Think twice before you sign that non-compete

Published: Wed, 10/27/21

October 27, 2021

Good afternoon. Take a break from refreshing your inbox and calculating your commission check with this week’s edition of The Quota. Today, we interview a lawyer who specializes in non-competes to find out how they pertain to sales, ask a few thousand salespeople whether they’d choose a big check over a low-stress job, and (of course) deliver a Sales Fail that shows it’s not salespeople who do most of the lying. Let’s dig in.

NUMBER OF THE WEEK

46
The percentage of salespeople who never intended to go into the business. That split is even more pronounced among women: only 30% say they intended to go into sales. Among men, that number goes up to 47%

Source: HubSpot Sales Survey

SALES ROUNDUP

Here’s what’s happening in the sales world this week:

Some salespeople have been taught to repeat their prospect’s name, though others find it to be a bit annoying. Turns out, the strategy is backed by science, at least according to Harvard marketing professor Frank Cespedes. NPR recently ran a (short) segment questioning the validity of the research where they interviewed Frank, who didn’t back down. Listen here.
Think you had a good sales day? In China, a top live-stream salesman nicknamed “Lipstick Brother” sold $1.9 billion (yes, billion) in goods in one day for Alibaba’s annual shopping festival. What’s the commission check on that one gonna look like? Read about it here.
Are salespeople happier when fewer reps have to compete for the same customers? Ummm… yeah! A car dealership CEO cut his workforce by 17% during the dog days of the pandemic, and it worked so well that he has no plans to hire them back. Read more about the happy salespeople (and management) here.

MEME OF THE WEEK

Source: Instagram -- Sales Humor

THE INTERVIEW

Attorney Jonathan Pollard

Non-Compete Agreements and Sales. Here’s What You Need to Know.

Have you ever signed (or been asked to sign) a non-compete agreement? For the majority of salespeople, these documents can be confusing and intimidating, leaving us wondering whether we’ve limited our future job prospects in exchange for an existing opportunity.

We wanted to provide some clarity on non-competes as they pertain to sales, so we reached out to Jonathan Pollard, an influential (and outspoken) expert on competition law. He is an attorney and the founder of Florida-based Pollard PLLC, which litigates complex, high-stakes non-compete, trade secret, and unfair competition cases. The firm routinely represents C-level executives and sales executives when they switch companies or start their own ventures. Jonathan has appeared in or on The Wall Street Journal, Bloomberg, NPR, PBS NewsHour, The Guardian, Inc. Magazine, and more. He is nationally and internationally regarded as an authority on non-compete law.

Note: The following interview does not, and is not intended to constitute legal advice; instead, all information, content, and materials are for general informational purposes only. The interview has been edited for clarity.

Q: What is the purpose of a non-compete agreement?

The only valid purpose of a non-compete agreement is to prevent unfair competition. But in America today, 99% of all non-compete agreements fail that test. Instead, corporate America routinely uses non-compete agreements to eliminate ordinary competition, lock up talented employees, and, ultimately, to suppress wages. It's not 1970. Let's stop pretending like Google doesn't exist and like every supposed "customer list" is a trade secret.

Q: Are non-competes for salespeople enforceable?

In some states yes, in some states no. Beyond that, it depends on the nature of the industry and the specific facts of the case. The idea of "protectable" customer relationships is basically this holdover from the world before the internet. Companies and certain courts pretend like it's still 1970, the internet isn't a thing, and the "customers" can't be found on Google, LinkedIn, or Facebook. Law is a system based on precedent. So you still have courts citing cases from 40 or 50 years ago talking about confidential information and "customer lists." And that basically ignores advances in technology and the market realities.

Q: What should a salesperson do if they're asked to sign a non-compete?

Ultimately, it comes down to this: If you NEED the job, then you sign the non-compete and deal with it. If you don't actually need the job, then you have leverage. Then you refuse to sign any non-compete and insist on negotiating. You can only do that if you're willing to walk away. But, if you actually are willing to walk away and you bring that much value to the table, then you have leverage.

Q: Are there any factors that can void a non-compete agreement?

Some states like California, North Dakota, and Oklahoma (among a few others) ban employee non-compete agreements. So non-compete agreements are void as being in violation of public policy in those states. But even in other states where employee non-competes can be enforceable, there are numerous defenses. Again, this all comes down to a state-by-state analysis. But, at large, the strongest defense to a non-compete (other than that it's unreasonable and illegal) is probably a prior breach of contract by the company. The most classic prior breach is a company failing to pay agreed-upon compensation. This routinely crops up in the sales context.

Q: If a salesperson has signed a non-compete, but they've left their employer to sell for someone else, how much risk do they face?

