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National Sign Subcontractor Non Compete Wording - How Do You Handle?


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Greetings and thanks for any feedback.

We do a lot of work for national sign and maint service companies. The wording on the non-compete part of the contract for many of them, if you read them carefully as we do, is pretty vague and draconian at the same time. Could be dangerous for our/your business and heres what I mean. How do you handle this but also do work for these national accounts?

Please realize I know the "reasonable"intent of this part of the contract is so we dont try to simply go direct to corporate XYZ and say "we are doing service work for you so lets just cut out ABC National Service out and save you some money". That is wrong and we will never do that. But the way it is worded does a lot more.

Non-compete says something to the effect of "you will not do business with our customers or any of their other suppliers for 2 years or we will sue you for $". 1 - They do not list who their customers are. 2 - how can anyone know who their customers suppliers are? 3 - we do interior lighting, exterior lighting and sign work for different national vendors so we may be doing sign work for one national maint company while interior work for another.

If you sign off on one of these (and a lot of them say some form of this) it seems that either you cannot do any work for any other company or some nutty company lawyer at least has a case if you do. Stupid boiler plate clause but its there - what do you do?

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  • !llumenati

just shootn from the hip here but if you are doing work for maintenance service companies then they have a maintenance contract with the corperate office and the franchises are not allowed to sub out on thier own. If ABC expires or cancels thier maintenance contract then they are no longer a customer of thiers and they are open game.

I;m no lawyer but seen a lot of contracts and they have more BS explaining words or phrases then the actual body content. Maybe for it to be legally binding the word customers must be itemized on who they are. Have you spoken to a lawyer?

There are some national manufacturers and service companies on here and should chime in and explain.

You can always try and send them a contract that specifies that for their contract to be binding you have exclusivity to ALL work in X miles from your geographic location. Just a thought.

GOOD things happen for a reason......

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  • Board Patron

My policy is never bite the hand that feeds you. The national service work we do is great fill work. The last thing I would do is try and rip them off. I work for 2 different nationals, for the same customer. One has certain parts and the other has their maintenance parts.

All my employees sign a no compete clause. They are not to take or find side sign jobs while working for me.

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Greetings and thanks for any feedback.

We do a lot of work for national sign and maint service companies. The wording on the non-compete part of the contract for many of them, if you read them carefully as we do, is pretty vague and draconian at the same time. Could be dangerous for our/your business and heres what I mean. How do you handle this but also do work for these national accounts?

Please realize I know the "reasonable"intent of this part of the contract is so we dont try to simply go direct to corporate XYZ and say "we are doing service work for you so lets just cut out ABC National Service out and save you some money". That is wrong and we will never do that. But the way it is worded does a lot more.

Non-compete says something to the effect of "you will not do business with our customers or any of their other suppliers for 2 years or we will sue you for $". 1 - They do not list who their customers are. 2 - how can anyone know who their customers suppliers are? 3 - we do interior lighting, exterior lighting and sign work for different national vendors so we may be doing sign work for one national maint company while interior work for another.

If you sign off on one of these (and a lot of them say some form of this) it seems that either you cannot do any work for any other company or some nutty company lawyer at least has a case if you do. Stupid boiler plate clause but its there - what do you do?

The whole concept of Nationals has come up quite frequently in my conversation base this year. I also work for some Nationals but am selective of which ones I work for. I am not painting with a broad brush, but most of these middlemen are not very good payers and their payment terms are as vague and misleading as their "Non Compete" clauses as well as just about every other clause so they can cover their hind quarters when the ineveitable payment runaround occurs.

Having said this, the concept of the "Non Compete" clause is understandable when applied to particular instances. They are attempting to protect their interests when sending you to a particular customer to prevent you from simply offering that customer your services directly to cut out the contractor who sent you in the first place. I understand their concern in this venue. But to say you basically cannot exist in the market because you may possibly solicit some nameless generic customer that they may or may not actually have I believe is related to the precept of the Void Contract.

How about if they made you sign a contract that said you would smash your truck into a fence weekly as part of your work schedule. Would it be enforceable ? It is a void contract from inception. Could they sue you and win? You can sue anyone for anything in our present society but I doubt any court would hold that scenario up and award damages. This would also get into the area of enforcing ""Unjust Enrichment" and the legal system, in my past experience, doesn't do this.

