Contract clause spells trouble for career progress

| 20/02/2015 | 54 Comments

(CNS): In an increasingly tough job market junior employees are facing a new hurdle in their efforts to find work with the worrying enforcement of ‘non-compete’ clauses in contracts, making it more difficult for young workers to switch jobs. Concerns have been raised that the issue is not only unreasonable but it could fuel local unemployment because such clauses, which don’t usually affect junior staff starting to climb the career ladder, can block the development and hinder the advancement of the workforce.

Mario Ebanks, Director of the Department of Labour & Pensions, warned employees of the dangers of signing contracts carte blanche without proper consideration of all of the terms and conditions and where necessary negotiating them because the clauses could be enforced. Ebanks said the labor law does permit “special requirements or conditions” and pointed out that employment contracts are subject to negotiation between the legitimate parties. He added that employees have a right to access the courts to resolve any disputes.

A local junior IT technician, who spoke with CNS on condition of anonymity, said he signed an employment contract a few years ago that contained a clause prohibiting him from working in a similar position for any “competing companies for a period of six months”. But at the time he never imagined it would force him to be unemployed when he is willing to work and had an offer on the table.

“The truth is, who signs a contract thinking that you will never be able to freely leave the job after resigning and immediately move into a new job? I am not a manager and I don’t have any information or trade secrets. I work directly with customers servicing their computers and that’s it. It never crossed my mind that this would happen,” he said. Once he resigned, he found he was not only out of a job but his new offer was withdrawn.

“The new employer was threatened with legal action if they hired me,” he said.

After his former boss called his prospective employers and threatened them with legal action they withdrew their offer and now the young Caymanian has joined the ranks of the local unemployed and could be that way for the next six months, despite being a qualified and experienced young IT worker.

Feeling his former bosses wanted to make an example of him with what he described as an “underhanded tactic”, he told CNS it made no sense to threaten his potential employers who were not party to his contract.

“I think it is unreasonable for a company to restrict employment opportunities of the lower level employees through non-compete clauses,” he said. “Employees at non-managerial positions are not likely to possess confidential information that a non-compete clause seeks to protect.  These clauses especially affect Caymanians who have nowhere else to go to find a similar role elsewhere that would match their skills and experience.”

With jobs harder to find and options already limited, he said, the authorities need to intervene and restrict such clauses for those lower down the career ladder.

CNS contacted the employers involved but we have not received comment but we saw both the employment contract, which contained both non-compete and confidentiality clauses, as well as the job offer withdrawal. The technician’s potential new employers said he had not disclosed the potential legal implications around the restrictive covenant and as a result they withdrew the offer.

Bodden Town MLA Alva Suckoo said he was shocked about the clause and wondered how employers can expect Caymanians to exclude themselves from employment for so long on a voluntary basis.

“Too many Caymanians are unemployed and unable to find work that they are qualified for as it is, and I certainly do not support requiring ‘non-compete clauses’ in contracts for Caymanians in the Cayman Islands,” he told CNS. “ The situation may be a bit different for an individual from another jurisdiction if they have been brought here for a specific purpose and role, but to seek to restrict someone from working in their own country, who may not have many other options available to them, is certainly not something I feel is fair and or realistic.”

A local recruitment industry insider was also surprised that the company was seeking to enforce the clause for such a junior position as he noted that while it happens with permit holders, it is not common with local junior workers.

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  1. Anonymous says:

    Whoever moans about non-competes is moaning too late at the end of their contract. They should have raised concerns prior to signing the agreement. An employee who does a deal and then reneges on it when it does not suit them is one to avoid in my book.

  2. Fred says:

    ““The new employer was threatened with legal action if they hired me,” he said”. I’m no lawyer, but I’m pretty sure that a non-comp clause can only be enforceable on the employee, not actionable against any prospective employer. Would a legal beagle care to confirm ?

    In any event, that need not be the issue. The prospective employer would not care to hear that his new employee may be subject to legal action and that in itself may be enough to have them withdraw the offer. Add a little dash of Cayman politics (“I can use my influence against you, you know” ) and the employee is stuffed.

    What would be more reasonable would be clauses dealing with (a) not taking or sending any data in any format whatsoever outside of the company premises except with permission, not copying any files and so on (data protection) and non-solicitation of clients. If they are already in the contract then also including a block on working in the industry for 6 months is a grossly unfair term of the contract. I really doubt a Court would find in favour of the employer on that alone if t were put to the test.

    • Anonymous says:

      The potential employer cannot procure the breach of the contract. To do so would be actionable.

  3. Anonymous says:

    Now is the time for all good men to come to the aid of their country……..

  4. Iamnotapirate says:

    So he signed a contract (which is his word), Worked under that contract until he left, and then decided That it was now (not then) unreasonable for him so it must now be unreasonable for everyone else too. Is that about it? The real problem is that many people who work under similar contracts will think that giving their word and then not honoring it is just normal and OK. Be a man about it. You don’t like the job or the contract don’t sign it and move on like the rest of the working world does. Blaming the employer because you gave your word to follow something you don’t understand just shows your not qualified.

