Covering Your Bases


EMILY SCHAPPACHER | March 12, 2014

Company owners protect their assets with noncompete agreements.


Saying “no” to noncompetes 

Steven Jomides, president of Lawns by Yorkshire in Westwood, N.J., is one contractor who doesn’t think noncompete agreements make the best business sense. The $10-million company, which offers commercial maintenance services, used to require employees to sign noncompetes, but Jomides recently stopped putting as much emphasis on them. He says his philosophy is simple: “If you offer good service and you make your customers happy, regardless of who comes and goes, you should keep your customers.”

Jomides says the costs to draft, maintain and enforce noncompete agreements outweighed any benefits his company saw in return. He also found the contracts difficult and time-consuming to enforce. Plus, there was the potential to upset clients if they were to get caught in the middle of a legal scuffle.

“Noncompetes aggravate everyone and, from a business perspective, I don’t think it’s a good decision,” Jomides says. “We hire people who bring work in, and people who leave take work with them. We have come to accept that as part of doing business.”

Some experts believe Jomides may have the right idea. A recent Harvard Business Review article—authored by On Amir, associate professor of marketing at University of California, San Diego, and Orly Lobel, a professor of labor and employment law at the University of San Diego—reports noncompete clauses are a standard feature of many employment contracts, but they often can be a double-edged sword.

Research shows innovation, productivity and economic growth all are greater in parts of the country where noncompete agreements are not permitted or enforced. The authors also conclude limits on future employment decrease workers’ perceived ownership of their jobs and diminish their desires to exert themselves and develop their skills—factors that can be more detrimental to a company’s success than the actual loss of the employee.

“Given today’s increasingly mobile labor market and the heightened competition in many industries, it’s understandable that companies want to guard their talent closely,” the authors write. “But if the walls meant to protect human capital diminish the quality of the capital, they may not be worth building.”

Reposted from Landscape Management Magazine. View the article here.

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