Question about Non Compete

Discussion in 'Business of Photography' started by katie_beck, Feb 26, 2013.

  1. I wanted to see if anyone had any advice about how to deal with a non compete once you have already signed one. This particular non compete was signed in the state of Alabama. I will be the first to admit that I shouldn't have done it. Hindsight is 20/20 and I was a student desperately needing internship credit to graduate. But I'm here now and would greatly appreciate any advice on how to move forward because I have received mixed advice about the enforceability of these contracts in this state. I have also received mixed advice about how to approach this subject with my employer.
    When I signed the contract, it was for a high end wedding photography business. The majority of their business is weddings but they do portraits and events on occasion. I also am considered an independent contractor by my employer. I am paid a low hourly wage, receive no benefits and also receive no credit for my work. 4 years later, I am being told that portraits and events (as well as weddings) are out of the question for me (even though I've been given verbal permission to shoot weddings and portraits for friends on occasion). And for the record, all of the work I've done on the side is small potato stuff - for friends and family. I am only a part time employee. All of the potential clients who approach me are contacts I made whlle I was in school or through family and friends. None of my clients are from the area of town my employer conducts business and have no business with my employer. Though the business I work for is considered high end and works in a very specific part of town for a very specific type of clientele, I am told that I am pretty much chopped off at the knees as far as everything (in an area that encompasses two counties).
    I am recently graduated with student loans to repay, rent and a car note. I am not receiving credit for my work and feel very taken advantage of. I have learned no valuable trade secrets or secret formulas or etc. I realize that I ignorantly got myself into this situation but as I move forward, I would like to know how reasonable this contract is and if I have any leg to stand on. I don't want to compete with this business but I feel like the limitations placed on me are very unreasonable and make moving forward with any career for myself next to impossible. My next step is to move out of state or seek advice from a legal expert but I wanted to check in here and see if anyone has any insight into what I can and can't do.
    Thanks in advance for any advice! Please don't be to hard on me! I know I was a fool to sign it.
     
  2. wow, I trust you . . . I believe you really did get caught up in trying to move forward and do the right thing .
    . . today you have a lot of responsibility and need some advise. You need both legal and business . . . I
    have a question, how long is your contract good for? The rest of the stuff is what it is at this point . . . but
    how long are you "bound" to this agreement and for how long AFTER your gone? - BTW, you say you
    did not pick anything up, that's likely not so true, you did undoubtedly get access and profited from your
    position (which it's not really clear to me that that position is, or was) . . . more information please.

    The foundation is to not burn bridges, be nice and kind and don't assume anyone was trying to dupe you.
    . . it's almost never the case that someone intend to do you wrong. Keep your chin up, and maintain a
    positive attitude . . . then plow thought the details . . .
     
  3. "4 years later, I am being told that portraits and events (as well as weddings) are out of the question for me"
    Is that 4 years after signing the agreement or 4 years after leaving the company (assuming you've left but from the tone of your post it sounds as though you're still working for them)? If it's 4 years after leaving the company my feeling is that it's an onerous and unreasonable restriction and not enforceable. If you still work for them you're probably stuck with the terms of the agreement.
    Not withstanding all that and no matter what your answers are to the above questions your best course of action is to get legal advice from someone knowledgeable about these matters in the area that has jurisdiction.
    ps: I'm neither an attorney nor labor expert so take that for what it's worth as well. ;-)
     
  4. Alabama, like other states, limit non-compete agreements to a reasonableness standard in time and distance. Typical time restrictions are about 6 months to a year. There is probably case law in Alabama to that gives a pretty good idea if not an exact limit on time. The idea is to protect an employer but not deprive the employee or contractor a living. Four years seems way out of bounds.
    Ultimately this is a legal question and photography is merely incidental. Since this is a situation where harm may result by the issue, you need to get an opinion from an attorney in your jurisdiction. (i.e. don't ask a lawyer for photography advice/don't ask photographers for legal advice). Its a pretty simple matter (especially after four years) and it should not cost all that much to get an opinion or a letter. A good investment.
    There are also doubts as to the protectable interest criteria and undue hardship standard in Alabama. If you still work for the same employer then you are on much more slender grounds. The you question is more an issue of business and relationships.
    http://birmingham.legalexaminer.com...e-agreements-enforceable.aspx?googleid=266204
     