    • 1111 says:

      Except if the contract is unreasonable, So just to be clear your solution is to allow the company to retain the clause, forcing any new employee to be unemployable for 6 months after they leave, or not sign it? Wouldn’t that just be an underhand way of ensuring they only employ expats who typically don’t change jobs? My contract doesn’t hold that clause, it does restrict me from taking clients, but I am free to work in my chosen profession, which I consider fair and reasonable. Having said all that the employer showed their true colours by calling the other company and threatening them, even if we can’t agree on the contract side I don’t see how you can defend that?

    • Anonymous says:

      Judging by your grammar and punctuation, you’re not qualified to post on this website. Please sit down and shut up.

      • Da Truth says:

        Having a poor education should not preclude somebody from being able to have an opinion.

  5. Anonymous says:

    Oh my good Lord……..talk about being vindictive and malicious!!! To call the prospective employer and bar this Caymanian from employment? This company NEEDS to be EXPOSED for simply being vinsictive! Sounds like a good court case to me! Be sure you send everything to Immigration Board and NWDA and your elected officials!! This CANNOT continue……..
    We’re already being short-changed in OUR island. As Ewing said in TCI to the unscrupulous businesses in there “of all the people who should benefit it has to be TC Islanders”
    SUE ‘EM BoBo…….about time we stand up on them two feet God gave us. And may justice be yours!

    • Anonymous says:

      Non-competition clauses are very common in employment contracts albeit not usually for junior positions unless sensitive client information is handled. I have worked under a non-competition clause all my life and have never had any problems. You should not sign a contract unless you understand it – we all know that – so why complain after the event? This should have been raised at the point of contract, and in any event, if taken to court, the court would only enforce such terms if considered reasonable considering all the circumstances.

    • Oh, come on! The kid was Caymanian and accepted the terms of employment when he accepted the job. This is not an Immigration issue and he should have informed his new employer of the handcuff clause- in fact, he should have thought twice about leaving the job if he could not wait for six months before taking on a new job.

      • Time For Change says:

        I see so your company can know 6 months out that it needs staff or even better once someone signs a non compete clause you can treat them like crap as they can’t leave to get another job? On an Island this size this type of contract can never be upheld.

        • Fred the Piemaker says:

          How long do you think it takes a employer to replace a person with a particular skill in short supply? So its wrong for the employee who walks out without giving notice to be out of a job for a period of time, but OK for the employer to be without staff in a critical function?

        • Da Truth says:

          Actually the small size of the island and limited competition means its more important to protect your business.

  6. anon says:

    I am a business owner. I used to be an employee. On reading a lot of these comments it would seem to indicate one thing. That assumptions, conclusions being jumped to and hasty opinions are being posted without any idea of the other side to the story. At the end of the day, in all things, there are and will always be two sides and until you hear them both, no one can really judge right from wrong, good from bad. Its sensationalist journalism that produces this type of negativity. An employer has the right to protect his/her business and employees livelihoods and an employee has the right to protect his/her own. To take one side of the published article and judge on that alone is narrow minded and tunnelled.
    I am not familiar with IT service companies operations, but if a company has a nc clause and asks to have an employee willingly sign the clause before taking up a position, then it would suggest that that employer is looking to protect the interests of many (all his/her employees) because senior or not, likely that employee has access to sensitive information. If you are happy to sign something in order to get a job, then comply with it otherwise, if you didn’t agree with it in the first place, then don’t sign it and don’t join the company. You cant expect to have your cake and eat it and then go eat someone elses! Before long everyone is then doing it and companies are closing shop and more people fall out of work! Respect what you sign and respect that there is likely a good reason for an nc clause being asked for.
    Many companies insist on nc’s in many countries in many many industries but they must be reasonable. Remember, most if not all employers have been employees at some points during their careers. Not all employees have been employers however (walk a mile in someone else’s shoes). So its back to two sides again. I think an employee has every right to earn a living and feed his/her family. An employer too has the same right but responsibility extends to many others mouths to feed too. Why should it be allowed for one individual to jeopardize the livelihoods of many (Caymanians and expats alike). Bottom line, if you don’t agree with a contract or condition, don’t sign it or at the very least, ask if it can be altered to what both parties can accept. If you willingly sign something, then abide by it. A bank produces a mortgage document (normally and understandably quite weighted in the banks favour to protect their interests) and if you want the money to buy the house then you sign it. You cant then just ignore the contract you sign when you feel like it and expect the bank to accept you breaking contract and allowing it. Law firms here have been kept quite busy acting on behalf of banks against mortgage contracts broken, for whatever reason. Even though there are two sides to even every one of those stories (and some families have had it horribly tough), nonetheless, the bank is mandated by its board to protect is investors, its business, its employees, all its other clients and its interests etc.
    I hope this person gets a job and succeeds and at the least learns from this that respect, ethics and principles have two sides and that each must be understood as he/she embarks with a new company. If he/she is a qualified as the comments suggests, there must be many companies that would gladly snap him/her up without the need to even address let alone break a nc. So good luck to both the employee and employer and hope it all works out (as it normally does in the end).