Again, this all varies (a) from state to state and (b) based on the specific facts and circumstances. Unless the sales person does not have a non-compete or non-solicitation agreement whatsoever, then there is real risk. If their non-compete agreement is governed by NY law, maybe that risk is lower. If their non-compete is governed by FL or TX law, that risk is almost certainly much higher. These situations require actual legal advice.

Q: Is there anything else you think salespeople and their managers should know?

Employee non-compete agreements are outdated and no longer serve any valid business purpose. In today's world, they are nothing more than illegal efforts to eliminate ordinary competition and suppress wages. Companies that abuse non-compete agreements ultimately do more harm than good. They end up losing talent. And, if there is litigation, clients end up in the middle of it. That's not good for business. Bottom line: Corporate America needs to imagine a world after employee non-compete agreements. Because that's where society is headed. In the next 10 years, employee non-compete agreements will all be banned. Companies better get ready.

SALES FAILS

Each week, we bring you the most cringe-worthy sales moments from across the web. To submit your sales fail story for consideration, click here. (Don't worry, you'll remain completely anonymous).

After spending three years selling for a Fortune 500, I took a chance and joined a SAAS startup, hoping I could end up leading a sales team, and that my stock options would eventually make me rich. The CEO of the company was a hard-charging former telecom exec, who referred to himself as a “serial entrepreneur” and he was pretty aggressive about trying to land big deals even though we were super early-stage and didn’t really have product-market fit yet. Anyway, I managed to get us in the door of the U.S. division of a global conglomerate, and the CEO and I were presenting to the division director, a VP, and their staff, when the Director asked if our software could do something that it definitely couldn’t do, and (as far as I knew) would never be able to do. I started to answer, but my CEO cut me off, looked the Director right in the eye and said, “absolutely.” We got a commitment that day based on the made-up feature.

Fast forward a week later, and the VP of Engineering pulls me aside and asks me why I told the CEO we’d be able to ship that feature. He told me that it was literally impossible and that he was being put in a bad position because of me. I tried defending myself by telling him what happened, but the drama spiraled out of control and I ended up getting let go less than a month later because of it. What I later found out was that the CEO was using the commitment from the Conglomerate to close our next round of funding, so he would have done and said anything just to ensure he could raise more money. Eventually, the company ended up going under, but I saw on LinkedIn that the lying CEO just raised money for another venture. I’m sure he’s lying to his investors about that one too.

- Anonymous, 42 Austin, TX

GRAPH OF THE WEEK

Source: LinkedIn Poll -- March 2021

ASK THE QUOTA

Want to submit a question and be featured in our advice column? Click here. (Don't worry, you'll remain completely anonymous).

Dear Quota Team,

I've been in sales since I got out of college (about 11 years) and for the last four, I’ve been an AE at a large telecom company. Generally, I do pretty well. I usually hit my quota and stay off my manager’s radar, but I’m definitely not a top performer or anything. That being said, I make a great income, and never have to worry about money which is great. My problem is that I have such big swings in my attitude and how I feel about the job. Sometimes, I feel great about what I do and believe that I made the right career decision, but then other times, I get so low and start thinking that the job is pointless and I wonder what I’m even doing with my life. I even have this dream of resigning and just taking off to travel in South America or Europe for a few years or going back to school to learn about something I’m actually interested in like history, but my practical side keeps me from quitting. Is this normal or do I just not belong in sales? What do you think I should do?

Unsure in New Hampshire

Dear Unsure,

It’s perfectly normal to have ups and downs while working in sales. It’s a demanding profession, and since it’s performance-based, everyone will have good days and bad days, good months and bad months. If you didn’t have some swings in how you felt, then you wouldn’t be human -- you can’t appreciate the good things in life if you don’t experience the bad things too.

Where your question gets a bit more complicated is when you talk about getting so low that you start to wonder what you’re doing with your life, and that’s a point you definitely need to address. What you need to figure out is whether this is about the job, or about you, because there’s a not-so-small chance that you could leave sales altogether and still feel like this. If that’s the case, then quitting would only leave you jobless, and possibly feeling worse than you feel now.

That being said, if you can’t stop thinking about leaving your job to travel the world or go back to school, and you can make it work financially, then give it a shot. That way, you won’t have to live with the regret of not pursuing your dreams. But keep in mind that many salespeople have been where you are now, and quite a few of them ended up rejoining the sales world after trying their hand at something else. It’s a lucrative, fast-paced profession, and it can give us opportunities we couldn’t get elsewhere. But you might not be able to truly appreciate it until you take a step back and look at the big picture, and that’s okay too.

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Today's email was written by Ken K., Steve R., and Emily H.

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