  5. david_henderson

    david_henderson www.photography001.com

    I'm no lawyer but here's a question or two that maybe you might want to think about. From what you say I'm assuming you still work for the business.
    IF you can't extract yourself from the essence of this contract whilst working for your employer
    AND you have to wait a while after you've left to be able to compete against your employer within the prescribed territory
    • I think I'd be asking questions about whether my contract can effectively bar me from carrying on a competing business or whether it can only prevent me from soliciting or working with proven clients and prospects of the business you currently work for.
    • Whether the geographical and timescale parameters built into your contract are reasonable and enforceable.
    • Whether the fact of the non-compete contract makes you de facto an employee and should have been due benefits accordingly.
    I used to run a business with non-compete clauses in senior employees and contractor's contracts in the UK and these were all difficult and changing issues for us, and it was sometimes the case that a contract that our lawyers were convinced would be enforceable was much less clear cut a few years later. You need legal help from within the jurisdiction, as John says, but bear in mind that what you'll get is an opinion, not a guarantee. You can get that far without your "employer" knowing I'd imagine.
    But if you quit you have to consider whether you can afford to support yourself until you can open your doors as a separate business, and in reality beyond, for businesses don't generally open with a full order-book. Would it in fact be any less costly for you to move away and open up a bit earlier? You've still got lead-times on finding and equipping premises, planning your marketing etc and you can do all of that whilst bound by an anti-compete clause.
    You need to consider also whether you have the business development and management skills to run a business on your own. Right now I imagine you execute photography projects. You cannot expect that as you open your doors people will just walk in. You say you haven't been taught much whilst with the current "employer". Have you learned enough? Is the question of non-compete actually irrelevent because you need to accumulate some knowledge and some cash before you can open up with real hopes of success? Do you need to earn money doing something else before you set up to compete?
    In other words, what to do is not entirely a function of what's legally allowed.
     
  6. Usually non-competes are only good for 6-12 months after you leave. They cannot restrict you from making a living. I would talk with a lawyer but I highly doubt that the 4 year non-compete is binding.
     
  7. Katie -
    John H gives good advice - find a legal service or call an attorney who specializes in employment law. Most will give a free consult (30-50 minutes) - legal aid / services vary by state. Generally, in order to be enforceable non-competes have to be for a limited period of time, be limited in geographic area (depending on the service / employment), involve current or potential future clients, and not impede your ability to make a living.
    If you signed the agreement 4 years ago and still work for that company - the agreement is probably still in force. If you worked for the company 4 years ago, quit 2 or more years ago and they are now coming after you - than call an attorney. If you worked for the company in the last year, and have since left - but they are saying the agreement is 4 years long - call an attorney.
    In Photography the typical non-compete will specify that you won't take the client list with you when you go, that you won't solicite current clients of the company for yourself (for a period of time), and that you won't directly compete with the company for the same client base for a period of time. An example of a client base may be Seniors from a particular district, Corporate Clients, Weddings with a certain budget for photography, etc... Anything beyond that may be viewed as limiting your ability to work.
    Keep in mind - I'm a photographer not a lawyer - so this isn't legal advice. Just the opinion and experience of what I've seen and been through.
    Dave
     
  8. I'm fairly certain the "four years later" statement is NOT four years since ending employment, but four years since entering into the contract. Now the work has become unfulfilling, underpaying, underchallenging, and it has been made clear that higher grade work through this company is not in the cards for her. The OP is concerned that any attempts to be hired for higher grade work outside of the contracting company will be quashed by the existing noncompete.
    I would first request a raise, arguing that you are not making a livable wage and are underpaid for what you do. If that gets declined then I would request a promotion to a higher position that has the responsibility and pay you seek. If that gets declined then I would request a renegotiation of your contract to rewrite the noncompete clause in a way that allows you to market your services for hire independent of the company (side work). If that gets declined then I would get to looking for a new job.
     
