Within the span of the last decade or so, I’ve seen a lot of confusion and misunderstanding about a bunch of non’s. Non-Disclosures, Non-Solicitation, and Non-Compete’s, just to non (sorry) a few. In this day and age of contracts for everything, people are often asked to sign one of the Non’s as part of a preliminary discussion about a particular topic. So, let’s take a few moments to discuss each of the Non’s to see what the fuss is all about.
[Side note: The Non’s discussed below can be considered “individual” contracts. They can be signed independently of ANY other term or condition (such as a software license or services agreement). But signing an individual agreement for one of the Non’s does not necessarily mean that you have the contractual terms and coverage for actually closing the full deal. Make sure that you don’t unwittingly provide work/software/services before a full SLA, SOW or WO is completed in addition to the agreement(s) below!]
Non-Disclosure (aka: Confidentiality Agreement or Confidential Disclosure Agreement)
The most common Non takes aim at the restriction of one’s ability to talk about a particular subject. Used to protect what at least one side to the conversation thinks is secret, a NDA or CDA is used to reinforce the verbal promise to keep something quiet. Generally speaking, if they’re not combined with other Non’s, they are 100% legal and enforceable in almost every jurisdiction. [This isn’t legal advice, though, so if you have a specific question about a specific NDA/CDA, find a lawyer in your area and ask them to read it and provide you with solid legal advice.] The reason behind the general legality is that the conditions of the formation of a contract have been met and there isn’t some sort of reason to not generally enforce the terms. If I promise to keep something secret and you tell me the secret thing, I should be held to the restriction to not tell someone else.
These documents typically cover the “what if” in the event that I don’t live up to my obligation to keep the secret. Usually including some form of indemnification (if what I’m being told could affect a third party), the common remedy for breach of a NDA/CDA is the payment of damages required to put the cat back in the bag. But be careful if there IS indemnification and if you’re going to be provided something REALLY secret (like Protected Health Information (PHI), social security numbers, etc). Make sure that you understand what you’re getting (and speak up if you don’t want that kind of information) and what the potential ramifcations are for disclosure.
Be careful also about NDA’s that have no term limit. Not only should the window for disclosing the secret have a term, but the length of time of which you must keep the secret should also have a term. In other words, the NDA might only be valid for 2 years, in which you get a dozen bits of information. After the 2 years, any new information provided would no longer be covered by the dead NDA. But the previously-disclosed dozen bits of information have to be kept confidential for a DIFFERENT length of time, usually between 5 and 7 years (because from a business perspective, that’s about how long a real secret is valuable). The only exception to this would be real Trade Secrets, as they’re defined in your state’s laws, which would be kept confidential so long as they are considered Trade Secrets.
Non-Solicitation (aka Non-Hire)
Sometimes confused with a Non-Hire clause/agreement, the Non-Solicitation is probably the easiest and least disruptive of the Nons. Solicitation is the act of enticing someone to come work for you. As a small business owner, you would be concerned about your large clients soliciting your services employees, for example, who were onsite at the client locations and providing excellent service (the large clients sometimes realize that they can get a cheaper service if they hire the workers directly). So a Non-Solicitation clause in a contract is a promise to not entice the other party’s people away.
This doesn’t mean you won’t hire their people, which is where the confusion of the Non-Hire provision comes in. There’s a big difference between soliciting and hiring. Generally speaking, I never promise the more restrictive no-hire, as I simply don’t have that kind of control over my HR folks. But I can promise that we won’t be talking with onsite service people about how great it is to work here. However, if the service people think they’d like to work for us, I can’t stop them from applying to generally-posted positions from our website, for example.
Do watch out for an overly-broad damages clause, though. In the event that you DO solicit, there’s a chance that you’re going to owe the other side a significant amount of money (some clauses like to say that the solicitor will pay the other the cost of the hiree’s first-year salary!).
