There is some good news as we enter the first year of a new decade: some employers are cautiously beginning to add new employees as business begins a torturously slow climb back.

But there is some not-so-good news as well: Many smart, qualified, potential employees are still subject to non-compete agreements with former employers.

This doesn't mean you can't hire that superstar sales person you've had your eye on. It simply means that you need to sharpen your interviewing skills and dig deep enough to uncover any restrictions to the hire. Restrictions, interestingly enough, that won't necessarily show up on a resume or in a reference.

Two years ago, I undertook a "point, counter-point" dialogue based upon a column written by Scott Kirsner, a high tech writer for The Boston Globe, on the issue of non-compete agreements. My intention was simply to point out that there are two sides to every story and that Scott had advocated for only one.

Given the comments I received at the time — on both sides — I followed up the next month with pointers for small business employers on who should be asked to sign a non-compete and why.

And here we are, two years later, re-visiting a topic that isn't going quietly into the night!

If you are an employer fortunate enough to be in hiring mode, here is an interview question you should ask your final applicants: "Are there any restrictions with your former employer which would prevent me from hiring you? For instance, when you left your former employer, was there an existing non- compete agreement in place or did your severance arrangement include signing one as a condition to receiving a severance package?"

If the answer is "yes," don't give up… simply dig further.

Here, for example, are some possible restrictions on your potential new hire and my suggestions for addressing each situation:

• Your company and the former employer of your applicant might be competitors in your industry. If so, and the applicant has a non-compete agreement in place, your applicant may be restricted from working for you for the period of the non-compete and, vice versa… you might be restricted from hiring that applicant.
  
  Unless there is a very short period of time left on the non-compete restriction, this is probably the end of the line with this applicant.

• Your company might be a customer of your applicant's former employer. If so, depending upon whether there is a "non solicit" restriction in the agreement and what that "non-solicit" restriction prohibits, your applicant may be restricted from working for you for the period of the non-solicit. And again, you might be restricted from hiring that applicant.
  
  It's possible as well that the applicant may simply be restricted from soliciting customers of his/her former employer. In this case, you may be able to hire provided you restrict the applicant's activities regarding these customers. This requires more digging.

• Your company might be talking with your applicant's former employer right now about doing business. If so, depending upon the restrictions in the applicant's agreement, your applicant may be restricted from working for you for the period of the non-compete. And, you guessed it, you might be restricted from hiring that applicant.
  
  In this case, it may be an opportunity for you to tailor and define the applicant's activities, with the consent of his or her former employer [depending upon how eager the former employer is to sign you up as a customer!].

Recently, a client asked me the difference between "liquidated" damages and "punitive damages." He had been called for jury duty and was worried about understanding the legal jargon thrown around.

I reassured him that lawyers and judges make very sure that members of juries have a clear explanation of the terms they need to consider and that in any case, it was unlikely he'd be involved in a case involving punitive damages.

But, for the uninitiated:

"Liquidated damages" can best be described as the result of two parties to a contract deciding, in advance, the dollar amount agreed upon as damages if one party defaults on the contract. It's a method used in a contract to reach a reasonable estimate, where possible, by quantifying the dollar amount which would result in the event of one party breaking their promise under the contract.

"Punitive damages," on the other hand, represent an actual punishment for some egregious wrong [and usually don't get awarded in a standard contract case].

Widett and McCarthy specializes in advising small business owners in the area of contracts. Whether reviewing a contract for services with your customer, negotiating a lease with your landlord or finalizing financing documents with your lender, we make sure your best interests are protected.

In addition, and for those clients whose successful growth requires a more comprehensive relationship, we act as "general counsel:" On-call when you need us as a sounding board, legal advisor and strong right hand.

Some of my best ideas come from my clients!

A new client e-mailed to thank me for the CD on Contracts I had sent to him ("Contract Essentials for Small Business Owners") and asked if he could find it on my web site.

Well, now he can and I invite you as well to visit, listen and learn some useful tips on best practices developed during 25+ years of helping clients get the most out of their contracts.

Follow this link
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