At the time, I didn’t realize what I was signing, as these documents were buried among a bunch of other documents. I left the company because they lied to me about the bonuses and how the pay was structured and their code of ethics.
Turns out I’m really good at working in this industry and I love it. I was offered a job with a company owned by a disabled veteran—I’m a disabled veteran myself—but I now realize that I can’t take the new company up on its job offer because I signed a non-compete agreement with the old company.
Here’s my beef: The company I left is fine with getting paid monthly for services, even if they never had the ability or intention to follow through. They also charge customers for these services and try to increase the price to customers to pay “overtime”.
During my time there I discovered many shady business practices and I would like to expose them, but I also signed a confidentiality agreement. I’m curious to know if I blow the whistle what consequences will I face?
Anonymous
“Many NDAs are illegal when used to prevent current or former employees from reporting illegal activities.”
Illustration by MarketWatch
Dear Anonymous,
I will address your non-disclosure agreement first and your non-compete agreement second. Violating an NDA can lead to legal and financial consequences, including criminal charges if the case is particularly egregious—for example, one that involves highly sensitive material. If you’re the CEO of a large corporation, most reasonable observers will understand why you might have an NDA that prevents you from jumping ship and revealing trade secrets to another company in the same industry.
However, NDAs cannot be used to prevent current or former employees from reporting illegal activities. Such activities may involve sexual harassment, safety issues that could endanger the safety of employees, customers or the public, or financial abuse. Reporting such illegal practices is generally protected by the Equal Employment Opportunity Commission, the Securities and Exchange Commission, or other state anti-discrimination agencies.
Non-compete clauses are probably more common than most people think, and, as you’ve experienced, they’re often buried in reams of paperwork. Not everyone who signs one knows they did. In fact, over 47% of private sector workers are bound by non-compete obligations, studies show. What’s more, 38 percent of employees say they’ve agreed to at least one non-compete clause in the past, according to this study, conducted by researchers at the University of Michigan and the University of Maryland and published in the Journal of Law and Economics.
You may find yourself in a bind when it comes to taking on new work in your industry, at least for the duration of your non-compete agreement.
“Noncompetes are more likely to be found in high-skill, high-wage jobs, but are also common in low-skill, low-wage jobs and in states where noncompetes are inapplicable,” the Michigan and Maryland researchers wrote. “Only 10% of employees negotiate a non-compete, and about a third of employees receive a non-compete only after they’ve already accepted their job offer.”
Such agreements are designed to protect intellectual property and customers and to prevent employees from using what they learned at one company and transferring that information to another company, or from establishing themselves and taking away customers and business from their previous employer . However, California, Colorado, Oklahoma, North Dakota and Minnesota have banned noncompetes, with critics arguing they unfairly penalize workers and prevent them from making a living.
Such an agreement should not prejudice workers – fast food workers, for example, should not be subject to such clauses – and should only be in effect for a reasonable period. What is considered an unreasonable length of time varies by industry. “Generally, the non-compete time period tracks whether the employee’s skills, the activity the employee is prevented from performing, will become obsolete at the end of the limited time period,” according to Gardner, a Texas-based employment law firm.
“In the IT industry, for example, a five-year non-compete would likely be unenforceable because computer technology changes daily, if not hourly,” the law firm notes. “If a computer technician is barred from working in the IT field for, say, five years, that employee may not be able to get any position in the field after the five years.” The Federal Trade Commission last year proposed a rule to ban such clauses and filed a lawsuit against several companies.
You should review your non-compete agreement with an employment attorney to make sure it is fair and reasonable. Also, review your allegations against your former company with the help of your attorney and make sure you have evidence to support them. You don’t want to add a defamation lawsuit to your list of problems, especially since a successful case against you could result in financial penalties. This, my friend, is where your lawyer can help.
Working for a bad boss or in a toxic work culture can be very traumatizing. Sociologists have likened it to living in an abusive or abusive marriage. You may need time to recover before making any rash and potentially life-changing decisions about your NDA and non-compete. What’s going on at your former company may or may not rise to a level to act on, so you’ll need to tread carefully.
In the meantime, thank you for your service and I hope you find the right professional opportunity in time.
More from Quentin Fottrell:
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