G. Tips to Avoid Being Hired by a Deceitful Employer

It is important to find out all you can about a company's reputation, financial status, and credit rating and how it treats its employees before accepting an important job. Armed with this knowledge you will be in a better position for evaluating whether a particular job is for you. For example, if you are being hired to replace someone, try to learn the name of that person and the reason he or she is no longer there. If possible, speak to that person. Investigate an employer's credit rating to discover if the company is having financial difficulties. Such information can often be obtained from a credit-reporting agency or bank. This information is especially important if you expect to receive large pension benefits because a recent investigation by the U.S. Department of Labor uncovered an insidious problem involving hundreds of companies misusing and diverting money from employee 401(k) pension programs.

The following are significant items worth investigating:

• Does the employer conduct business as a corporation, Subchapter S corporation, partnership, or sole proprietorship? (Note: If you work for a partnership or sole proprietorship, it is easier to sue the owners personally.)
• Who are the principal shareholders or partners?
• How many people does the business employ? Small employers (i.e., fewer than six employees) may not be subject to various state and federal discrimination laws.
• What are the locations and kinds of real property and other assets owned by the employer?
• Does the employer have a history of litigation. Are there any outstanding encumbrances or liens?
• Was the business recently sold, and did the new owners assume its liabilities or just purchase its assets. (Note: Sometimes, employees are exploited when a new owner disclaims obligations and promises concerning severance, retirement, and other benefits previously offered by a former employer.) Investigate the status of the person hiring you. Employers sometimes argue in court that an employee was hired by someone who did not have the legal authority to offer employment, negotiate compensation, or live up to the agreed-upon terms. Only an officer (such as a vice president) or owner can bind the company. Make sure the person hiring you and signing your employment agreement has such authority. If possible, avoid signing contracts containing restrictive covenants. Restrictive covenants (also called "covenants not to compete") can prohibit you from doing many things, most commonly forming a competing venture or working for a competitor, soliciting former customers or employees, or using the knowledge acquired on the job in future endeavors. For years, courts have struggled to balance the conflicting considerations of restrictive covenants. Some clauses are viewed as unfair because they limit a person's ability to earn a living. However, courts also recognize the legitimate interest of employers to safeguard their business from deliberate commercial piracy. There are no set rules regarding the enforcement of restrictive covenants and each case is decided on its own particular facts and merits. When judges decide that such contracts go too far in restraining employees, they either modify the terms (making them less restrictive) or declare such covenants to be totally unenforceable and of no legal effect. The relevant factors typically considered by a judge are:
• Any unfairness in length-of-time or geographic limitations (such as being greater than two years or restraining you from calling on customers throughout the entire United States)
• The degree of hardship on the employee if the covenant is enforced
• Any additional compensation given to the individual (such as an extra week's pay) as inducement to sign a contract containing such a clause or full pay after termination while the covenant is in effect
• The degree to which the individual has access to confidential information such as customer lists, trade secrets, specific business methods, established customers, and related information
• Special skills and training received by the employee
• The bargaining power of the parties
• The status of the individual: whether she is an employee or independent contractor. (Note: In a number of states, a company cannot legally restrain independent contractors from working for a competitor even after signing an agreement with a restrictive covenant.)
• Possible breaches by the employer of any of its own obligations under the contract (e.g., a failure to pay salary or other compensation). When employers violate agreements, this may release the individual from any liability arising from obligations contained in a restrictive covenant.

Counsel Comments:Carefully review and resist signing contracts containing restrictive covenants. An employee who works without an employment contract and who leaves without taking any trade secrets has total freedom to work elsewhere in the same industry. This generally includes.findlaw the right to solicit the ex-employer's customers. However, you may be subjecting yourself to a lawsuit (even when no valid grounds exist) by signing an agreement containing such a clause.

The agreement beginning on page 80 illustrates a sample confidentiality agreement that some employees are requested to sign before working.

Counsel Comments:The author is often consulted by female clients asking his opinion regarding the potential enforceability of an onerous restrictive covenant clause contained in a written employment agreement. I may advise that the client not compete with the contract's terms after a resignation or termination because the expenses involved in fighting the dispute in court may be too costly. Employers typically have the money and will to fight. Thus, since such written contracts often have a "chilling effect," avoid signing contracts containing restrictive covenants if you can help it.

Tip:If you are being pressured to sign a contract with a restrictive covenant, negotiate to reduce the covenant to a reasonable period of time you can live with (such as three months only) and insist on the right to receive continued salary and other benefits while the restrictive covenant is in effect. Remember, everything is negotiable before you sign on the bottom line. Once the agreement is signed, however, you may be bound by its terms.