# Business Ethics - Non Compete Clause?



## Footfall (Feb 27, 2008)

I also agree with Floordude. You are hiring your *competition *to do your work! That fact alone should be food for serious thought.

Now that I read over Floordude's post again, I think I just said what he did but with more words. Well said. I think I need lessons on how to get my point across clearly and accurately.


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## Bob Kovacs (May 4, 2005)

Jason W said:


> Protect yourself and your investment in time by having him sign an agreement. Have a lawyer draft the document so nothing is missed and so that you can use it again in the future when you need subs that do the same type of work you do. Make sure there is a cash penalty included in the clause, what ever the limits of the law will accept.
> 
> I'm having one done right now. Seems like any carpenters I sub out to can't help themselves from handing out business cards to my clients. Although I've never lost a customer to this back door activity, I'm not going to wait until it happens either.


What you're having drafted isn't a true "non-compete clause" if it's just barring solicitation of your existing/past customers- a true non-compete prevents the signer from working in the same industry within a certain distance for a defined amount of time. Most subs and/or employees will tell you to get bent when you ask them to sign such a document, and the courts have also repeatedly thrown them out anyway- you can't prevent someone from earning a living. I'd think long and hard before wasting the money on a lawyer for something that'll be tough (and expensive) to enforce- in most cases it'd cost you many times whatever profits you may have lost just to go to court, and that's assuming that you even win.


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## Jason Whipple (Dec 22, 2007)

Bob Kovacs said:


> What you're having drafted isn't a true "non-compete clause" if it's just barring solicitation of your existing/past customers- a true non-compete prevents the signer from working in the same industry within a certain distance for a defined amount of time. Most subs and/or employees will tell you to get bent when you ask them to sign such a document, and the courts have also repeatedly thrown them out anyway- you can't prevent someone from earning a living. I'd think long and hard before wasting the money on a lawyer for something that'll be tough (and expensive) to enforce- in most cases it'd cost you many times whatever profits you may have lost just to go to court, and that's assuming that you even win.


Well that sucks!

I will reconsider, but is there no legal way to stop subs from pulling out the rug from under you? Even if it is with a client your working for and they are subing for you on that job? Thats what I'm looking to do.


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## Bob Kovacs (May 4, 2005)

Jason W said:


> Well that sucks!
> 
> I will reconsider, but is there no legal way to stop subs from pulling out the rug from under you? Even if it is with a client your working for and they are subing for you on that job? Thats what I'm looking to do.


Sure there is- find decent subs, let them know the ground rules, and can any sub that does that to you (and let them know up front that you will). Will a good sub really risk losing all of your future business just to steal one job from you?

BTW- I'm curious as to what kind of subs you guys are worrying about this happening with. If we're talking about true "subs", as in single-trade contractors, I really don't see the big deal, as I don't see many occasions where this would be an issue in the first place. For example, if you're a remodeling sub doing kitchens and baths, and your tile sub picks on a $50k kitchen renovation picks up a job tiling the customer's foyer 6 months down the road, why do you care? Would you really go back into the house just to tile the foyer? If your painter gets a call from the client asking him to come and repaint 3 bedrooms, is he really "taking a job away from you"?

Now, if we're talking about the guys who are called "subs" but who are really "fulltime employees that I don't want to pay taxes on and therefore I call them subs", that's a different issue, and one where the last thing you want to do is have them signing a binding agreement with you- you don't need one getting pissed off and dropping a dime on you. Of course, the best situation is to not have such a scenario in the first place..........


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## ChicoGuy (Jun 5, 2008)

Footfall, I appreciate your direct comment to my question/concern about a contract clause. As Jason W pointed out, there are 2 sides to every story. I'm not holding any info back and my intent on posting was not to cry pout and ask for sympathy. I think very little of any person who would take a job from under a close friend/employer/etc (in which the client could have only met you due to your employment on the job) - without first asking for their "blessing". Get your own clients the hard way - pay your way - put your time in - do good work - hit the pavement. Don't leach off of others!

It was further suggested that the question may be "who is feeding who"? The person who is feeding (me/my business) is the party who pays for a insurance, gas, materials, overhead, marketing, etc (all things needed to drive the business). The fact that an employee/s of mine might be doing the "hands-on" work, while I am managing all aspects of the business, in no way should negate anything from my position. I could easily do the work myself, and may go back to this now that I have seen a part of him that is suspect.

Someone else asked about employee vs. sub. He has been a paid employee until recently receiving his GC license. My tax attorney advised me to keep him on payroll for all jobs he started while an employee, and 1099 on all new jobs he will contract with me in the future.

If a contract will hold water legally, as Footfall is pursuing, than that's what I will be implementing into all future contracts.


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## mrghm (Nov 19, 2006)

how is this for a top guy.
i have a medium carpetry compnay (20 guys), we are doing the millwork, decking, wood floors etc on a 10 unit job the contract is worth about 200k,

the building is about 100yrs old there is existing timber windows that are being repaired by a another company but due to their poor work and unable to complete them in time, (due to be finshed last nov) The GC gave me a instruction to supply labour to complete the other contractors works at T&M.

I use a sub that is skilled in old window repairs we have used i the past no problem. he starts work with one of my other guys besides talikng to every one on the job he is doing an ok job, i am happy the GC is happy.

fastforward a week, he submitts a invocie to be paid no problem with that but we pay on a two week cycle, he says he needs money so we tell him thet we would pay it in a few days next time we are doing a cheque run.

he works another day then gets an idea that he is not going to be paid tells the GC and every one else who listens packs up and leaves site, his depoiste was processed by the bank and his funds were cleared by lunch time, he then sends a SMS saying he demands to be paid weekly and at a higher rate or he will not come back to work.

we did not respond, next morning he is on site work so we tell him to get his crap and get off site, 
he now goes and starts to work for the orignal contractor using our materials and our tools.

also turns out he was collecting sales tax which he was not registered for, plus he removed some of our tools from site.

from now all my subs will sign a clasue saying they can not work on a site where my company has a contract, plus paymnets will be two weeks no matter what.


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## boman47k (Oct 13, 2006)

The sub/empoyee sibject was a little confusing here too at first. Still a little fussy on the ethics part. Not to hijack the thread, but what I am curious about is does he charge you the same rate as a sub as he did as an employee?


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## Rockhound (Jul 12, 2007)

I see both sides here. There IS something to be said for Loyalty and Respect and he should have mentioned it. There is ALSO something to be said for those doing the actual labor thus making it possible to BE a contractor. I always love the situation where a contractor I sub from tells me about a job which would have paid a nice sum to the subs but he turned it down because we're 'too busy' only to end up working long weekends on his BUDDIES cheap hellhole of a job while HE is out on his boat/motorcycle/horses etc.


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