Understanding Noncompetes: The Hidden Dangers of Your Dream Job
So, you finally landed that dream job you’ve been working so hard for. But before you pop the champagne and celebrate, have you taken a closer look at the fine print?
Noncompete agreements, those pesky clauses that prevent employees from pursuing their own ventures in the same industry or working for a competitor after leaving their job, can have serious consequences. Just ask wedding dress designer Hayley Paige Gutman.
In a recent testimony before a Senate economic policy subcommittee, Gutman shared her harrowing experience with noncompete agreements, following a three-and-a-half-year legal battle with her former employer, JLM Couture. This battle came to light just three months before the U.S. Federal Trade Commission announced a new rule banning noncompetes altogether.
Gutman found herself unable to work in wedding dress design for five long years due to a noncompete agreement. Reflecting on her experience, Gutman expressed her frustration, saying, “I could start over with a new name, I could open new social media accounts and rebuild, but I could not work in my chosen craft.”
The FTC estimates that around one in five Americans, totaling approximately 30 million people, are currently bound by noncompete agreements. The agency believes that banning these agreements could open the door to 8,500 new businesses yearly and potentially raise the average employee’s wage by $524 per year.
While the noncompete ban was slated to take effect on September 4, legal challenges may delay or derail its implementation altogether.
Opponents of the ban argue that noncompetes serve a purpose, preventing employees from using insider knowledge to establish rival businesses, safeguarding trade secrets, and encouraging longer employee retention.
In her gripping testimony, Gutman recounted her early encounter with a noncompete clause in her 2011 employment contract with JLM Couture. Over the years, JLM asserted that Gutman violated the agreement by utilizing her @misshayleypage social media accounts to promote other companies, leading to a heated legal dispute.
Despite facing numerous challenges, Gutman eventually reached a settlement agreement with JLM Couture in May. The agreement granted her the rights to the “Hayley Paige” name and social media accounts, albeit at a hefty price tag of $263,000.
Now, as a small business owner, Gutman reflects on her journey in a recent interview with the Independent Business Podcast, imparting valuable lessons to fellow entrepreneurs about perseverance and overcoming obstacles.