With Non-Compete Clauses: VARs And Employees Beware!

Solution providers vary in how they handle noncompete clauses in both their own employee contracts and in the contracts new employees bring with them. However, most would agree that employee hiring agreements can become a battleground, as shown in recent lawsuits between two Microsoft large account resellers.

Softchoice, a Toronto-based solution provider with a large presence across the U.S., on June 24 filed lawsuits in Minnesota and Virginia against rival En Pointe Technologies Inc., and some of its employees, alleging that the Los Angeles-based company improperly hired certain Softchoice personnel.

Solution providers should be aware that hiring and noncompete agreements can become hotbeds of dispute, as seen in the lawsuit, unless carefully constructed, said Hope Hayes, president of Alliance Technology Group LLC, a Hanover, Md.-based solution provider. She said it is essential to not only have your employees sign good noncompete agreements, but to also carefully scrutinize potential employees' previous noncompete agreements. Hayes said that she comes down hard on anyone she knows who violates noncompete agreements in relation to work done with Alliance Technology.

Hayes once fired a sales rep who, as he was being walked out the door, got a box for his personal effects, but then started grabbing customer files. "He said he developed the business," she said. "I said, 'But I paid you.' "

Employees who violate agreements ultimately shoot themselves in the foot. "No one else will ever hire them," she said. "Who will ever trust them?"

John Zammett, president of HorizonTek, a Huntington, N.Y.-based solution provider, said there's no way he would hire someone who has a noncompete from a former employer.

Zammett said he recently wanted to hire a friend of five or six years as an engineer, but after learning that he was under a noncompete, Zammett declined to hire him. "However, a couple weeks later, his former employer went belly-up, so we got him," he said.

Unlike many in the business, HorizonTek does not ask its employees to sign a noncompete. Zammett said he prefers instead to trust new hires while making sure that if they do something to hurt his company that he will make sure others know about it.

He cited the example of a sales rep who he later discovered was working for another solution provider in California and another local company while working for HorizonTek.

"I fired him and got him blacklisted," Zammett said. "He went 18 months without a job. One storage vendor I worked with who wanted to hire him called me about him, and I told them if they hired him I would never buy products from them again. They hired him, and I cut our relationship."

Many states are right-to-work states, and enforcing noncompetes is difficult or impossible, solution providers said.

One of those states is Texas, where enforcing a noncompete is too much work, said Joe Vaught, executive vice president and COO of PCPC Direct Ltd., a Houston-based solution provider.

"You go to court and spend too much money," Vaught said. "It's not worth the effort. Around here, you know who you're dealing with, and do everything with a handshake. A handshake down here is still a pretty good bond."

Joe Kadlec, vice president and senior partner at Consiliant Technologies LLC, an Irvine, Calif.-based solution provider, said his is also a right-to-work state. But even so, it is important to have employees sign contracts that they cannot reveal confidential business information they receive from others, or take such information when they leave, he said.

"We've never had to go after anyone," Kadlec said. "When people leave, we remind them of the contract they signed."

Another way to prevent issues with noncompetes is to keep the business all in the family, said Jeanne Wilson, president of Condor Storage, a Sedona, Ariz.-based storage solution provider.

"We're a family-run business," Wilson said. "When people leave, you may have invested a lot in them for training. But it's kind of hard for someone else to recruit someone who is a co-owner with me and related to me."

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