Three Things that I’ve Observed About Noncompete Agreements By John Halapchuk

On April 23, the Federal Trade Commission issued a final rule?to promote competition by banning noncompete agreements nationwide, protecting the fundamental freedom of workers to change jobs, increasing innovation, and fostering new business formation.

I agree with FTC Chair Lina M. Khan when she says “Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism.” I want to provide some insight based upon my own experience when it comes to noncompete clauses.

Over the years I’ve watched the threat of the noncompete clause cause an employee to either not leave a company or job they simply don’t like, or if one does leave, they seek out an entirely different career path and very often a lower paying one, at least until the noncompete period ends. But here is the reality of the noncompete as I’ve seen it. I want to point out that my point-of-view is certainly limited, and you may have different experiences than me.

There Are No Secrets

At a field sales level, the noncompete supposedly served to stop a sales professional from “stealing” customers from the company they just left. It was also supposed to be a deterrent from having customer information leveraged or taken. Trust me, that customer information was pilfered in one way, shape or form months before those sales professionals left. Here is why this is dumb anyway. Even if a sales rep didn’t take the info, it’s not really that hard to call a prospect, ask them who they have service with today and ask when their contract ends. It happens all day long, every single day. Trust me Mr. Company, everything that you think is “inside info” is common knowledge to every one of your competitors already. The only worst kept secret is that not everyone taking Ozempic uses it for diabetes.

Do Better

I haven’t ever actually seen a noncompete enforced. I have seen instances where “cease and desist” letters went out, but the rep always ended up selling to the account anyway and nothing happened. Or the rep and his new company just came up with some creative way to “disguise” direct contact with the customer. Years ago, while I was working for a small company a rep left and began taking customers away to his new company. The owner of his previous company got him on the phone and threatened him with legal action citing a breach of the noncompete agreement. The owner of the company told him that he wasn’t actually a very good salesperson if the only way he could get sales was by stealing his customers. The rep reminded him that was exactly what he did when he went to work for him and that it “was ok when you were benefitting from it”. ?When that didn’t work, he offered his former rep $1,000 to back off. The rep figured, “Well, if he’s willing to offer $1,000 let’s see how much I can get”, so he asked for $10,000. The owner just said, “Were you raised by wolves?” and hung up on him. Frankly, here is my attitude about the whole thing. If you want to stop me from taking your customers, stop worrying about me and start worrying about being BETTER than me! You probably wouldn’t lose the customer if you focused on them the way that I do. Trust me, no amount of information that I took from you had anything to do why I bested you. I just did better. Do better.

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Noncompete Agreements and the Rebound Relationship

The only area where I’ve noticed noncompete agreements seemingly work was at the very high levels; C-Level or SVP types. In a way I get this because these folks truly have important inside info that could be critical in respect to very large accounts and the scale with which they would hurt their former organization could do real damage. These folks get their golden parachutes and their five million dollar “go away” packages and they sign their NDA and then must adhere to their noncompete. Then they go and take a job in an unrelated industry for a year and when their noncompete runs out they go to work for a competitor anyway. They still end up leveraging what they know about their old company to gain an advantage. The only company that got screwed was the one that was the bridge between jobs – the rebound relationship company. It’s kind of like when someone is married for 25 years and gets a divorce. They jump into a quick relationship with someone and then break it off and marry someone that’s just like their old spouse – “I think you’re a wonderful company, really. It’s not you. It’s me.” ?It’s not like and SVP level suddenly found that job with a competitor. He or she has been talking to that new company for the last year on the side and on the rebound relationship company’s dime.

At the end of the day, I’m glad that employers don’t get to use noncompete agreements to bully, coerce of stifle professional growth. Not all employers were this way but the ones that bastardized the spirit of the noncompete and weaponized it are why the FTC put an end to them. ?I say good!

The views and opinions expressed by me are mine only and are sometimes factual, sometimes dramatized for effect, and every once in a while, completely made up. They do not reflect the views and opinions of any of my employers, peers, friends, or strangers on elevators, past or present.

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