My boss recently asked his sales team, which includes me, to sign a non-compete agreement. I’ve signed them in the past at other companies, and had to respect one when I left, so I’ve had some experience with them in the past and had no problem signing it after I reviewed the terms. However, some of my co-workers were a little put off and skeptical of it. One even mentioned to me that it seems like our boss now owns our career, it’s like we’re slaves!
I’m assuming by the way he said it he thought I’d agree with him. After all, he has had several conversations with me on economics and philosophy and knows I’m always for liberty, so I think my response surprised him a bit. I said, “I don’t really have an issue with it. He pays for our office, phone and internet. He gives us access to a huge database of leads. He pays for our client appointments, and he earned the contracts we use with our carriers, I think it’s fair for him to protect all that.”
We’re in sales and we get paid a base salary. Our industry also has a fairly long sales cycle. Of course, we try to shorten it as much as possible, but it’s the natural of the industry. Sometimes it takes 3 months to get business in the door, other times a few years. However, we all got paid from day 1. That means the owner of my company is out of pocket for quite a while due to our base salary. He hires us with the expectation that we’ll grow the business and eventually earn him some money. It’s a win-win if we’re able to grow our sales, we all make money. None of his employees would be able make any sales without the out of pocket capital from our boss. He sees the base salary as an investment that will eventually have a positive return.
However, he is not guaranteed a return on a new hire. It could be that he pays a base salary for several months or years and never gets a return on that investment if the salesman cannot sell. Shouldn’t he be able to protect his capital? Without a non-compete a disgruntled, or failed salesman could sell his database or trade secrets with a competitor. Even a successful salesman who was able to build up a big book of business could get lured away by a competitor with an offer of more money up front. That book never would have been able to grow without the original employer providing the capital. The new employer wouldn’t be out-of-pocket as much since the salesman now has strong relationships with his clients. The business would just transfer from the original employer to the new employer. By having employees sign an agreement that they won’t compete for a year after they voluntarily leave the company doesn’t sound so egregious.
So no, a non-compete agreement is not corporate slavery. It’s just a way for a business owner to protect his investment and his employee agrees to comply. I’ll concede that you could imagine an agreement that is essentially slavery, but you can do that with any contract. No court, private or otherwise, would uphold a contract that says something like, “if you decide to leave the company you may never work again”, or “if you no longer want to abide by the rules of this company you must move to Somalia.” That’s ridiculous and an unreasonable clause that really makes no sense and would never be considered a valid contract.