Non-compete/non-solicitation contract

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zippy1882's picture
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Joined: 2008-05-17

Greetings all,
 
I am new to the business and am now licensed.  I hired within this firm as an intern and signed a contract that I never realized what the impact would be if I would ever leave the firm.  I have been with the firm for about a year and I continue to be their work horse where they pay me next to none and they plan to give all of their clients to his son when he enters the business which will be about 4 years from now.  They plan on keeping me as the work horse where I "support" them and I have no time to build my own book of business.  Anyways,  I was so pumped to get the job that I really never looked into the wording of the contract and now that I want to leave to be a junior partner at another firm that wants me (which will be a big raise and more potential), I look at the contract saying that I cannot do securities business for 1 year after I leave here. 
 
First off, I am an idiot for not looking at the contract more deeply before I signed it.  I just assumed it said that I cannot take their clients if I were to leave them.  Heck, I am only 24 years old.
 
Here is what the contract states and any help would be appreciated.
 
 
 
 

NON-SOLICITATION/NON-COMPETITION<?: prefix = o ns = "urn:schemas-microsoft-com:office:office" />
 
The hiring or continued employment of Employee, Employee covenants,
understand and agrees as follows:
 
1. Except as necessary for the performance of Employee's duties and
responsibilities for Employer, Employee will not directly or indirectly
(nor instruct, request or encourage any other person or entity to
directly or indirectly) use any trade secret or confidential or
proprietary information (including, but not limited to agent lists, client
lists, contract terms, business plan costs, pricing and or financial
information) belonging to Employer.
 
2. During Employee's employment with Employer, and for one year
following the last day of the month of cessation of the employment
relationship between Employee and Employer, Employee will not
directly or indirectly solicit: (i) insurance products or securities sold
or placed by Employee within the twelve months preceding the
cessation of Employee's employment with Employer; and/or (ii) any
agents or clients with whom or on behalf of whom, Employer has sold
or placed business within the twelve months preceding the cessation
of Employee's employment with Employer.
 
3. During Employee's employment with Employer, and for one year
Following the last day of the month of cessation of employment
relationship between Employee and Employer, Employee will not
directly or indirectly compete with Employer.
 
4. During Employee's employment with Employer, and for one year
following the last day of the month of cessation of the employment
relationship between Employee and Employer, Employee will not
directly or indirectly sell or renew any insurance policy or product
placed, sold or renewed by Employer with a particular insured or
agent within one year preceding the cessation of Employee's
employment with Employer.
 
5. Employee shall not take any action (nor shall Employee instruct,
request, or encourage any other person or entity to take any action)
that will cause the termination of the business relationship between
Employer and any insurer, agent, insured, client or supplier to
Employer. Employee also shall not solicit for employment any person
employed by the Company for one year following the last day of the
month of cessation of the employment relationship between Employee
& Employer.
 
6. Employee acknowledges that if Employee violates this agreement,
Employee will cause severe and irreparable injury to (firm name) its business and good will, an injury that is not adequately
compensable by money damages. Accordingly, in the event of a
breach (or threatened or attempted breach) of this agreement, (firm name) shall, in addition to any other rights and remedies, be
entitled to immediate appropriate injunctive relief, or a decree of
specific performance of this agreement, without the necessity of
showing any irreparable injury or special damages.
 
7. If the entirety or any portion of this agreement shall be held by a court
to be invalid or unenforceable because it is too broad in any respect,
the agreement shall be narrowed/reformed by the court to the extent
required to be enforceable.
 
8. This agreement shall survive the termination of any relationship
between Employee and Employer
 
9. If employee violates any of the provisions of this Agreement, the
period set forth for non-solicitation/non-competition shall be
increased the equivalent length of time that Employee is not in
compliance with the provisions of this Agreement.
 
10.Any action for injunctive or other relief under this agreement shall be
venued in the Federal Court for <?: prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Michigan or in the County for the state of Michigan.
 
