When searching for employees in competitive industries, you will likely run into candidates who are currently in non-compete clauses with their companies. While it is known that these candidate restrictions are generally quite hard to enforce, companies do use them to discourage employees from taking their talents to competitors.
At least half, 49.4%, of companies requiring their employees to sign non-compete clauses upon the hiring process. Private-sector workers are most primarily affected by non-compete clauses; between 27.8% and 46.5% of those workers sign non-compete clauses.
When hiring a candidate with a non-compete agreement, employers know that these contracts commonly plague many candidates in sales, freight brokerage, and other industries. Employers are also concerned when a top candidate has signed a non-compete clause with another company in the past. The process can be expensive when a company already gave an offer to a potential employee, only to find out that they are bound contractually to another agreement.
Each state in the country has its laws and regulations about the extent of non-compete agreements' enforceability. Through the years, the court system has realized that non-compete agreements get in the way of employees efficiently pursuing a livelihood. However, except California's state law, most states will enforce a non-compete agreement under particular circumstances.
A big reason why non-compete agreements are deemed too difficult to enforce is that their terms are generally very broad. They can be easily challenged due to this, as a court can find them entirely unreasonable.
While some companies restrict their employees' search for outside work upwards of seven years, others keep the non-compete clauses shorter to attract more talent. If the agreement's scope is too narrow or too wide, then the non-compete agreement will be quite challenging to enforce. If terms are clearly laid out in the contract early on, they will be much easier to implement early on than if things are left unsaid or vague throughout an employee's time at a company. While many non-compete clauses identify timeframes like seven years, it is considered an exceptionally long one.
The rule is, for non-compete agreements to be enforced, they must be considered reasonable.
The Recruitment Process
Recruiters should know early in the process whether or not a non-compete agreement could bound a top candidate. Candidates who work in industries known for non-competes should disclose their status to a recruiter immediately. It is also suitable for both parties to have a copy of the non-compete agreement for everyone's records.
However, many individuals do not have a copy of their non-compete clause, which experts agree is shocking. Most of the time, they are too hesitant to ask human resources for a copy during the onboarding process.
The potential employer should be informed right away whether a candidate is in a non-compete clause, and the candidate should immediately be told if they will be required to enter into one. That way, no one's time is wasted early on in the process.
Later on, if a prime candidate with a previous non-compete agreement is still a desirable option, legal can be brought in to determine the contract's enforceability.
When a Prime Candidate Has Signed a Non-Compete
While it can be challenging to get companies to abandon a non-compete agreement altogether, terms can usually be negotiated. However, companies do apply their litigation to separate non-compete agreements differently.
Approaches to how much the non-compete agreements will be enforced will depend on a variety of factors. These factors include the state the candidate lives in; the nature of the company the candidate is interested in working for, and whether the new business is a different enough business model to be a factor; what the candidate's role in the new company will be; the candidate's relationship with superiors; and the company's experience with litigation.
In many cases, a candidate's potential new company will have an attorney look over non-compete agreements before making an offer. Other times, a company provides legal counsel and support from its legal team after a new candidate is hired and is already in the onboarding process. However, in many cases, a candidate is on their own and will lose their new position if things do not go well in navigating the old contract.
Many candidates have walked away from potentially life-changing opportunities because of a non-compete agreement being required. On the other side, companies regularly pass on talented employees engaged in previous contracts due to complicated legal issues. However likely it is that the non-compete clause could potentially be negotiated with by an earlier employer, it could prove too expensive or legally tiresome to be worth it to a recruiter.
On Requiring a Non-Compete Agreement for Prime Positions?
Those looking for a job are understandably hesitant when potential employers ask them to sign a non-compete clause. Many companies who implement onboarding paperwork slide them over to new employees without making them seem like a big deal and failing to explain what they actually mean. In some industries like pharmaceuticals and biotech, recruiters are more transparent about what these agreements mean. Employers and recruiters should think about the repercussions of what non-compete agreements will mean for employees and their relationships in the long run.
At Infinity Consulting Solutions (ICS), we understand the intricacies of finding quality, long-term candidates and the challenges companies can face while searching. Companies look to ICS for the highest quality professionals to fulfill their direct hire and recruitment needs. Before client interviews, we thoroughly pre-screen every candidate to certify that their skills and experience align with what you are looking for. Give us a call today to get started in your search.