  9. Do it and see what happens. Probably nothing.
     
  10. Steve - that depends on the company, the territory, the rational thinking of the owner and the depth of their pockets.
    I've seen major sports photography companies go after individuals who took one (1) account from them, for no other reason than they could and you would have thought the world was ending... or going to end if they lost that account.
    Same is true on the wedding and portrait side - it all depends on whose ox is getting gored. What I've found in general though is the less secure in their ability to deliver to clients, the less secure the company is about allowing competition.
     
  11. Wow everyone thank you so much for your advice! I really do appreciate your time.
    Just to clear a few things up:
    -I am currently a part time employee (an independent contractor, but still).
    -I second shoot, do graphic design work, design books, edit images and fulfill client orders and just basic office stuff.
    -I do not handle finances or etc, just basic run of the mill photography studio work
    -I have shot weddings for the company on my own (1 time) and occasionally shoot portrait sessions or events for the company (for which I receive no credit anywhere). There are other principal shooters and second shooters-all of which have received credit for their work. Don't ask me why this is the case because I have no idea.
    -The non compete contract states that I can't own/operate a similar business for 2 years after my employment ends. I haven't left yet because of this in a way...photography work around here is hard to come by unless you are doing weddings, portraits and etc. I've got to make a living so I've kept my part time job here hoping I'd be given room to grow and I've just done odd jobs on the side (with permission).
    - I've received one raise in 4 years and I make a very low hourly wage. This is hard to swallow because I'm not receiving credit for any of the work I do and I can't use anything in a portfolio. The truth is I barely make enough money to get by. I've spoken to other photographers and according to what I have been told, my wages are way below what is considered standard, both hourly and for second shooting and principal shooting. I also receive no commission on print sales.
    -As far as rational thinking of the owner, well, it's not really looking that way. I'm hoping for the best but the past few months (and really the entire history of my employment) has been difficult to say the least.
    -I don't know if this needs to be said, but for the record: I have never done anything even remotely questionable to cause this employer to be so insecure about me their stealing business. Nothing has ever happened and in fact, I have brought this employer business on more than one occasion. I know that doesn't matter as far as contracts go- but I'm sure you all can understand my frustration.
    I understand that there will inevitably be limitations placed on what I can do when I end my employment. My confusion is to how broad and all encompassing this contract appears to be. Two counties is a pretty big area to be protected when most of your business comes from a very small part of town and you are known and advertised as a high end wedding photography business. Could there potentially be room for me to do my thing for small budget weddings and portrait clients that I generate on my own? 2 years seems like such a long time. I'd never steal a client or mess with someone else's hard earned business (which I understand the desire to protect) but this just seems absurd.
    The other thing that scares me is that when I signed this, it was kind of misrepresented to me. I'm not saying this isn't my fault, but I thought it meant weddings, in this specific town. The studio has moved twice now and now I'm being told it's portraits, events, basically everything. Around here, photographers shoot a little bit of everything. If this is so broadly enforceable, then in their eyes I can't shoot dog pictures because they once photographed a dog. I can't afford to get sued but based on the insecurity this studio has exhibited about me photographing things for my own personal contacts, I feel it is a very legitimate fear. They have the money. And they are certainly worried about protecting their business to the point they won't give credit on a blog to someone who has been with them (through thick and thin) for four years.
    I'm going to take your advice and seek legal counsel. Its pretty scary considering how little money I make but I know that's what needs to be done. But I do want to sit down and talk to my employer face to face and at least explain my side and see if there is a more reasonable agreement that would make us both happy, but the events of the past few months don't give me much hope. I'd hate to burn a bridge because I do genuinely care about their business but a gal's gotta eat, you know:)
     
  12. There unwillingness to "credit" you for the work you've done or allow you to use your work in building a portfolio may also be wrapped up in some legal piffery. If you are really an independent contractor, and not an "employee," your contract may not adequately cover copyright ownership of the work - you may own copyright of your work, not them. That, however, is a matter that would need to be covered with an attorney that specializes in intellectual property law.
    It's a potential area of leverage that you might be able to explore. There can be amicable times people leave one job and incorporate their "work" as part of their resume. It's another area best dealt with by an attorney.
     
