Contract - Non-Compete and Intellectual Work Opinion

[oober]

I'm required to renew my contract with my employer and I was just wondering about what other contractors face and do in these situations. I'm not employed permanently and therefore do work on an hourly basis. They made some additions which I highlighted in bold.

I'd appreciate some opinion on this. If you are a contractor, do you accept these or how to you manage this?

E. Non-compete Agreement

For so long as Contractor shall remain employed by Company and for an indefinite period after termination of employment with Company for any reason, Contractor shall not directly or indirectly solicit or accept business from customers or clients of Company. Also during the Non-compete Period, Contractor shall not directly or indirectly solicit or facilitate any Contractor of Company for employment elsewhere (i.e., employment with any person or entity other than Company).

Contractor's bar from soliciting or accepting business from "customers or clients" of Company applies to all individuals or entities who were or are "customers or clients" of Company at any time during employment and after termination of employment, without Company’s written consent.

Contractor's bar from soliciting or accepting business from "customers or clients" of Company also applies to "customers or clients" of "customers or clients" or any other employees, contractors or third party business contacts from "customers or clients" of Company, without Company’s written consent.

Contractor's bar from soliciting or facilitating business for Contractors of Company also applies to any contractors or freelancers Company may use in order to render normal business services.

Exception to this non-compete agreement: Any individuals or entities that were sourced independent of any knowledge of the Contractor of these said individuals or entities via any Company related operations. Please note: When any type of business venture was properly gained independently, Contractor may still not use (abuse) any Company related knowledge of said individuals or entities to further expand/increase/extend this business venture.

So first thing that I was wondering about, is the indefinite period after termination. This can effectively lock you out forever from working with certain clients/companies. Especially in conjunction with the added section.

Added section wants to expand Customers or Clients of Customers or Clients. This can potentially be a quite a large base of companies/clients. It's effectively locking you out of any 2nd degree relationships, given our SA tech industry this might be a large base.

G. Intellectual work product

Any software code, writing, invention, process, creative mark or other work which Contractor may make or conceive of, either alone or with others, at any time while Contractor is busy with work which in any way relates to the business of Company, shall be the sole property of Company and Contractor shall have no rights in nor claims thereto (including, but not limited to, rights or claims accruing under the copyright, trademark, or patent laws of any country).

As would be expected and due to the general nature of regularly working on software systems for “customer or clients” of Company, Company has the sole exclusive right to transfer any “Intellectual work product” ownership rights to any “customer or clients” of Company without consulting Contractor and Contractor shall still have no rights in nor claims thereto.

This section might be more standard, but since I'm a software developer the with work which in any way relates to the business of Company is sort of implying all work I do since anything like say a website I design for someone else etc. can be seen as related work. This effectively locks you out from doing any extra contract work besides for the Company. Also I'm vested in another business and I'm writing tools and applications(after contract hours) which now automatically belongs to the Company.

Then the added section will give the company rights to just transfer and patent any work done, which is also quite broad.

 

[Venomous]

While I do think it devious that you should solicit their clients for work while employed(perm, or contract), and circumventing them. Also not at the time of of you leaving.

But on a further note, if your field is specialised with few job prospects then they cannot use the non-compete to prevent you from earning a salary.

 

[Tomtomtom]

I'd tell them to get stuffed. Or more likely, cross out the disagreeable parts, change "indefinite" to say 6 months, and sign.

If they have a problem with that (presuming they even bother to read it) then they can go ahead and hire someone else. What's the point of the risk of hourly work without a minimum of freedom and control?

 

[^^vampire^^]

I'd tell them to get stuffed. Or more likely, cross out the disagreeable parts, change "indefinite" to say 6 months, and sign.

If they have a problem with that (presuming they even bother to read it) then they can go ahead and hire someone else. What's the point of the risk of hourly work without a minimum of freedom and control?

If they don't bother to read the changes he has made then they won't bother to sign next to the changes he made, in affect making his changes non-binding and therefore the entire contract null and void. Then when/if he has an issue later down the line if the company does review the contract and see this, they can claim that there is no contract and any gripes he has won't matter.

What he does need to do is go and discuss his concerns with management and get anything clarified in writing stating that portion xxx means yyy in laments terms and won't tie his hands with regards to zzz. This is important as a manager might say "don't worry it doesn't mean you can't do work with whichever company or work in similar industry" but at the end of the day the contract is binding, not what the manager says.

