Dare to Jump Overcoming Noncompetes and Other Roadblocks to a Better Agency Fit
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If someone were to give you $1,000,000 to make a job move, you’d move, wouldn’t you? Now, what if that move meant a couple of lean years? For a million dollars, you’d likely tolerate several lean years. When you’ve got a good-sized book of business, kids heading to college, a mortgage, and a lifestyle you’d like to keep, why on earth would you consider leaving your cushy gig for another opportunity? Because in the long run, you’ll be further ahead than you’ve dreamed possible. For the driven producer, setting your own limits is important. So when you work for an agency that does not allow that kind of freedom, it can be an underlying frustration, one you may not even realize until you see a better option. But when that better option becomes clear, what can stop you? The most obvious answers are a noncompete, what you’ll lose in the transition, and the lack of a guarantee. It’s not easy to take two steps back to take 10 forward. You must have patience, confidence, and, above all, vision. Here, we’ll look at these roadblocks and how to overcome them for the prize of a vastly better future.
The “Nons”: Types of Restrictive Covenants and What Your Options Are
Restrictive covenants are all about protection—protect the business and the investment it has made in its producers and clients. These agreements are considered critical to the strength and stability of an agency. Without them, the agency is far too vulnerable to ruin. It also means a diminished valuation of the business. However, the law often recognizes the right to compete for client relationships under the right circumstances; it does not always recognize an ownership of those relationships. There are three main approaches to restrictive covenants. The Noncompete Agreement. A noncompete restricts producers from competing against their former agency by barring them from working in a similar industry within a geographic area, e.g., 50 miles or surrounding counties of an office, for a specified period of time after release from employment, which is typically from six months to two years to be enforceable. It must be considered reasonable for both parties and should not impose undue hardship or be detrimental to the public. The Confidentiality and Nondisclosure Agreement. A nondisclosure restricts the producer from disclosing an agency’s proprietary and confidential information for a specified period of time. One year to 18 months is a typical duration. Agreements may contain a nonpiracy clause and are seen to be less restrictive than noncompetes; moreover, courts are more willing to uphold them when contested. The Nonsolicitation Agreement. A nonsolicitation agreement provides a narrower scope than the noncompete agreement and restricts the producer from soliciting the current or prospective customers or employees of the agency. What Are Your Options? Start by hiring a lawyer to review all of your restrictive covenants to know exactly what your contractual obligations are. While no ethical business leader would suggest an unpleasant or unethical exit from a company, if you are considering a move, it is wise to understand the details of your agreements. In rare cases, they may not be in force or may be rightfully contestable. If you’ve never signed an agreement and it does not come up until you leave, inforum-online.com
you’re lawfully in the clear. In some instances, you may have some room even if you have signed an agreement. For example: • The agency may have overstepped the bounds of enforceability, such as an excessive time period or too broad a restricted territory, and therefore, it may be worth litigating enforcement of the agreement. • For agencies where multiple mergers or acquisitions have occurred, previous contracts may not be in effect. In Acordia of Ohio LLC v. Fishel, an insurance agency filed for injunctive relief against a com