An area you didn't touch on is actual jurisdiction relating to any claims or disputes arising in the normal course of business. This is just as important. They always want to have any issues settled by arbitration or systems present in the home locality of the contracting entity. IE, you have to take issue with problems on their turf where they feel the deck is stacked. Take a look at the fine print of your credit card rules and you will see this is a common practice which has been both upheld and struck down in many cases.

I live and work in California and we are operate under very liberal rules which usually favor the small guy. I recently embarked on a disute for timing of payment from a National who thought they were being quite cute with their perceived vagueness on a contract with my company. Basically, like so many who are listed on this board, they were dragging their feet hoping I would just go away. I informed the National that the property that the end customer was based was on soil here in California and we have certain rules we follow. I informed them I would take a mechanics lien against the major mall as the store was on their property. I also told them I would file a small claims suit against the end customer even though they actually didn't hire me and we could straighten it out at court. I also told the National I would present my bill directly to the end customer in advance for settlement so said customer would be appraised of the original amount for my service and I hope it wasn't marked up too much or falsely.

After a series of you can't do that because of page 1 clause 8, I told them to "Kiss My Ass" and I will take my chances. But the customer will be appraised of the whole situation. I also added I would inform the end customer that the National was claiming the major comapny hadn't paid and I embellished the situation by adding said National was insinuating that the major was a "Dead Beat".

To cut to the cahse on this long winded story, I got paid in three days. I don't do any more work for said Natinal but I we had no long term relationship with them due to their deceptive practices in the first place. If we were going to depart enemies anyway, we departed as enemies with me collecting what was owed me.

Bottom line, yes, a contract is a contract but that cuts both ways. And in the final analysis, laws and contracts were made to be broken. In addition, I have never heard of my state extraditing any entity to a sister state for a civil matter. In summation, if you want to catch me, you are going to have to do it in California.

Best

Dominic

"Don't be afraid to see what you see" - President Ronald Reagan

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I would have 1 addendum added stating that if they miss 1 payment deadline than the contract is null and void. Pretty simple you dont screw me and I wont screw you.

BTW I think it sort of dumb for a no compete as most para legals could shred one in about 60 second. I also agree that why bite the hand that feeds you . If they are sending 10 grand a month in service why would you jeopardize it for a 400 buck service call. We have frequent requests from companies that my customer have sold signs to that want to buy direct and I just direct them right back to who we sold it to. I have ZERO interest in doing retail work.

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Thanks very much for all replies. To be clear, we would never, ever try to cut any company out of the business they gave us. We follow the Boy Scout Motto here, simply - ... trustworthy... loyal...etc.....BUT many of these non-competes read this way. This leads me to the answer that hit closest home:

"But to say you basically cannot exist in the market because you may possibly solicit some nameless generic customer that they may or may not actually have I believe is related to the precept of the Void Contract.....How about if they made you sign a contract that said you would smash your truck into a fence weekly as part of your work schedule. Would it be enforceable ? It is a void contract from inception. Could they sue you and win? You can sue anyone for anything in our present society but I doubt any court would hold that scenario up and award damages. This would also get into the area of enforcing ""Unjust Enrichment" and the legal system, in my past experience, doesn't do this."

It seems to me though that the answer above about "the precept of the Void Contract" and " into the area of enforcing Unjust Enrichment" seems pretty reasonable. Without giving us the names of the customers and also saying we can’t do business with “the customers (again, not named) suppliers” it could be any and every brand and retailer. Considering they are not using us exclusively, and their contract does not say so it seems even further reasonable.

Anybody else have any actual experience with this line of the question or more feedback on if this clause has any weight since it is so vague and far-fetched?

THANKS AGAIN

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I have not seen too many non-compete clauses that will hold water. To my understanding for it to hold up you have to be paid a extra amount for the non-compete. I have had atty's tell me unless a employee is pay a bonus for the added non-compete it is not worth beans. When you pay them the bonus and they go work somewhere else you can sue for all the bonus money plus interest back.

I

Installation & Maintenance Services

Brian Phillips | expresssignandneon@sbcglobal.net | P. 812-882-3278

Express Sign & Neon | 119 S. 15th Street - Vincennes - IN 47591

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