The most stringent of the Non’s (and the most controversial), is the Non-Compete. A non-compete agreement or clause in a broader agreement usually says that the employee agrees not to work in the particular field of employment, or in a particular geographic region, for a specific period of time, in the event that they leave the employ of the current employer. In other words, it’s a promise to not work against the current employer if the employee thinks the grass might be greener somewhere else.
The problem with non-compete’s is pretty obvious. You’re agreeing, to get a job with a new employer, to not go work somewhere else if you leave this new employer. You’re really at your most vulnerable (in terms of negotiation positioning) because you want the new job, and, above all, you’re giving up your ability to work in your chosen field if the new job just doesn’t work out. Wow.
For this reason and others, courts are starting to take a REALLY hard look at non-competes. In the last decade, non-competes went from very loose to very restrictive. In those states that allow them, they have to be extremely limited in scope (what you do and where you do it) as well as duration (how long you can’t compete). In California (as of the moment of this article), they’ve been all but rejected as against public policy and are now unenforceable, even if signed.
My general rule of thumb is to NEVER sign a non-compete unless you’re SIGNIFICANTLY financially compensated up front (ie: they give you a starting bonus about the size of the salary required to cover you for the time you can’t work).
As you can see from the multiple prior articles, we just held our first free conference call regarding firesales. Stephen Guth was gracious enough to host and we had several great suggestions on how to deal with the inevitable steals and deals that seem to pop out of nowhere this time of year. Thank you to all who participated! We’ll look forward to seeing you again in January or early February with another call.
And, as expected (but kinda’ eerily coincidental nonetheless), Amazon is currently selling my Software Licensing Handbook for 23% off (regularly $114.95, now $88.82). Geez. What a deal!
I don’t know that I’ve ever explained to you how the publishing process works, but suffice it to say, I do not get the same royalty from a book sold via Amazon (or other resellers) as I do from Lulu. In fact, I have to give the resellers a WIDE margin in which they are allowed to play. This margin includes their profit, so they can discount the book any way they desire, as it only affect their per-book profit. But regardless of the discount they offer to you, the total value of the margin comes out of my royalty.
I, however, can’t discount my own book because the price I offer to you via Lulu has to be the retail price presented to the resellers. Amazon and others can offer you great deals and I can’t match it even if I wanted to. So, dear reader, if you wanted to save money on the Software Licensing Handbook, now is the time to do it, as the Amazon holiday firesale is in full swing!
Filed under: conference call
Last call to join us on Thursday, November 20 at 5pm ET for a free discussion how to negotiate through the typical end-of-year deals commonly seen (and the expected “extras” as a result of the current economic state). Stephen Guth from the VMO Blog will get the topic rolling, but the remainder of the time is for discussion amongst the participants. We’re expecting a great session and one filled with dozens of hints, tips, tricks and tactics.
For this reason, participation is by-request-only for buyers via the form below. Please remember that you are responsible for your own long-distance phone charges (the call is to a number within the continental US). Also, verify your e-mail and contact data entered below are correct, as this is where the participant details will be sent!
Please fill out the form below to register:
Filed under: Uncategorized
I saw an agreement the other day which listed the services in about two sentences. This might be an acceptable description if the services are personal lawnmowing… or room painting.
Generally speaking, your services description for any project of any length of time needs to be more than a paragraph. No, it’s not about length – it’s about quality. But while quality doesn’t rely on length (see Ken Adams for more detail on that argument), it’s an indicator of completeness, which is what’s really important.
Let’s look at a basic project, like lawnmowing. A single sentence services description would probably look like this:
“Provider will mown the grass at xyz location one time per week between today and 1 year from today.”
Is that a complete enough description? Perhaps.
How do you know if it’s complete enough? Start to ask questions.
1. How big is the area to be serviced?
2. How long is it going to take to mow the lawn?
3. Are there times of the day where the noise would be problematic?
4. Should the provider “edge” the lawn at the curbs and sidewalks?
5. What should be done with the clippings?
6. Who is going to be doing the mowing?
7. Who supplies the equipment?
8. Is there an adjustment for the cost of fuel for the mowers?
OK… I think I’ve made the point. Even for something as seemingly simple as lawnmowing, it doesn’t take long to generate a list of questions that should be answered in your services description/SOW.
