Non-Compete Clauses for Temp & Employment Agencies 2

[phygmint]

There have been posts from frustrated employees of temp agencies / employment agencies questioning Non-Compete clauses.

Example: Joe gets a job thru Happy Temp, LLC. They hire him to work for Big Corp. Joe loves Big Corp, and Big Corp loves Joe. Big Corp wants Joe to come to work for them permanently. It's a match made in heaven.

However, Happy Temp says Big Corp has to buy Joe from them.

Joe is upset and wonders how that's fair. He wonders if he can get out of the non-compete agreement he signed when he was hired by Happy Temp.

Here's the skinny: The binding agreement here is not about the agreement between Happy Temp and Joe. It's between Happy Temp and Big Corp. When Big Corp goes through Happy Temp to get employees, they sign an agreement. It basically says that Big Corp won't come in and cherry pick Happy Temp's employees without hiring them for a minimum time or paying the fee agreed upon.

Happy Temp advertises, finds employees, screens them, and goes through a whole process to find workers.

Big Corp, not wanting to go through the hassle, and wanting to "Try before they buy" employees, goes through Happy Temp to get screened, tested and prepped employees. If they don't like them, they send them back - no fuss, no muss. If they do like them, they get a chance to hire them permanently.

The way Happy Temp makes back its money is by charging Big Corp more than it is paying Joe. If Big Corp wants to hire Joe permanently, they have to pay Happy Temp for their trouble, or continue to hire Joe for whatever the minimum period is expected by the agreement between them and Happy Temp.

It's not up to Joe to decide if it's fair, or if Happy Temp is charging Big Corp too much, or anything else. He got the job at Big Corp through Happy Temp, and Happy Temp has a right to be compensated for making that match.

I run a small temp agency, and you bed your bullocks if one of the companies to which I provide employees tried to hire them out from under me we'd be in a legal battle. I take a lot of liability and responsibility to send someone to a company. I have overhead, and insurance, and all kinds of outgo, and I need to make a living. It's not all about you, Joe. You need to suck it up or go get a different job on your own without the help of an employment agency.

As a disclaimer: Non-Compete agreements are treated differently in different states, based on different criteria.

 

[fredericofonseca]

There is a lot more to this issue than just the fact that the agency has placed someone at a client site and needs compensation.

Whatever work a agency has to place someone that gets paid over a short period of time. We can not compare the situation of a contractor that is on a client for 3 month and tries to bypass the agency with another one that is on a client for 5 years.

Also in many cases the such clauses have a period of 12 month - This is what most people find unacceptable as it may interfere with their right to work. This alongside the fact that many agencies even try to prevent their contractors from working for ANY of their clients, even if the contractor doesn't even know who their agency clients are.

Regards

Frederico Fonseca
SysSoft Integrated Ltd

http://www.syssoft-int.com

FAQ219-2884
FAQ181-2886

 

[Noway2]

Phygmint, welcome to tek-tips. I read your post, and find nothing objectionable in your statement. However, it reads more like a rant or a manifesto than a topic for discussion or question.

May I ask what the point to your post was?

 

[phygmint]

NOWAY2 - I was actually commenting on a previous post that was closed to answers ("Temp Agency Woes"). The site said this post would be linked to it. I thought it was an important issue to address on the other side. I think a lot of employees don't really understand the temp agency / employment agency viewpoint and it may help them when going through one if they do.

I'm also interested in other points of view on the subject.


FREDERICKOFONSECA - The court will not uphold an agreement that is too general. The instance I cited was very specific - Big Corp made and agreement with Happy Temp - company to company.

Agreements that try to be too broad don't hold up in court. For instance, if Happy Temp tries to say Joe can't work for ANY Corp, doing the same thing, it won't hold. Happy Temp can't try to prevent Joe from getting a job in the industry, just with their client. But Joe got the job at Big Corp THROUGH Happy Temp.

As far as time, it doesn't matter if Big Corp's contract with Happy Temp is for 6 months or a lifetime - their agreement is whatever it is. It isn't for Joe to decide that because that's inconvenient for him that he has a right to judge it. But that's what happens. Employees go through an agency to get a job, then want to go around them. If Joe doesn't like working through Happy Temp, he needs to get another job with another company or honor Happy Temp's agreement. That's all.

 

[DonQuichote]

Dear phygmint,

As with anything, there are good and bad companies. I once encountered a one-year non-compete clause (an unspecific one stating I could not work for any company in the whole sector) for a two-week job. Needless to say that I did not sign that contract.

