Thursday, October 22, 2009

Time to Lawyer It Up

Although I hail from a family of attorneys, I am no fan of the legal system and how it retards corporate innovation and ingenuity. The litigious inclination of today’s corporate executive is a true blight, limiting the global competitiveness of US-based companies.

Consider the vicious circle that engulfs many firms. They devise an offensive legal strategy to strangle and distract competitors.

Concurrently, they employ a defensive legal front to fend off investors, customers, partners, and…yes…even their own employees who claim they’ve been somehow wronged.

I could easily play the legal card. Strategic Communications Group (Strategic) owns the trademark for the phrase “Network of Relationships.” Undoubtedly, each quarter I receive an inquiry or two from a law firm with an offer to seek out and take action against violators.

“We will happily do all of the research and handle the legal filings for a modest 60 percent of all fees collected,” one firm recently wrote in an Email.

My answer is always the same: “Thank you, but no.”

While it is an important part of Strategic’s value proposition, this trademark (and the business concept it represents) is not core to our success. As such, I’d rather focus my time on more meaningful activities that create value for the organization.

With such fervent views on this issue, you’d think I would be mortified by Starbucks recent legal suit to block the hiring of a former marketing executive by rival Dunkin’ Donuts.

Well…not quite. In fact, I stand 100 percent behind Starbucks’ right to enforce an employee agreement that included an 18-month non-compete provision.

I do respect the right of every individual to seek employment at their company of choice. Plus, it’s absolutely appropriate for an executive to carry their experience to a new position, especially when it provides a competitive advantage to their employer.

Yet, in this specific case Paul Twohig freely elected to sign an agreement at Starbucks that barred him from working for a competitor for a specific period of time. And now he has to live up to and meet those conditions.

Strategic’s own employee agreement includes a section that prevents the solicitation of clients should the staffer resign from the firm.

The employee must also agree not to take steps to influence a colleague’s standing with our company. Simply put, they can’t recruit away other agency staffers to their new place of employment.

Only once in 15 years have I had to ask our corporate counsel to remind a former worker of these obligations. He chose to ignore his commitment. That wasn’t OK.


kocody said...

Paul wasn't a marketing executive, he was SVP of Ops. He ran over 400 locations at his peak with Starbucks.

Anonymous said...

While I agree with you about honoring one's agreements, many of these non-competes have been struck down by the courts as unfair restraint of trade. I don't know the details of this case, but Strabuck's may not have an easy win on this. Most likely they will have to demonstrate that the person, in their new position, could directly impact the competitive standing between the two companies.

Stephen said...

I have to agree with the previous Anonymous, the courts generally shoot these down because technically it is illegal to sign a person into a position where they are unable to work and make a living in their profession. I have also seen this type of lawsuit backfire where the court awarded the defendant a full severance for the duration of non-compete.

DaveR said...

My non-legal-yet-somewhat-experienced take on this is that..

1) Morally and ethically, I agree with Starbucks' position - this guy signed an agreement and is now ignoring it. Regardless of one's feeling about big-bad-powerful company against a person, he signed it of his own free will, and can't just act like he did not.

2) Different states have different rules on "right-to-work" and that is where enforceability of noncompetes comes into question. Where it was signed, where the signees call home, where the new prospective employer is, etc. These rules were created though to protect unfair advantage of the individual, but this guy seems to just be trying to ignore the agreement he made.

Marc Hausman said...

Thanks everyone for the comments.

Yes...I understand that it is difficult to legally enforce the terms of a non-compete agreement. However, the mere threat of a lawsuit can be reason enough for a former employee to adhere to their commitment.

It's difficult for someone to justify the time and expense that goes into defending themselves from such a legal action.