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  • Rob Houghton

California, invalidate NCCs for all but equity stakeholders in businesses.

So what does all this mean for the WDC metro insurance professional??  It means if you sign an NCC which has a geographic and time restrictive clause you are greatly limiting what you can do if/when you depart your existing firm or if you are terminated with/without cause.  My experience is that other prospective insurance employers will probably not want to hire you.  Why would they?


So let's take the curious case of John Q. Public, a successful producer who worked for XYZ Insurance Agency in Fairfax, VA not too long ago.  John worked very hard for 20 years and has a book of business of $750,000 in revenue commissions and his agency owner (lol, and wife) decided one Friday afternoon to summarily fire John because they didn't like the way he parted his hair.  He received a two week notice and ""Thank You"" for your revenue stream of $750,000 (his book of business).


One month later, when in the final interview phase with a WDC-based Tier One insurance broker, upon a standard review of his employment contract, it was discovered that John had the dreaded NCC in his contract.  The NCC stipulated that John was not allowed to work in the insurance business within 200 miles of WDC for two years.  Are you freaking kidding me?  No, I am not.  John ultimately found a job paying much less in a different profession altogether.  Sound far-fetched??  The name and circumstance were changed in this example, but something very similar has occurred twice in just the past 30 days to dear candidate friends of mine.


Some agency owners promote key employee retention by providing nurturing and fair-minded business practices while others choose to use geographically-restrictive NCCs to enslave their employees.  Beware.


Just to clarify, a NCC is different than a Non-Solicit and/or Piracy Clauses.  A Non-Solicit clause protects an employer from someone stealing existing or prospective clients.  No problem with this.  Every employer has a right to keep their clients and prospects and should do whatever they can legally, and otherwise, to protect these hard earned assets.  Same with Piracy clauses - every employer has a right to protect their confidential information.


So what about the courts??  It is true that the Virginia and Maryland courts are employee-friendly, but the practical issue is whether a new prospective insurance employer is willing to hire someone with a geographically restrictive NCC - do they want the legal exposure of possibly ending up in court with their new employee?  Probably not.  The insurance community in the WDC area is a very small one and most owner operators know each other and will respect each other's employment agreements.


Sooooooooo....what do I do if asked by a new employer to sign a non-compete clause with geographic restrictions?  How about reviewing the contract with your personal attorney and striking the geographic restriction?   If they refuse, do you really want to work for someone who is seeking to enslave you and your career?  I don't know of any mid-market or Tier One insurance broker in the WDC region who use these geographically-restrictive NCCs anymore, but they are found in many ""mom & pop"" agencies.  Don't be a victim.  Be smart.


Full Disclosure:  We do not and will not represent any firm that has a NCC with geographical limitations.


Much more on this to come...


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