no loopholes for violators.

So, if it can be proven that a former employee takes a mailing list or other such proprietary information, then he/she may be nailed to the wall.

If you're considering any kind of legal agreement, have it written up by a good lawyer. Sometimes the perception of legal strength is more important than the reality.
I hate to be a ditto but,

North Carolina is also a right to work state and the "contracts" don't hold up in court.

Jerry
 

Rick Bergeron - CPF

SGF, Supreme Grumble Framer
Ditto Jim and Jerry.

Just an informational note:
Our attorney told us a few months ago that Idaho was the only state in the country that had a Non-Compete statute that would hold up in court. It seems as though the legislature believes that a 2-3 year, 250 mile radius is reasonable to be included in a non-compete clause.
 

Lance E

Member
Non-compete clause is a waste of paper here too, as Jim noted a confidentiality agreement is the way to go, local laws will most likely cover you to a certain degree anyhow.
This is a topic that would be best to ask your lawyers directly as local knowledge is necessary.
 

B. Newman

SGF, Supreme Grumble Framer
My reason for asking about this in the first place was a suggestion from my CPA about needing a framer and discussing of where to find one. (He worked while in college for a framing supplier, so he has a somewhat understanding of our industry.) He threw out the idea of hiring a "homebased" framer that might want more work, and would already be "up to speed" on a lot of the knowledge. My concern was (and is) would they try to take my customers, and what is their "attitude" toward "correct" framing. (I guess I'm as prejudiced toward other home framers as I fear some folks are toward to me!)

I told him my concerns and he mentioned some sort of "non-compete" clause or agreement. But from all the responses, I think my best bet is shy away from that idea, and just concentrate on finding, and then keeping the best employee I can find.

Thanks for your help.

Betty
 

Jillcpf

True Grumbler
I am wondering how such a clause might effect a framer, with exerience and a personal following, that may be hired in a shop with such a clause?

Would the customers that came with the framer in the first place be included as the hiring shops or as the framers. Would this issue have to be addressed as a seperate portion of the contract.

Just a point to ponder.
Jill Hennes CPF
 

Jim Miller

SPFG, Supreme Picture Framing God
Good question for a lawyer, Jill.

I'd bet that customers, wherever they come from and whoever brings them in, generally become the "property" of the business as soon as they buy there.

After all, it might be difficult to prove that a certain customer wouldn't have come in *without* the new employee. And what would the employee have for the customer's benefit, if not for the employer?

If certain customers were identified as referrals from certain employees, what would that mean? Commission? Perpetual rights to take that customer away if the employee leaves the business?

This seems something like a prenuptial agreement...if it's needed, then something's seriously missing from the relationship.
 

Bogframe

SGF, Supreme Grumble Framer
I personally would never sign a no-compete clause. I am on good terms with all but a few of my former employers because I have been, for the most part, well treated. I've even referred clients to them when I felt that their needs would be better served by my ex-bosses. I'm probably a freak for not wanting to shaft all these "ex's", but that's just me
.
With one well-known exception, I've never had a bad word to say about the work done by my former employers, and I don't expect to be saying so, nor will I be competing with any of them
 
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