In actuality this cuts you off from a massive amount of future work. If the company is doing business with just 10 clients and each of those clients in turn has 10 clients then you are already cut off from doing business with 100 other businesses. Now I'm sure the company OP is working for has probably got a larger client base than that and in turn those clients have a much higher client base which basically means good luck ever getting a job again. I wouldn't say what they have done is blatantly illegal but they are almost effectively cutting you out of the job market with this clause. If working at the current company is your sole source of income then they need to put that the conditions are effective as long as you are contracted to them as they are minding their own business interests while you work for them, but after that I would say this is not in your best interest. If you do work for other clients this could potentially cut off your current work ties already.

Address these concerns with management depending on the relevant concerns.

 

[Tomtomtom]

If they don't bother to read the changes he has made then they won't bother to sign next to the changes he made, in affect making his changes non-binding and therefore the entire contract null and void.

And that would be ideal for OP, because a null contract means just that: no contract. Hence, no restriction on trade.

It serves them if it's binding, not him. So what sort of issue could OP have that'd require reference to it? I doubt there's a single term in it that works to his advantage relative to the common law.

As long as he's getting paid and doing what he likes with his own time and IP, all is good. And if he's not getting paid, then it's not the contract he needs to worry about.

Don't go whining to management. Someone in HR downloaded that thing off the Internet and management doesn't care. So just edit it, initial it, and leave it at that.

 

[SauRoNZA]

Has a non-compete clause ever actually held ground in SA?

I often hear that not even a single case has ever been won, but then I've also never looked into it.

 

[pinball wizard]

*review.

Revue is like cabaret, or dinner theatre.

 

[pinball wizard]

Has a non-compete clause ever actually held ground in SA?

I often hear that not even a single case has ever been won, but then I've also never looked into it.

A few jobs ago, the company I was working for was in the process of enforcing a prior employee's restraint of trade. The took it very seriously and prevented said ex employee from accepting a position at a rival company.

 

[FoXtroT]

My Business Law lecturer always said they were basically meaningless. Unless the new company was within a couple of Kms of the old one the employee couldn't be stopped.

 

[SauRoNZA]

A few jobs ago, the company I was working for was in the process of enforcing a prior employee's restraint of trade. The took it very seriously and prevented said ex employee from accepting a position at a rival company.

Prevented how?

 

[SauRoNZA]

My Business Law lecturer always said they were basically meaningless. Unless the new company was within a couple of Kms of the old one the employee couldn't be stopped.

That was my understanding too. Not sure what distance has to do with anything.

But you have a right to work long before you have a contractual agreement in the hierarchy of things.

I’m sure companies threaten legal action all the time, but does it ever actually go anywhere?

 

[pinball wizard]

Prevented how?

Lawyers got involved I don't know the whole story, but I believe they made believable threatsto him that he would be liable for monies if he accepts the position. I understand that his lawyer told him to find another job rather.

 

[pinball wizard]

That was my understanding too. Not sure what distance has to do with anything.

But you have a right to work long before you have a contractual agreement in the hierarchy of things.

I’m sure companies threaten legal action all the time, but does it ever actually go anywhere?

I went through this in my current position with respect to approaching customers I had contact with at my previous company. Although I had no restraint in place, my current employer had hr and legal look at my previous contract before I was allowed to approach. They took it seriously enough to make me think it can be and sometimes is a real thing.

 

[cguy]

Here in the US it is enforced in some states but not others. What does hold constant though, is that no company can enforce anything, anywhere unless they are actually paying you for the term of your restraint of trade. This deals with the "right to make a living" clauses somewhat. It's very surprising that such an agreement would hold up anywhere without pay.

 

[Tomtomtom]

What does hold constant though, is that no company can enforce anything, anywhere unless they are actually paying you for the term of your restraint of trade.

That makes sense. I think we can trust the litigious U.S. to have got the balance about right. Not getting paid to sit on your hands -> can't be forced to sit on your hands.

I went through this in my current position with respect to approaching customers I had contact with at my previous company.

Understandable, because companies don't enjoy the same inherent rights to freedom etc. that humans do. Uber wishes they did.

 

[Ancalagon]

To be honest, I would walk away. A contract this onerous that prevents you from ever working for their clients even 50 years later is just way too heavy handed. Next thing you know they will be timing your toilet breaks.

Regarding the transfer of intellectual property section, I'm less concerned about that, but that is partly because in my interpretation of the second paragraph, it relates to the intellectual property produced as mentioned in the first paragraph. It doesn't say all of your work even in your own spare time, just work that arises from your employment. If they intended it to mean work in your own time, again I would tell them to get stuffed.

They could if they wanted to add a conflict of interest clause, so that you cannot develop a competing product to a product that you are developing for them. But if your employment for them would have you making games all day, there should be nothing stopping you developing financial software in your spare time.

 

[Cius]

I would never sign that thing. Definitely query it.