  13. "-I second shoot, do graphic design work, design books, edit images and fulfill client orders and just basic office stuff."

    If they directly supervise your work, provide you office space, have you work on their computer in their office when doing design work and editing, etc, then you are unlikely to meet the IRS criteria for being an independent contractor.

    Which is not good for them if the IRS gets involved. However, if you don't want to burn bridges, you might not want to push this. However, the reason why businesses are tempted to classify people who should be employees as contractors is to avoid paying payroll taxes, unemployment, overtime, MINIMUM WAGE, blah blah blah. The whole situation seems like a mess.

    read this, for instance: http://www.dir.ca.gov/dlse/faq_independentcontractor.htm

    BTW as an independent contractor, you are self employed and by definition in business for yourself. A non-compete as restrictive as the one you've signed cripples your ability to do business as a photographer and very likely further undermines the claim that you're an independent contractor rather than employee.
    See a lawyer and get the situation and your rights outlined in black and white. You can then start thinking about what steps you might want to take.
    See a laywer ... see a lawyer ... see a lawyer.
    Please. :)
     
  14. "Employee" and "independent contractor" are two mutually exclusive statuses with regard to one specific employment. You are either one or the other with regard to this employment, but not both.
    You need to see a local lawyer in your state who is already familiar with covenants not to compete. Some of the things you have posted about your situation strike me (and I am a lawyer) as legally unreasonable and therefore unenforceable. Courts in general do not like these covenants and will often strike them down as being unlawful restraints of trade. But a local lawyer with some experience in employment law will be able to look at your contract and give you some sound locally applicable advice. Good luck to you.
     
  15. FWIW I concur with John H. I would think any other course is primarily speculation and could be rife with pitfalls. I would suggest you see an attorney who is licensed to practice law in your state.
     
  16. Talk to a lawyer - today.
    You have not only contract issues, but employment issues possibly. State the facts - bring in copies of that agreement, w-2's, 1099's etc...
    Don - the company I work for provides a desk, direct supervision, computers, etc... to independent contractors all the time. And our office is crawling with ethics, compliance, and tax officers. That is not what makes one an employee vs. a contractor. There is far more to it than that. If she doesn't have her own home office, or space at an office away from "work" that she calls an office then the IRS may frown upon her being called a contractor.
    Dave
     
  17. Thank you all so much for your advice. I am definitely making plans to see one and I will also bring up the independent contractor status. I will also be looking for a new job. We are in fact paid as independent contractors though I do agree we should be employees. I'm not sure the reasoning for this but I will look into it. I used to work from home on occasion but now we are strictly in the office. I am not reimbursed for mileage or gas (unless its an out of town event). I make slightly more than minimum wage so that's not an issue (though considering our level of responsibility and skills, we really should be paid a more reasonable wage). Sigh. It is what it is.
    As far as copyright, I signed a document saying that what I shoot as an employee belongs to the studio. I'm not so much concerned with the ownership of the images. Its their clients. It would be nice to be able to use the portfolio I've created while working there for so long, but my own portfolio will do. I just don't think I should have to give up so much to gain simple work experience. All I want is the ability to make a career for myself independently from them. They can keep their pictures.
    I can't thank everyone enough for the insight you've provided! This has really weighed heavy on my heart and I never realized how complicated this would all be. If I had, I probably would have never signed that paper. SO glad I posted on here!
     
  18. Thank you all so much for your advice. I am definitely making plans to see one and I will also bring up the independent contractor status. I will also be looking for a new job. We are in fact paid as independent contractors though I do agree we should be employees. I'm not sure the reasoning for this but I will look into it. I used to work from home on occasion but now we are strictly in the office.
    Sure sounds like "employment" to me...
    The IRS has very strict rules about who is a contractor and who is an employee.
    Best of luck with the lawyer!
     