Just remember, your services description is all that stands between you and your money for the quality of the services performed. You will NOT get to use what’s in your head, what you assume, and in some cases, what you think to be industry standard, to hold the services provider accountable after contract signature. In other words, if you can think it, WRITE IT DOWN.
Seems a little anal retentive? Sure. You can even apologize and tell the other side that you’re just weird. Making fun of yourself actually is beneficial to your negotiating position if you can do it with sincerity (read the book I recommended last week for details – it’s in there). Trust me, a little anal retentiveness now goes a long way to preventing problems later.
Want to know more? Get the Software Licensing Education Series – 300s Track.
Filed under: review
In most business-related books, the general rule of thumb is that if you manage to get a single nugget of valuable information, the book was worth the cost. This rule is a result of understanding that business books are based on amalgamations of information – that a book on any given topic isn’t going to be universally applicable and that information contained therein will only work given a set of defined criteria.
When you look at the best business books, they become “best” simply by being more applicable. The broader the application, the broader the audience, the better the book. Which means that Yes!: 50 Scientifically Proven Ways to Be Persuasive must be best book ever written.
OK, I don’t mean to be so overly-effusive. But in the span of my life, I’ve done more reading than most. I’ve read long novels and short stories. I’ve read fiction and non-fiction (you saw my comparison to Stephen King the other day, right? I’m a huge fan and collect old first editions of his, like My Pretty Pony, in case you were curious about what to get me for the holidays). I’ve read boring books, interesting books and everything in between. In fact, some would say that I read too much. What can I say? I love to read. My point is that with all this reading, I’ve come to live by the general rule of thumb stated earlier.
So it came as quite a surprise that each and every one of the 50 “ways” described in this book is immediately usable in many different facets of your life. This isn’t just a book for lawyers, negotiators, salespeople or others who have to “be” persuasive for work. This is a book for every man, woman and child to learn how to better present their desires to another human. Do you have a spouse, boss, co-worker, parent, child, brother, sister, friend, or email buddy? Then, as they say, “this book is for you.”
Go get this book. It’s better than mine. Definitely more generally applicable (though I think the Five Fundamental Skills explained in more detail in the SLH are still pretty universal).
Filed under: conference call
Don’t pass up the opportunity to fill the last few seats and join us on Thursday, November 20 at 5pm ET for a free discussion how to negotiate through the typical end-of-year deals commonly seen (and the expected “extras” as a result of the current economic state). Stephen Guth from the VMO Blog will get the topic rolling, but the remainder of the time is for discussion amongst the participants. We’re expecting a great session and one filled with dozens of hints, tips, tricks and tactics.
For this reason, participation is by-request-only for buyers via the form below and will only be guaranteed to the first 25 registrants. Please remember that you are responsible for your own long-distance phone charges (the call is to a number within the continental US). Also, verify your e-mail and contact data entered below are correct, as this is where the participant details will be sent!
Filed under: contract terms
Look, this is simple. I preach up one side and down the other to create templates and to use them. They’ll save you time, effort and risk.
But, for heaven’s sake, know your own terms! This might sound simple, but not knowing the ins and outs of your own templates will burn you much more severely than any opponent’s terms.
Yesterday, my brother-in-law Kyle relayed the story of a recent plumbing job he needed completed. The plumber had to return to fix his work. Near the end of the job, the plumber was talking to the drywaller – who had asked him who was going to pay for the second drywalling required as a result of the plumber’s poor performance.
Kyle was reading the reverse-side of his plumber’s order form (where the so-called small print was listed) during this conversation. He spoke up that he was appreciative of the 90-day warranty. The conversation between the plumber and the drywaller came to a quick end as the plumber responded with an incredulous “What?”
Kyle took the opportunity to teach the plumber about the warranty his document afforded – and the fact that Kyle wasn’t going to have to pay for anyone’s service on the repeat job.
So – make things easy on yourself and know what your contracts say. Memorize them if you have to.