A. It is also agreed that as used in this Agreement reference to
"insurance products or securities sold or placed" shall refer to those
insurance products, securities sold or placed, with the Employer at
any time during the twelve month period, prior to Employee's
termination.
 
B. It is acknowledged, agreed and understood that, as used in section 2
and 3 of this Agreement, the term "agents" shall not refer to retail
agents with which Employee's new employer has an ongoing and
significant business relationship at the time Employee commenced
employment with the new employer.
 
 
 
CONTRACT # 2
 
EMPLOYMENT-AT- WILL
 
I understand that no employee or representative of the Company, other than
(partner’s names), has authority to enter into any agreement for employment for any specified period of time. I further understand that any agreement regarding employment for any specified period of time must be in writing and signed by myself as well as (partners names) in order to be binding.
 
I agree to conform to the rules and regulations of the Company and 1
understand that this is an "At Will" employer/employee relationship and that
I have the right to terminate my employment at any time, with or without
cause, and the Company has the same right. I further understand that no one
except (partners names) has the authority to enter into any agreement contrary to the previous statement and that any such agreement
must be in writing and signed by me and (partners names) in order to be binding.

zippy1882's picture
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Joined: 2008-05-17

Thanks Bill.  This is a matter I am most certainly taking to a lawyer because this could get ugly. 
 
From your experience, have you ever seen someone in my position have a court uphold a decision to not make a living in their chosen profession for 1 year?  The contract does not state anything about geography but just about the 1 year restriction and the new position would be about 120 miles away from my current office.
 
When you say "courts tend to be far more strict in deciding to enforce a non-compete," what does that mean?  Does that mean that I am pretty much screwed and decisions more than likely will not rule in my favor? 

EDJ4now's picture
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Joined: 2006-02-08

Listen to Bill.  I practiced law for 5 years, but when I had an issue come up recently, I called an attorney who specialized in the area in question (for you employment) to discuss the issue and what my options were.
 
This is a state issue, so you need to talk to a local attorney who can give you much better answers.  If the answer is "you're screwed," then you won't run up any legal fees.  If the answer is more nuanced, as it probably will be, you will at least have some idea if it is something worth fighting.
 
Good luck.

jwcopper's picture
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Joined: 2008-05-13

If you are going to another firm ask them.  Often the new firm has a legal department and they will help you with this type of thing.  If you don't have a legal department and you are going to a small independent RIA, they would likely want you to talk to their lawyer, or they will realize they don't want to deal with you at all.  If you do leave and the current employer agrees to let you off the hook, get it in writing, and have your lawyer draft the release letter.  Most of the time these are agreements entered into to protect the firm from you doing something agressive when you leave.  If this is a big firm and you are leaving, try to make sure it is not when half the firm is leaving like AGE folks leaving Wachovia right now.  When they get that kind of a max exodus, they aggressively chase after everyone to try and scare you and make every last little nickel than can off of you.  Sorry you are captive, I was once before and never will be again.  Captive in any industry is bad news, good luck!

Morphius's picture
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Joined: 2007-07-21

jwcopper wrote: If this is a big firm and you are leaving, try to make sure it is not when half the firm is leaving like AGE folks leaving Wachovia right now. What specifically are you referring to when you say that "half the firm is leaving" AGE/Wachovia "right now"?  Are you making a general observation from what you read in the press or are you more intimately positioned to make that observation?  Other than the recent high profile departures of Bagby & Tad Edwards, I'm not aware of any particular recent mass exodus.  Are you?  I'm not trying to nit pick, jw, just trying to determine if you know something beyond what is widely reported or if you were just trying to make a general point on timing one's exit to avoid a rush, rather than the specific situation right now at AGE/Wach.

troll's picture
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Joined: 2004-11-29

Morphius wrote: jwcopper wrote: If this is a big firm and you are leaving, try to make sure it is not when half the firm is leaving like AGE folks leaving Wachovia right now. What specifically are you referring to when you say that "half the firm is leaving" AGE/Wachovia "right now"?  Are you making a general observation from what you read in the press or are you more intimately positioned to make that observation?  Other than the recent high profile departures of Bagby & Tad Edwards, I'm not aware of any particular recent mass exodus.  Are you?  I'm not trying to nit pick, jw, just trying to determine if you know something beyond what is widely reported or if you were just trying to make a general point on timing one's exit to avoid a rush, rather than the specific situation right now at AGE/Wach.
 
