This was originally published at GoingConcern.com on July 21, 2010.
Blessed are the forgetful: for they get the better even of their blunders. Friedrich Nietzsche
Non-compete, non-solicitation and confidentiality clauses are common in professional services. You were probably asked to agree to them when you signed your offer letter and will be asked to sign again to get a severance payment.
Non-compete and non-solicitation clauses restrict your ability to go to work for a perceived competitor or related business for a period of time (often 1 to 2 years, sometimes more). They also attempt to prevent you from soliciting business from former clients or soliciting staff from your former employer for your new employer or firm. Confidentiality clauses give firms the right to protect certain company information and bona fide trade secret s.This is most often translated in accounting firms to mean client lists, methodologies, pricing, and other proprietary documents such as engagement letters and proposals.
Professionals who’ve left their firms involuntarily – some of the thousands cut by the firms in the last three years – worry about the legal issues associated with working for former clients as employees and consultants.
Let me get the easiest part out of the way first. Contract or not, as a professional I believe you have an ethical obligation, as well as often a contractual one, to keep confidential information confidential. Taking client lists, sales and profit data, pricing, or methodologies to a new employer or your own firm and passing them off as your own or using them against your former employer is not kosher.
That being said, a big reason you went to work for a big firm is to learn big. Once methodologies, competitive strategy, rates and revenues are in your head, there’s no preventing that information from informing and illuminating your future strategies and decisions. There’s no “Eternal Sunshine of the Spotless Mind” machine that can erase the indelible mark audit firm experience has made on your psyche.
My advice: Don’t do evil.
When it comes to non-compete and non-solicitation clauses, many judges will favor the employer and a signed contract by what is assumed to have been an otherwise lucid and sane individual over your whining unless your arguments are strong and except when it comes to preventing you from earning a living. You may have signed an overly broad, onerous list of conditions that seemingly shackle you in indentured servitude for the indefinite future but that doesn’t mean your former firm will bother enforcing them or be able to when they hit a court of law.
Some states are more understanding than others. California has pretty much decided that with very few exceptions, these clauses are unenforceable.
“In a widely watched decision involving the now defunct accountancy practice of Arthur Andersen, the Supreme Court invalidated any agreement that seeks to restrict the right of an employee to go to work for a competitor or solicit a former employer’s customers using non trade secret information.”
In New York, clauses such as these are often enforced if you were terminated for cause. If you were laid off or left voluntarily, they’re generally unenforceable if not for valid reasons. Other states like Pennsylvania often use a “blue-pencil” to adjudicate such disputes, often striking out parts of the agreement that are too restrictive and leaving others in to strike a balance.
For example, when it comes to how long a firm can keep you from working for a competitor or from “competing” with the firm – if that’s even a practical issue with a non-partner or non-business development executive – most judges follow the “tequila shot” rule of thumb:
My most recent former firm harassed me over non-solicitation. I left an innocuous voice-mail message for a former colleague about a networking opportunity. That former colleague, who I didn’t realize had mechanical pencil lead instead of blood running through his veins, reported this “solicitation” to my former partner. It seems even mere knowledge that a bigger, brighter world exists outside the hallowed halls is enough to cause some firm natives to become anxious and paranoid.
Do your homework, get legal advice if the stakes are high, and make sure you are doing the right thing rather than trying to do any harm and you’ll probably be fine.