I also encountered agencies who stated that after a certain period (half a year usually), I was free to apply for a job at the company I was working.

One of the biggest issues in fairness is telling beforehand what the options are, so anyone can decide the fairness to be acceptable or not before the contract is signed.

It's not up to Joe to decide if it's fair

O yes it is. It entirely up to a customer to know the fairness of the process. It is (sorry, should be) a consumer's right how his food was made and what's in it, if and how suppliers are kept poor and if and how the environment is damaged. This Joe is the vital part of the process and he must know how fair it is.

+++ Despite being wrong in every important aspect, that is a very good analogy +++
Hex (in Darwin's Watch)

 

[phygmint]

I wasn't talking about non-disclosure. Obviously a good company is going to be upfront and a good employee is going to read what he signs.

I'm talking about employees who go through temp agencies, more than happy to get a job using the agency's resources, who after a while decide that they're ticked off because they can't just go to work for the company directly and cut out the middle-man (agency).

And no, at that point it is NOT for Joe to judge existing agreements between companies because he wants to get greedy. If he doesn't like them, he can leave and go get a job on his own, without the help on an agency, and keep all the money. Otherwise he needs to accept the agreement that was put in place.

Are you suggesting that it's okay for Joe to get a job through a temp agency, then decide to circumvent his agreements, or the agreement between the agency and the company? Would you also think it's okay to get a realtor to help you find a house and then try to cut them out and deal with the homeowner themselves instead of paying a commission? Because that's basically the same thing.

 

[hjgoldstein]

==> Would you also think it's okay to get a realtor to help you find a house and then try to cut them out and deal with the homeowner themselves instead of paying a commission?

Frankly, yes because (in this country) many realtors or as we call them Estate Agents are rogues and charlatans.

It is time for pacifists to stand up and fight for their beliefs.

 

[Noway2]

Are you suggesting that it's okay for Joe to get a job through a temp agency, then decide to circumvent his agreements, or the agreement between the agency and the company?

So far this discussion has put the onus of the agreement on the employee/client with frequent remarks to it is the employee who seeks to cut out the temp agency. I think that this is looking at the issue from the wrong end. The agreement as to whether or not the employee can be directly hired by said company and under what conditions should be spelled out in the contract between the temp agency and the company. Such an agreement would typically be along the lines of "you will hire X through the temp agency for Y weeks/months and at the end of this contract period you may either decide to renew the contract, not renew, or hire the employee directly for $Z".

If for example, someone is hired through a temp agency and earns $10/hour and the company is paying $15, with $5 going to the agency, I can understand why after a certain period that it would be in the interests of both the employee and company to hire the employee directly for $12.50/hour. The contract between the temp agency and the company should cover this condition. I think it would, at a minimum, be ill advised for the temp agency to assume, or even try to permanently lock in, that the employee will only be available through the agency - indefinitely.

Once the contract terms have been fulfilled, there would be nothing dishonest about the situation. The contract should also cover what happens if the company should terminate the contract early, as in how much penalty and whether or not they may attempt to direct hire the individual in question.

 

[lionelhill]

Noway, although the agreement as to whether the employee can be hired directly by the company has to be spelled out in the contract between the agency and the company, it also has to be spelled out clearly to the employee.

The reason is this: If the company decides to cancel all further dealings with the agency, it is now free to hire whoever it wants. However, existing agreements must still run their period. Therefore BigCorp is now in the position of advertising a new post, but Joe is barred from applying, despite the fact that Joe may have given up using HappyTemp and so have BigCorp. Joe should be aware of this risk up-front when he applies for jobs via HappyTemp.

 

[Noway2]

Lionelhill, I agree with your last post 100%.

While I understand the frustration that phygmint is expressing in his/her posts, I think that their anger may be partially misplaced. It seems like it is being addressed at the employee who leaves HappyTemp to go work for BigCorp and that the perception is that this is predominately the fault of the employees, whereas it has been my experience that it is BigCorp that is the one making the job offer available and initiating the process.

 

[kmcferrin]

There are usually several agreements in place in these situations. There are agreements between Joe and HappyTemp where Joe agrees not to solicit employment from any customer that HappyTemp places Joe at UNLESS the employment details are worked out by HappyTemp. Then there is the services agreement between HappyTemp and BigCorp, where BigCorp usually agrees not to hire HappyTemp's people without paying the finders fee. Usually these are time limited with a "right to hire" clause, i.e., for the first six months BigCorp cannot directly hire Joe, but after six months they can without paying a penalty or buyout fee. This agreement USUALLY also goes in the other direction, stating that HappyTemp cannot poach BigCorp's employees. So both sides definitely get protection.

