CHAUDHRI: Non-competition agreements need not be legal to have strength
Some employers will fight competing ex-employees regardless of what side of the law they may fall on
Like me, you may be surprised to learn that he only started the multi billion-dollar revenue generating enterprise after waiting out a 5 year non-compete clause following his termination from Southwest Airlines.
Neeleman was fired less than 6 months after joining Southwest following a successful run at Morris Air.
He explained on a recent episode of How I Built This that his start-up mentality completely didn’t fit into the corporate culture at Southwest.
He explained on the episode that over dinner he was told by Southwest CEO Herb Kelleher, “You’re driving everyone insane in this company” and that even his biggest supporters thought he should go.
Devastated by the termination, Neeleman continued to develop ideas that would disrupt the airline industry, but he faced a major hurdle.
Neeleman couldn’t start working on these ideas because of the 5 year non-compete clause that he agreed to in his Southwest employment agreement.
He explained that about 1.5 years into the non-competition period he called Southwest’s CEO and said “Hey Herb, you know, I’ve consulted legal counsel … this thing isn’t really enforceable.”
The CEO responded, “David, you’re the last person I want to see in the airline business. So, I will fight you tooth and nail. I do not want to see you in the airline business”.
The lesson here is staggering.
Even though Neeleman knew the non-competition clause had no legal legs, he declined to take on Southwest in court.
Presumably if he did, his attention would be split — he would stunt his growth and potentially squash his new business venture.
Some employers will fight competing ex-employees regardless of what side of the law they may fall on.
Neeleman was well-resourced and independently wealthy, but he too was likely cautious of the risks of taking on his ex-employer.
Many employees sign employment agreements that contain restrictive covenants; terms that limit what you do if you resign or are terminated, the most common being non-competition, non-solicitation and confidential information clauses.
Employment lawyers will tell you the vast majority of such clauses are not legally enforceable.
They are too lengthy, too broad and hard to define. Only the most carefully-drafted competition clauses have legal viability — they are short (usually 6 months or less,) limited in geographic scope (i.e. 5 km radius) and narrowly defined to the business carried on by the employer.
But like the story of David Neeleman tells us, these technicalities don’t always matter.
Employees should always be careful signing contracts containing overly-broad and restrictive covenants that may live on post-termination.
You may not realize it at the time, but you could sign away your rights long after your employment is over.
On to your questions from this week:
Q. I received an office wide memo that our office is reopening and that employees are expected to work in person 2-4 days a week and must be available to attend meetings in-person as well. I can do my job at home and do not want to risk the commute or working in close quarters with other colleagues. What are my options?
A. As most of the country is lifting workplace restrictions, you will likely be unable to decline a return to work on the basis of preference alone. If you require a medical accommodation or if there are family or child care obligations that prevent you from returning to the office discuss them now with your HR department. In that case, your workplace may me be required to provide you with reasonable accommodations to work from home.
Q. I have been laid off for over a year and a half. I now received a recall to work but to a totally different role. I don’t know anything about the role and don’t really want to do it. I told this to my supervisor who said this new role won’t have to last forever but won’t promise anything. What worries me is that I could be stuck in a job I really don’t like.
A. If you’re concerned ask about the duties, who you will be reporting to and what your new compensation will be. Consider if the role and compensation are comparable to your old job (i.e. within 15 percent of what you used to earn, considering all perks bonuses and benefits). Even if it is different but comparable in seniority and pay it is prudent to carefully consider the offer before rejecting it. If you think the job is akin to a demotion in either role or pay, get legal counsel to advise you on the best course of action.