  19. >>>We are in fact paid as independent contractors though I do agree we should be employees. I'm not sure the reasoning for this but I will look into it.<<<

    A desire to avoid paying for workers comp insurance, unemployment insurance, employee based taxes and avoiding various other responsibilities are the usual suspects. With this non compete agreement and low pay, the business person has quite a nice situation going unless someone were to leave for unrelated type work.
     
  20. "Don - the company I work for provides a desk, direct supervision, computers, etc... to independent contractors all the time. And our office is crawling with ethics, compliance, and tax officers. That is not what makes one an employee vs. a contractor."

    A lot of companies get away with it. That doesn't mean that the IRS, if brought into the picture, would not slap the company down. It happened to MicroSoft and for many years after, tech companies were extremely cautious about properly differentiating employees and contractors.

    It is a gray area. It is a gray area where the IRS particularly frowns on grunt workers - like our OP - being classified as independent contractors because, as I said, they can then avoid paying minimum wage, overtime, etc to people who'd be non-exempt employees.

    I'm not a lawyer, but I did run a software company when the IRS was looking closely at the contractor/employee issue in the high-tech world. And I have worked as an independent contractor for years. My last gig (I'm working as an employee for a startup in SF at the moment) required me to answer a questionaire with 25 questions of the sort I mentioned above.

    Anyway, as I said in my post and others have repeatedly said: she needs a lawyer who specializes in employee/employer relations.
     
  21. " I make slightly more than minimum wage so that's not an issue"

    John H gave list of things they can avoid paying that provides business owners motivation to do this. I'll add a bit.

    As a contractor, you must pay the 7%+ payroll tax (FICA, medicare, etc) normally paid by employers, along with the 7%+ an employee pays. In other words, you pay a bit more than 15% in total rather than half of that.
    If you're paid minimum wage as a contractor, then, in actuality you're making minimum wage minus the 7%+ payroll tax your employer should be paying (the tax calculation is a bit more complex than this, but the general picture applies).

    Thus you're making less than minimum wage.

    Then there are benefits they might be providing employees, like health insurance. Misclassifying employees as contractors is a classic way for an unethical employer to provide health insurance (and other benefits such as 401Ks) to a favored class while leaving less favored people out.

    Add in John H's list and you can see why misclassification is so beneficial to employers and leaves the misclassified employee screwed.

    And you can see why the IRS takes it so seriously.

    It also impacts people like myself who have spent a large portion (or all) of their career actually working as real live independent consultants/contractors, with multiple clients, freedom to negotiate our own fees, etc.
     
  22. Walk away from these people. Tell them that you've realised their non compete isn't worth the paper it's printed on, and they have mischaracterised you as a contractor when you were, in fact, a part time employee, information you will report to the IRS. The reality is that they assigned you your work, assigned you a payment of their choice, and you reported to them, so failed to meet any of the criteria of self-employment. The respondent who noted the 14 per cent FICA you should have paid, that's true, and you were also entitled to mileage repayments if they were having you operate your own vehicle on their behalf. I ran my own business, and I also worked part time for a newspaper in Pennsylvania, and the reality was that I made more money, in the end, working part time for a grocery than I did working for the newspaper, once you took all the associated costs out of the equation. Of course, if you were under 18 when you signed the contract (under 21 in some states, I think) I doubt the contract was ever enforceable. For example, did it have a formal witness, and not the owner of the company acting on his own behalf? Little things like that mean a lot. Good luck!
     
  23. Register the business in the next state and "visit"?
    I'm surprised that this restriction is still legal. In many legal jurisdictions such non-compete agreements have been struck down in the courts where there are strict laws against anti competitive and restraint of trade practices.
    The issue beneath it all is the fear of the original photographer that ex employees will run off with the client list. Its best to open up the conversation and discuss it. No one wants big legal bills that would be incurred on such commercial contract matters.
    If it was me I would respect the underlying interests of the past employer whilst building your business. The best way to do that is occasionally contact him (or her) and say that you have an opportunity, but you are too busy and pass it over to him as a referral.
    As the saying says, "know your friends well, but your enemies better". I think that how it goes?
     

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