Do I have to sign a no compete after 11 years of employment?
I was recently told I must accept a commission based salary. I have been salary for almost 2 years. I was hourly the previous 9 years. This commission based salary will cut my yearly income by nearly 50% if my sales stay the same as they are now. I was handed a no compete agreement today at noon and was told to have it back by 5pm. Considering the paycut I am taking, I was thinking of looking for better opportunities. Do I have to sign now? Do I have a grace period to sign such a document? Should I talk to a lawyer in Texas?
Attorney answers (2)
William J. Dyer
Reputation Level 14
Answered over 2 years ago.
Lawsuit / Dispute Attorney in Houston, TX.
I agree with much of what's in Mr. Sweat's very fine answer, but unfortunately he may have been relying on a since-changed version of the key Texas statute on the enforcement of non-competition covenants, section 15.50 of the Texas Business & Commercial Code. Basically, the Texas Supreme Court and the Legislature have been playing ping-pong with this law, slightly tweaking it to make it either more or less favorable to employers, and the latest moves deleted a limitation on the employers' power to effectively impose a requirement to sign a noncompetition covenant as a condition of continued employment. (They've actually changed it yet again, with a new revision effective on September 1, 2009, but that affects only doctors.) At the risk of repeating what of Mr. Sweat wrote:
(1) NO, you don't "have" to sign a noncompetition agreement -- but your refusal may cost you your job and leave you with no remedy. Unless you already have a contractual promise that your employment will continue for a particular amount of time on specified conditions, then you're part of the overwhelming majority of employees who are in "at will" employment arrangements. In general, either employer or employee may terminate an at-will employment agreement at any time, with or without notice, and with or without good cause. (There are only a few exceptions -- for example, you can't be fired in retaliation for filing a worker's comp claim or refusing to perform an illegal act, or if the motivation comes from certain types of discrimination against protected classes -- but none of those are likely to apply here.) So you're free to say "No," and your employer is free to say "You're fired!" as a result.
(2) A corollary to the "at will" employment doctrine is that there's no "grace period" provided to you by law. The employer is within his rights in saying, "Sign this TODAY or you're fired," just as you're entitled to say, "Give me a week to think about it or I'll quit right now on the spot." Whether you get the "grace period" you're asking for isn't a question of law, it's a question of economics and business negotiation: Is the employer willing to lose your services permanently in order to enforce his own arbitrary deadline? (There's some group dynamics at work here, too, if there are other employees simultaneously being asked to sign: He may not want to "create a [practical, not legal] precedent" that he effectively has to extend to everyone.)
(3) Yes, in my opinion, you should definitely talk to a lawyer in Texas who's actually fought some of these matters in court and who could therefore give you a well-informed opinion about the likelihood of whether the specific document you're being asked to sign would or would not be enforced later if push came to shove.
You also need to talk to a qualified and experienced Texas lawyer EVEN IF your inclination is to NOT sign the document and instead move elsewhere: You've got an employer who's already shown himself to be sensitive to these issues, and violation of a written noncompetition agreement is far from the only basis on which an ex-employer can sue his ex-employee. Even without having signed anything during your past employment, you may have become privy to arguable "trade secrets" of your current employer -- and if you go to work for a competitor, your current employer may well sue both you and your new employer (which may cause the new employer to have second thoughts about hiring you).
Besides getting detailed and competent advice and counseling, cloaked with the confidentiality of attorney-client privilege (which discussions on websites like this one can't be), in order to help you make your decisions, you may well also want to enlist the assistance of counsel to help you NEGOTIATE. Employers may in fact be more willing to compromise if they know you're represented by competent counsel.
The money you spend on an attorney now may save you a large multiple of that sum in the future.
2 people marked this answer as good
Chais L Sweat
Reputation Level 9
Answered over 2 years ago.
Lawsuit / Dispute Attorney in Dallas, TX.
Without seeing your non-compete agreement, it is impossible to know if it meets all the requirements to be considered enforceable in Texas. It is a rather large risk to simply assume that the agreement will not be enforceable, and then sign it and hope things go your way in court. Further, most companies will ask you to disclose whether or not you are subject to a non-compete agreement before they hire you. This is particularly true of sales people, executives, and those with privileged technical information (aka "the secret sauce").
Non-compete agreements in Texas must be "ancillary to an otherwise enforceable agreement" or must carry consideration on both sides. If your employment is "at-will", where you can be fired at any time for any reason, then they must be supplying you with valuable consideration in exchange for your agreement. As a part of the sales force, you have access to information, such as contact lists and price points, and established goodwill with the current customer base that your current company has a valid interest in protecting. A non-compete is an effective way to do that. However, some courts have hinted that if all you have that is considered "confidential" is a list of names and phone numbers that could otherwise be easily obtained, then that information is not actually "confidential" and the non-compete may not be enforceable. Again, this is very thin ice to skate your career on, so be sure that you are willing to accept the risks before signing.
Additionally, the agreement must be reasonable to protect the company's interest. The easy analogy is a regional furniture salesman. A reasonable non-compete for a downtown Dallas furniture salesman might restrict him from competing within a 3 mile radius. It would not be reasonable to restrict him from competing anywhere in the country. Same rule applies for how long the restriction lasts. 6-18 months is generally considered reasonable. The more sensitive the information and the higher-up the employee is within the company, the greater the restrictions can be. It gets a little trickier when the sales force has a large or even national/global region. Unfortunately, there are no clear rules, and courts will often give it the "smell test" to determine if they find it unreasonable. Finally, a non-compete is not enforceable unless they give you some new consideration for it. If you've been doing the same job for years, they have to give you something new. It is possible they will claim the change to commission-based pay will satisfy that requirement, as it gives you the "potential" to make more money. Alternatively, they may try to quickly give you some "confidential information" or "specialized training" that validates the agreement.
If the restrictions are reasonable and you can live with them, signing may be your best option. If not, it may be time to exit. You can always ask for a release from the agreement if you decide to leave later on. Of course, it will be up to them whether or not to let you out of the agreement.
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