I run a small temp agency, and you bed your bullocks if one of the companies to which I provide employees tried to hire them out from under me we'd be in a legal battle.

I doubt it. Companies that sue their customers tend not to stay in business very long. In reality, in most cases BigCorp is going to say "We want Joe. We are taking Joe. If you want to block us from taking Joe you have the legal right to do so, but if you do then you will no longer be on the preferred vendor list for BigCorp and you will lose BigRevenue from us." Then you will say "OK, nice working with you Joe." I've seen this happen many, many times.

The alternative is for HappyTemp to seek legal action against Joe. But then a company that sues their employees tend not to stay in business very long, either. Besides, what are the odds that they will recover significant revenue from Joe? And how will BigCorp look upon HappyTemp when they find out that they are suing their employee for coming to work with them?

There's what's technically and legally "right", and then there's reality. In reality, business is about relationships. If you are foolish enough to poison relationships with your clients and employees then you will have difficulty being successful.

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[phygmint]

Wow. Okay. Well first, I'm not angry. I was just trying to spell out a side of an issue that didn't seem to be understood by people.

Second, I think that door swings both ways. A company who gets a reputation for cherry picking and stealing an agency's hires doesn't do so well either when other agencies find out. But I think, for the most part, that companies aren't the ones who decide they want to circumvent the system.

The truth is, the company usually winds up paying almost as much to hire an employee as it gives an agency. Benefits, workman's comp, all kinds of expenses get added on top of an employee's pay. A lot of employees have no idea how much it actually costs a company to hire and maintain an employee.

While the temp agency provides employees, Big Corp doesn't have to deal with any of that or any other employee issues. When Big Corp hires someone on permanently, they inherit all that. That's why it's easier to test-drive employees through a temp agency.

It's usually the employee that stands to make more by going to work for the company and cutting out the agency. They find out how much the agency is making and get greedy. They don't want to wait out a contract. They want to hire on permanently as soon as possible and they don't care how they got the position.

Third, yes. I would take legal action. And I believe the reason I've never had to is because I'm very specific in my contracts, and those I do business with know I take business seriously. I think people should stand up for their professions.

And justifying actions like cutting a broker out of ANY deal is just that - justification. It's wrong, and everyone knows it's wrong, and claiming that somehow it's right because, for instance, "many realtors or as we call them Estate Agents are rogues and charlatans" is just a dishonest person trying to convince himself that he has some right to be a dishonest person.

 

[hjgoldstein]

Never considered myself dishonest.

Oh well, you must be right. After all, you know me and have had dealings with me so you obviously have made a measured judgement.

Back to the main thrust of the thread.

I had been placed by an agency in a position for a 3-4 month period. After 18 months, being paid less than the market rate because the agency needed their cut and the employer didn't feel they needed to pay (in total) more than the market rate, the employer offered permanency.

I accepted (at the market rate) and now, as the business unit is closing, am looking for something else.

The agency doesn't want to know me any more. What is your take on this? Remember, the agency got 18 months' worth of their cut instead of 3-4. Who owes what to whom?

It is time for pacifists to stand up and fight for their beliefs.

 

[Noway2]

And justifying actions like cutting a broker out of ANY deal is just that - justification. It's wrong, and everyone knows it's wrong, and claiming that somehow it's right because, for instance, "many realtors or as we call them Estate Agents are rogues and charlatans" is just a dishonest person trying to convince himself that he has some right to be a dishonest person.

Let me give you an example. About three years ago, as the housing situation in the USA was racing towards the bottom, we were trying to relocate for a job to another state. We stayed with one realtor for the contract period of six months and decided to change agencies to 'freshen' things up. We went with a different agent, who charged a "marketing" fee to cover his expenses claiming that he was an independent contractor, not an employee of the broker and had to cover more expenses on his own, including the gasoline to make weekly trips to check on things and spruce things up. In the end, we agreed to $100 for the six months. As part of the negotiation, he described his plan and talked about what he was going to do: take the pictures, update listings, draw up new info sheets, etc. This was not stipulated in exacting terms in any sort of contract and based upon my past experiences, are things I think are generally considered customary and standard for this type of work.

The guy, however, didn't perform even half of what he said he was going to do and in fact, re-used most of the previous realtor's work. We felt as if we had really been shammed. For example, the guy was using spring pictures from the previous realtor in the fall listing, which looked outdated. The indoor pictures were taken right from the MLS web sites, etc. There were no open houses, no special advertising, nothing.

Before listing with him, we was very communicative and would return calls, emails, etc. After getting the contract, you could call and email all you want and be loath to get a response in a week. The disparity was astounding.

About 4 months into this six month contract, and about 10 months into the whole process we decided to keep the house and eventually moved back home after finding new work (again). However, the guy had the bollocks to demand his marketing fee and I seriously considered giving him the option of going away quietly or facing consequences that I won't describe here. In the end, I paid him his $100. A few months later he actually emailed me and asked if I would like to re-list with him. I pointed out the problem with communication and asked why would I want to do that? I never heard from him again.

Now, is my desire to refuse to pay him $100 my being dishonest and just trying to justify it? He failed to perform to the level that he indicated that he would and the behavior dramatically changed AFTER receiving the contract. This makes me think that he was the one being dishonest and the intention was simply to rob me of cash under the guise of a marketing fee.

 

[Noway2]

Here is an even better one that I had forgotten about. When I first moved to NC, we along with several co-workers discovered this new "contract" thing called an exclusive buyer's agent where in order to represent you, you had to agree that said agent was to be your exclusive buyers agent. Unless you agreed to otherwise, these things were in effect for 6 months. We were looking for a new home and found a realtor we liked and without thinking much about it, entered into one of these agreements.

After looking at several existing homes and not finding what we wanted, we started to consider custom building. Our realtor was happy to oblige and recommended this one area and it seemed pretty nice. We started looking at lots and found a few that were contenders. We were told the lot price was $20K. We started getting into house plans and working with them to figure out everything we wanted and comparing to the average for that neighborhood, etc. At the same time, this realtor put us in contact with a recommended loan agent from a bank. Things started getting fishy after that. First, the lot price went from $20K to $40K to then we were told $60K. The house we were looking to buy went from $190K to $220K to $260K + an undisclosed amount. What was really interesting is that the pricing was such that it was about $2k below the maximum amount we had been approved for.

With our suspicions growing, we had a sit down meeting with the builder, the real estate agent, and the development manager. The give away was that the real estate agents toddler was there and kept going up to the builder and holding her arms out. Finally she did this and said "Grandpa." Huh? WTF?

Turns out the manager was the husband of the real estate agent, the builder was the real estate agent's father, and the mortgage agent was his wife. None of this was disclosed in any of the several meetings, calls, etc, emails, etc. They all used different last names and only referred to each other in terms of generic titles such as "the builder." When we raised this as a conflict, they did finally admit to it, but didn't offer any explanations.

Needless to say, we walked away from this deal. Unfortunately, I had this stupid "contract" over my head that this agent would represent me. Fortunately, there was a clause in the contract that said, "if a house is purchased on which no commission is being offered by the seller, this contract does not apply". I bought land directly from another builder and no real estate agents were used in the transaction, just a lawyer. Now, several years later, I still live in the house he built. The one that we first looked at is in a section of town that has had its fair share of troubles like being put in line with a new fed-ex runway with 3am plane traffic.

So, Phygmint, it looks like you have had your share of dishonest clients. This doesn't mean that justification for the termination of ANY deal or contract is wrong. As with anything there are good ones and bad ones, and there are certainly dishonest ones on both sides of everything.

 

[kmcferrin]

Second, I think that door swings both ways. A company who gets a reputation for cherry picking and stealing an agency's hires doesn't do so well either when other agencies find out. But I think, for the most part, that companies aren't the ones who decide they want to circumvent the system.

True, but if BigCorp truly is big then there's nothing you can do about it. Which would you rather do:

a) conduct business with BigCorp, who can provide you with dozens of placements per year.
b) say no to BigCorp and lose out on that revenue stream.

Maybe your company is stable enough that it doesn't have to play ball when a multi-billion dollar corporation says so, but if you think they're going to have any problems finding willing partners because they are difficult to deal with then you are mistaken.

When I first moved to NC, we along with several co-workers discovered this new "contract" thing called an exclusive buyer's agent where in order to represent you, you had to agree that said agent was to be your exclusive buyers agent. Unless you agreed to otherwise, these things were in effect for 6 months.

That is not what an "Exclusive Buyer's Agent" is. An Exclusive Buyer's Agent is a real estate agent who ONLY represents buyers, not sellers. As such they have no "listings," so you don't have to worry about them trying to steer you towards properties where they (or their agency) gets to double-dip on the commissions. In the US you can get more information from the National Association of Exclusive Buyer Agents (

http://www.naeba.org/about.asp).

There are many good reasons to use an EBA when you purchase a home, not the least of which is you know that their only goal is getting you what you want.

The exclusivity contract that you mentioned is pretty standard practice (at least in Ohio), and any realtor I have ever dealt with has used them. They are essentially to guarantee that they don't do all of the legwork only to have you cut them out, and they usually have out clauses so you can switch realtors if there is a problem with the realtor that you have.

As to the situation you mentioned with the realtor/builder/mortgage lender, I'll say two things:

1. Never take the "recommended" mortgage broker/lender/home inspector from your realtor. There's too much opportunity there for backroom deals.

2. In the state where I live, such collusion between agents would be flatly illegal. In our state the real estate agent has a legal, fiduciary responsibility to their customer. You should have reported them to the authorities, because it is extremely likely that they colluded to take advantage of other people in the past in the same way.


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[kmcferrin]

Disclaimer: I am not involved in real estate (other than as a homeowner), by my last realtor was an EBA and I was extremely satisfied with his service. As with anything important, be sure to do your research.

________________________________________
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[HiTkRdNek]

However, Happy Temp says Big Corp has to buy Joe from them.

And they say slavery is dead!!

I have used contract companies a time or two. it can be a great way to get to know your team and employer before committing to the gig. However, that being said, recently I have found that recruiters are nothing more than used car people. They have tried to force me in to positions that I'm not really qualified for. Yes, I can be a graphics designer, but I'm more happy when I get to get my hands dirty with data. My suggestion to people is to get out there and market yourself without the middle man of the 21st century. In the end you will find a job that is a better fit and a team that doesn't have to buy and sell you. It also leaves more money in their general ledger for raises and bonuses.

As for the realestate agent aspect. Think of it this way. YOU ARE THE CUSTOMER you can hire and fire any one you please. Read the contract before you sign. If they are having you sign an exclusive right to represent, then some where in the contract will be a termination clause. It usually says something like you have to terminate them before hiring some one else. I have heard some states have a 30 day waiting period before listing with another agent, however i've not lived in one of those states. Bottom line is YOU ARE THE BOSS! You can fire anybody... and if you don't like the terms of their exclusive right to represent, then don't hire them in the first place. You're the customer, make them play to your rules!

It's up to you how you are represented. You don't have to play by their rules, shop your agent and find one that is willing to play the game your way. Agents are a dime a dozen in any town. Interview them before going to look at or listing your property. I did. It shocked the hell out of my agent. One because I interviewed him with questions about how he's going to best represent me. Two because I told him I do not want to see any of his listings. Why the latter? Cause I want him working FOR ME, not the other guy. Yes, I could have saved two percent on the transaction, but what little things got glossed over because he's moving inventory and making an additional 1.5% on the deal. He has been in the business for ten years and he told me that I was the first person to interview him like that. To me it just made sense. I want to sit down and get to know the person that is going to walk me through the biggest purchase of my life. No way am I going into that blindly. And subsequently.. I refused his exclusive buyers agreement and he still worked with me to find my first, second and third properties.

Bottom line, You're in charge, don't let them intimidate you with contracts and binding agreements. REFUSE TO SIGN.. if they're hungry enough they will work with you anyway!!

that's my two cents.

 

[lionelhill]

Noway2, the rental market in the UK is just as bad. I once had to help a friend who agreed to a very disadvantageous deal with a letting agency who made her redecorate her bedsit at her own expense before moving in (unusual procedure, but they told her another tenant wanted the bedsit and was prepared to decorate...), and then terminated her contract in the first week she was there. They did so on grounds that the house's owner had decided to sell. It turned out the other tenants had already been given notice to quit before my friend signed her contract, and the owner was the agent's mother.

 

[ponoodle]

I turned down a job from a temp company here in the U.S. because they wanted me to sign a contract saying that I couldn't be hired by the company I was to be placed in for a year, ever if I was only placed for a day. And this was rated the best temp agency in the county at the time. At least they were upfront about it though. And now I'm going to go Google "bedsit".