Thursday, May 05, 2005

The stupidity of "non-compete" agreements


James Pilger, the owner of a luxury hair salon in Plainview, N.Y., never saw it coming. In the space of three months, the cream of his staff jumped to a new salon started by a trusted employee of 17 years.

That workplace mutiny in early 2003 left Mr. Pilger feeling betrayed and, much worse, destroyed the business he had spent years building into a full-fledged body-care retreat, complete with hair salon, full-service spa, yoga classes and party space. "Twenty five of my key people took 44 of my top 50 paying clients," he said. "I went from $50,000 a week to $25,000 a week."

The rival salon opened a few miles away and lured his employees with higher commissions and, in at least one case, an ownership stake, Mr. Pilger says. He says he believes that his client information was used by the competitor for a mass mailing to solicit his customers. Bleeding losses, Mr. Pilger closed his establishment, named Solo, in August 2003 and took a job at another nearby salon.

Maybe he should have followed the example of many large corporations and asked his employees to sign written commitments to refrain from competing against him or otherwise undermining his franchise...

Human Resource Management and the president of the consulting group McGuireWoods HR Strategies[:] "If a potential employee is not willing to sign a contract, then maybe they're not the right employee for you,...Frankly, recruitment may become more difficult, but at least you won't spend every day worrying about whether half your staff might walk out the door."


1. If the managers had better business models, the employees wouldn't leave. Nobody can say that any other business is identical to a previous business.

2. If the managers had a better employment proposition for their employees, they wouldn't be tempted to leave.

I think - and it has been generally true in the past- most of these "agreements" are utterly unenforceable. But with the Bush folks, watch out: they would love nothing better to bring employment back to the indentured servitude of the "yellow dog contract" days.

No comments: