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Welcome to AccelPro Employment Law, where we provide expert interviews and coaching to accelerate your professional development. Today we’re featuring a conversation about non-compete clauses and how to address the concerns of both the employer and employee. Our guest is Nefertari Rigsby, the Executive Director, Human Resources and Employment Law Partner for Kaplan North America.
Non-competes are a necessary, if also controversial, part of the modern employment landscape. Employees dislike them because they may hinder the ability to land a better job. But employers want them to protect their business interests.
Rigsby previously worked in private practice in employment law and as in-house counsel and a strategic business partner for a Fortune 500 company. In this interview, she talks about best practices to craft non-competes agreeable to both sides; the complications presented by different states having different laws; and tips for how Human Resources can best approach a former entry-level employee who now has a job requiring a non-compete. The supplemental materials and episode transcript are available below.
Listen on Apple Podcasts and Spotify.
Interview References:
Nefertari Rigsby on LinkedIn
5:09 | California Business and Professions Code, Chapter 1 § 16600 (2008).
5:11 | Unlawful and Voidable Contracts. North Dakota Century Code § 9-08-06.
5:12 | Oklahoma Statutes Title 15. Contracts, §15-219A.
5:59 | Washington Noncompetition Covenants, § Chapter 49.62 RCW.
6:02 | Massachusetts Noncompetition Agreement Act, MGL c.149, § 24L.
TRANSCRIPT
I. NECESSARY FOR AN EMPLOYER, A HINDRANCE FOR AN EMPLOYEE
Matt Crossman, Host: Let’s start with defining the terms that we’re going to talk about. What is a non-compete agreement? When are they not allowed, and what can they cover?
Nefertari Rigsby: So in the most basic way of defining it, a non-compete essentially restricts an employee on where they can go to work and what they can do for another employer.
And the general standard is non-compete agreements cannot be over broad. What does that mean? They can’t be over broad in time. So you can’t have a non-compete with an employee forever. Typically the max amount of time is two years. And they can’t be over broad in geographic scope, but that has taken on quite a different change now that we have a virtual workforce, and geography is less of a concern in many instances.
They are generally intended to protect the company’s information—trade secrets, proprietary information, business strategies, things of that nature. So they’re intended to protect what the courts call a legitimate business interest.
MC: Why do you like non-competes? By that I mean, what value do they bring to the company that you think Human Resources executives might want to know and that lawyers on the other side might want to know as well?
NR: In the various roles that I’ve had in dealing with non-competes, I do see the benefit of them from a company standpoint, but I also understand very much why employees themselves are not fans of them.
I litigated a number of non-compete cases prior to going in-house with companies, so I can see how things can take a turn when you’re really truly representing an employer who’s trying to protect their confidential or proprietary information, and it can be something as simple as, “I’ve got a senior sales leader who’s gone over to the competitor and they know our entire five-year plan.”
That can be an issue for an employer. But sometimes you’ll have lower-level employees who say, “Why can’t I go work here? I just have an entry-level job. It’s not as if I’m in the know about any sort of trade secrets or anything like that.”
In those instances, I definitely see why employees would balk, in all honesty, because they’re receiving the non-competes, but they’re not necessarily intended to protect a legitimate business interest. Instead, the non-competes can be seen as a way to restrict their mobility and their ability to earn more pay and potentially better working conditions.
So I see both sides of the non-competes—why they’re good and why they can also be a hindrance.
MC: You mentioned geography. That’s always a big issue in employment law, especially lately with so much virtual and remote work. What is happening geographically here? Is there one state that is leading the charge that other states should look to in terms of how to craft a non-compete agreement?
NR: The challenge that I have had in my various in-house counsel roles is dealing with employees located in a variety of jurisdictions. You have states on the polar opposite ends of the spectrum from each other. California, North Dakota and Oklahoma have outright bans on non-competes. And then on the other end of the spectrum, I’m located in Florida, where there isn’t a ban on non-competes. So that is a challenge.
California is deemed to be a very employee-friendly state, whereas Florida, not so much. There’s a myriad of different variations across the country, whether it’s from case law or actual statutes.
And one of the trends that I have been seeing is that a number of states have been putting in place a salary threshold. If you don’t make over a certain amount of money, you can’t be subject to a non-compete.
For instance, in Washington State, you need to make well over $100,000. In the District of Columbia, you need to make at least $150,000 to be subject to a non-compete. So for me, that creates a challenge because you can’t have a single agreement with a non-compete provision when you have employees all over the country.
So the question that I always ask is, “Where is the person located?” Because that will change the conversation and the guidance that I give to the internal clients.
MC: How do you find out that a former employee went to a competitor? Do you monitor?
NR: Well, this is the fun part. Social media tells a lot.
One of the ways that I’ve learned that employees have gone to competitors: They share that information with their former colleagues, and then the rumor mill starts.
LinkedIn is a great place to go to look to see where people are going. They highlight, Hey, announce that you have this new opportunity, and that’s oftentimes where you find out that they’re working for a competitor.
I have seen instances where it’s on Facebook or on Instagram. You may not announce that you’re with the other employer, but let’s say you post about being out for celebratory drinks with a bunch of people who work for that competitor. It can kind of lend itself to, Hmm, did you start working over there when you left us?
Because most times if you ask an employee who’s resigned where they’re going to work, they’re not going to share that information. They say, “I don’t know. I’m looking for the next opportunity.” In some instances, they will. In other instances, they’re not going to share it. But people tend to announce a variety of things on social media.
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II. ADDING A NON-COMPETE TO AN EXISTING EMPLOYEE
MC: There’s one pretty narrow topic I wanted to talk with you about, and that’s adding non-competes with existing employees who don’t already have them. Under what circumstances would it be necessary for an existing employee to sign a non-compete when they don’t already have one?
NR: In the instances where most companies will say, “We need you to sign a non-compete with us,” more than likely they’ve progressed in the company, they’ve been promoted, they’ve received more projects, more senior-level roles.
Because they’re moving up in the company, they’re getting access to protected proprietary information. That’s when an employer would say, “With this next promotion, we need you to sign this non-compete.”
And it is not uncommon, nor is it unexpected, that an existing employee would say, “Wait a minute. Why do I have to sign this?”
At least from my experience, you have to have the conversation with an employee and explain the reasons behind it. Most times they tend to understand the rationale, but you can’t just hand an agreement with a non-compete to an existing employee, and one, expect them to be okay with it. And two, expect it to necessarily be enforceable because in a number of jurisdictions, you have to have what is called additional consideration in order for it to be an enforceable agreement against a current employee.
In Wisconsin, it is required that you provide additional consideration in some instances—money, training, promotion, things of that nature. You have to provide that to the employee as consideration for them to sign off on this non-compete agreement.
In Florida continued employment is sufficient consideration. Meaning, “Hey, sign this agreement if you want to keep working.” Now, from a practical standpoint, most employers don’t want to do that because that will definitely turn your employees off and have them out the door looking for other opportunities.
So I do not advise HR executives to just present an employee with an agreement and say, “Sign this, or you lose your job.” That’s not the way you want to handle those employee relationships at all if you’re an employer, especially with a number of employees across multiple jurisdictions.
MC: What challenges does this present for Human Resources executives?
NR: HR executives now have to deal with, again, the different requirements in the various states. They have to make sure they’re compliant with those requirements. For instance, you may have an employee who’s on-boarded and they sign an agreement. They’re based in Florida, and next year they’re located in California. What happens to that agreement?
I’ve been trying to come up with a good answer to that question, but I don’t really have one just yet. I give the typical lawyer answer of, it depends, and that’s the response that I received when I spoke to outside counsel about that very issue. Employees are moving around, they want to be able to work from home. They want to be able to pick up and go.
That’s a benefit for them, but that can also be a challenge for HR professionals. For instance, if an employee moves to California, and you find out they’re working for a competitor. That presents a host of issues and concerns for HR professionals and even your senior leaders within an organization.
MC: Let’s use an example. Someone starts off at entry level where a non-compete was not necessary. She has progressed in her career. Now she’s moving into a big job, one that if she was new to the company, she’d have a non-compete for sure.
So it’s an issue that you have to address with her. What are some best practices to make this as smooth as possible, recognizing that she’s not going to love this idea, but that the company also has to protect itself?
NR: So the first thing that I would definitely encourage HR professionals to do in those instances is to hear the concerns of the employee.
When they see it, they may balk and say, “What is this? Why do I have to sign this?” So hear the concerns, get the questions, and then reach out to counsel, whether it’s in-house counsel or outside counsel, to get feedback on how to respond.
For instance, let’s say she’s reading a provision in the agreement, and she’s reading it as a non-compete throughout when it’s actually a combination of a non-compete and a non-solicitation provision, which is very different from a non-compete in most jurisdictions. Explain the differences to have her understand these are two separate provisions.
In addition to that, be open to having discussions around the time period. Oftentimes an employee will see an agreement, and think, “Oh, for two years, I can’t work.” That’s not exactly what that non-compete provision means, but be open to hearing their concerns around the time period and possibly negotiating with them. So, “Instead of two years, what about 18 months? What about 12 months?”
In addition to that, they might ask, “If you lay me off, what happens to this agreement?” That’s a real concern for many employees when they’re presented with these types of agreements. And if it’s a situation where if you’re going to go through a reduction in force, you likely won’t be enforcing a non-compete, you can spell that out and add it to the agreement.
So again it’s a matter of having the conversation with the employees, addressing their concerns and explaining to them the why behind it, and getting down to, “Let’s get this to a place where we both are comfortable.”
MC: We talked a little bit about negotiating, and I don’t want you to give away all of your secrets, but for both employment attorneys and HR executives who might benefit from those secrets, when you’re negotiating with this long-standing employee, to whom you suddenly present this non-compete, what are some negotiating tactics that would make that process a little smoother?
NR: First hear them out. You don’t want to be in a situation where you’re saying, “No, there’s no room for negotiation.” That will turn the employee off.
And as the employee who’s actually looking to negotiate with the employer, you don’t want to take that approach either and say, “I’m not going to sign this.” So as long as both sides can explain the why behind their positions and their concerns with the non-compete provision, then you can get to a good place.
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III. WHO IS ASKED TO SIGN A NON-COMPETE AND WHO ISN’T
MC: Is it important for HR executives to have a policy in place regarding what type of employee they’re going to add a non-compete to ahead of time?
NR: Absolutely. Human Resources professionals: You must have a policy in place on who will receive these agreements. I’ve heard horror stories where companies just give everyone who comes to the company a non-compete. That likely will not be enforceable with the majority of the employees that you give it to.
It’s best to have a policy in place that it’s only going to be restricted to managers or personnel at a certain level or if they have access to certain confidential or proprietary information.
For instance, your sales teams at different organizations tend to be subject to, if not a non-compete, at least a non-solicitation, and there need to be policies in place for that.
MC: Let’s define those terms. What is the difference between a non-compete and a non-solicitation?
NR: A non-compete restricts an employee on where they can go to work and what they can do. A non-solicitation provision doesn’t say an employee can’t go work somewhere. But it says they can’t solicit prior customers that they have with a former employer.
This often comes up with sales representatives. You can go to a competitor, but you can’t call on those same accounts that you called upon when you were with your former employer.
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IV. ON GOING IN-HOUSE, CERTIFICATIONS, AND RUNNING FOR YOUR LIFE
MC: Now I’m going to pivot to talk about how you got to this point in your career. You are the Executive Director, Human Resources and Employment Law Partner and you also run Kaplan’s DEI initiatives. You worked in private practice for a while too, before going in-house. Walk me through your decision to go from private practice to in-house.
NR: In private practice, I did employment law. I was generally representing employers and handling your garden variety discrimination or employment-related cases. And oftentimes as outside counsel, I would find myself saying, “If you had just called me earlier, you wouldn’t have this EEOC charge or we wouldn’t have this complaint that we’re now having to respond to in court.”
One of the things that I did while I was in private practice was think about what I could do to provide better service and also educate myself in helping clients more internally as opposed to external, such as dealing with an agency or the court.
One of the things that I did is I received my certification as a professional in human resources while I was in private practice. It helped bolster my ability to service clients internally. And then with that, I was able to receive a position with the first company that I went to as essentially in-house counsel. And with this type of role, I tend to split time between HR work and legal work. And most of the time I actually sit with the human resources department as opposed to the legal department.
But I always have a dotted line or a matrix-level manager in the legal department. So even with my current role, I have a dotted line to general counsel as well as to the chief administrative officer of Kaplan. So that’s pretty much the norm for this type of role.
Transitioning to in-house from employment law and private practice wasn’t very difficult, but you do have to set yourself up to get those types of certifications to show you’re not just an asset as an attorney but also as a business partner as well.
MC: You were an employment law attorney and you thought, I can help these companies in-house, but in order to get there, I have to take this other step of getting this certification. If you’re talking to an employment law attorney who has similar aspirations, walk me through those steps, how you identified where it was you wanted to go and the steps necessary to get there.
NR: First things first: Always have a really good mentor to help guide you because there is a sweet spot as far as years of private practice that I have found and my mentor shared with me when you’re considering going in-house.
About how many years of private practice should you have before it makes sense? I’ve typically said you should have at least three to five years prior to going in-house, primarily because one, you have really good war stories to share during interviews or talking to internal clients. But two, you also see how things play out in litigation, and you learn how to avoid that.
And that’s the guidance and the counseling internally that a lot of the employers will definitely benefit from. Because when you’re going in-house, your goal is to prevent the legal issues from going outside. You want to handle them internally, and if you know how bad things can get and how things have ended up in court or before an agency, you can help in creating policies and practices internally to help a client, or your current employer if you’re in-house, avoid those situations.
So definitely having a good mentor, having the right amount of private practice experience to help direct your guidance in counseling are both important.
In addition to that, if you go to conferences, interact with different attorneys and HR professionals and learn the certifications that they have and the areas where they need help.
Oftentimes your HR professionals will be great with benefits and things of that nature, but they don’t handle the legal issues. So tracking things like, OK, this non-compete stuff, they need assistance with that. Figuring out where you plug in those holes will help you a great deal.
MC: A different line of questioning: You are going to run a 5K this weekend, and probably the next weekend, and probably the next weekend after that. Why and how did you get into running?
NR: I got into running initially with my move to South Florida. You can’t beat the weather. It’s a great place where if you want to be outside, you can do it every single day as long as it’s not raining.
So I got into running basically as a way to get outside. I love to be by the water. It started out just as walking. I would see other runners, and that’s when the love of running started for me.
MC: How important is that physical activity to helping you manage the stress of work?
NR: I definitely need it, and when I don’t run, I feel like I am not ready for the day. When I’m running early in the morning, I don’t have to think about work emails. Most people are not up, so I’m able to concentrate and focus on what I’m doing in that moment.
And then I always love the scenery. I tend to run by the water, so that helps a great deal. Whenever I’m able to do that, when I get back to my workstation, I’m ready to start my day.
This AccelPro audio transcript has been edited and organized for clarity. This interview was recorded on April 18, 2023.
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