Total rep #'s at AGE down 11% since merger was announced.  Not quite half.  Of course there have been new reps hired so the actual number is higher, but still not anywhere near half.  Of the reps that have left, a # of them retired or were pikers.

jwcopper's picture
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Joined: 2008-05-13

I am in a large metro market, I was not quoting an actual stat.  For me each AGE person I know has asked me about going indy.  I know several who have left, gone to other wire houses, and others that are still trying to get their affairs in order.  Sure, the ones that are happy are not talking to me.  Obviously I am only hearing from the unhappy ones.  Who ever it is that keeps calling anyone with independent thought a piker is quite immature.  To think the only reason someone leaves a firm is because they are lousy at their job is naive.  And yes, I am quite certain you will call me a piker now.

Morphius's picture
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Joined: 2007-07-21

Appreciate the clarification, jw.   It seems there is an awfully lot of variation regionally and even between branch offices in a given area in terms of retention of AGE FCs, so it can be misleading to extrapolate too much based on anecdotal evidence.  And the Home Office folks are really not sharing any meaningful hard data one way or another.There's a lot of emotions involving those at the firm previously known as AGE who have chosen to stay, and those who have chosen to leave.  And name calling, too.  I'm not sure why, but it is what it is.   Sometimes it seems it's not enough that we do what we think is best ... those who choose different paths must also be belittled or demonized, so that we might feel more confident in our chosen path.  Who knows why, but it flows in both directions.As the old saying goes, we may all have to grow older, but we sure as hell don't have to grow up!

Morphius's picture
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Joined: 2007-07-21

Primo wrote: 
Total rep #'s at AGE down 11% since merger was announced.  Not quite half.  Of course there have been new reps hired so the actual number is higher, but still not anywhere near half.  Of the reps that have left, a # of them retired or were pikers.I assume this also necessarily means that of the reps that have left, a number of them were NOT pikers.

troll's picture
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Joined: 2004-11-29

jwcopper wrote:I am in a large metro market, I was not quoting an actual stat.  For me each AGE person I know has asked me about going indy.  I know several who have left, gone to other wire houses, and others that are still trying to get their affairs in order.  Sure, the ones that are happy are not talking to me.  Obviously I am only hearing from the unhappy ones.  Who ever it is that keeps calling anyone with independent thought a piker is quite immature.  To think the only reason someone leaves a firm is because they are lousy at their job is naive.  And yes, I am quite certain you will call me a piker now.
 
For the purposes of my post, Piker=15 yr vet doing $225m.  WS is not making an effort to keep them.  I do not think leaving makes you a piker, my comment was directed at reps that were tolerated at AGE but ignored at WS.  I am not making a value judgement one way of the other.  Sorry for the confusion.

troll's picture
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Joined: 2004-11-29

Morphius wrote: Primo wrote: 
Total rep #'s at AGE down 11% since merger was announced.  Not quite half.  Of course there have been new reps hired so the actual number is higher, but still not anywhere near half.  Of the reps that have left, a # of them retired or were pikers.I assume this also necessarily means that of the reps that have left, a number of them were NOT pikers.
 
Absolutely, AGE has lost some big hitters and great reps.  This was expected and has happened.  However, stats like half are blown way out of proportion.  I do not believe (or know for a fact) that the "3% attrition of reps we WANT TO KEEP" has been accomplished, but I highly doubt the number is much higher of "reps we want to keep".   10 yr los < $250m are not included in this group.

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