  7. Jeremy says:

    I find this particularly odd. This clauses seem to be more for larger jurisdictions where the market/pool is larger. The employee was very sensible in his comments to the reporter. This tactic by his boss seems very much to get even with him, perhaps he was one of the few caymanian employees that made his quota for new work permits too.

    I know persons who left law firms had these clauses. But they left and they set up new firms. They all conspired to leave for differnt reasons at differnt periods just so they could work at a new firm in the same market while not breaching there contract, and they were all on work permits.

    I would only understand this to work in law firms where people that are leaving can possibly take client’s or conflicts of interest that could arise or managerial positions who help with policy and directions of the company.

    As for IT we don’t have any trade secrets/intellectual property here like what Apple and Google do and these clauses are included in their contracts. I could understand the vulturing for employees for a competitive edge. We have several businesses and if someone stole my employee (in a particular business) then I may feel away, however we always feel that we need to treat out employees well so they don’t leave and people would want to work for us.

    Perhaps maybe this employee should be brave and go to the courts (with legal aid because he is unemployed) because he is suffering now and perhaps this could be a form of workplace discrimination as he was seeking to better himself but has not been thwarted. He should perhaps provide a letter to immigration of the situation so the employer doesn’t bad mouth him and import another work permit holder.

    Laws are written for equality, I find it abusive to happen in cayman including his former employer threatening legal action including contacting the other firm. Although I have read apple and Google trade barbs like this all the time.

    • Anonymous says:

      You clearly don’t understand intellectual property, so I wouldn’t be here professing to be an expert if I were you. Its not just all about clients and conflicts, its about sensitive client information held on records maintained by the IT departments, and all the metadata that sits under it. Its about employees using such sensitive information and documentation to their gain after leaving a particular employment, and moving on to the next. Of all things, IT departments keep probably the most important and sensitive information of any organisation, legal or otherwise.

      • 1111 says:

        That may be true, but for me my judgement of this is going to be swayed if the employer made him work his notice, if the data and non compete is that sensitive they should be paid out of their notice period and asked to leave same day. If they made him work his notice period then it tells me its something else, besides I’ve never seen a contract that doesn’t spell out intellectual property and who retains it. There is usually enough narrative in a standard contract that doesn’t require a NC clause.

  8. mpd says:

    Cayman is governed by companies.
    Companies owned by politicians.

  9. Anonymous says:

    How would you like to be the employer if you have contracts with no compete clauses and you invest in overseas trainining of expats and then they turn around and leave your company to work for your competition. Try that on for size

    • Anonymous says:

      You can set contractual time obligations for that, though, it shouldn’t be forever. Nurses often get paid training and in return must work for an agreed upon length of time, or pay back some portion of the cost, but once they’ve worked long enough to cover the cost of training they can do what they please, and the wise employer keeps trained and talented staff by being the place where they want to work.

    • Anonymous says:

      This was not an expat situation but all employers take a risk that once trained people can and will leave them. That’s the cost of doing business. But to tell someone they cannot work for 6 months after leaving you is just pure wrong – unless you intend to fully support them for that 6 months.

      I’m pretty sure no court would ever enforce that against a local who has no possibilities to got and work elsewhere.

      As a business owner myself I think there has to be some balance. You can’t stop competition you can only try to be better than the competition by offer superior customer service etc.

      At the end of the day having someone unemployed who can and wants to work is detrimental to us all. Not only that but you have to admit that it will not be easy for him to obtain employment in other areas if his most recent experience is in IT support – not in this job market.

      Funny enough – if there’s another clause about trade secrets and disclosure in the contract what’s the point of a non-compete clause? The end came is the same right – no pouching of customers?

      After reading this entire story I couldn’t help but think this employer was being more vindictive than anything else. I’m sure this is NOT the only young man that has left him employment to go and work with a competitor so why enforce it now?

      Desperate times … desperate measures I guess! Very sad for such a small jurisdiction!

  10. Anonymous says:

    I personally know this individual as we are close friends and also worked as colleagues in the past. We speak regularly about our jobs and personal issues and this issue of course struck up an interesting conversation. He always spoke about his aspirations to turn his career to IT. It was also a major obstacle for him to get a foot in the door lacking the experience most employers ask for which is a completely different discussion. About 2 years ago he finally took the steps needed to certify himself and get in the realm of IT. He always spoke of the major financial sacrifices he had to make to get in but in the end he’s happy. To hear what happened to him simply because he was doing what he had to do to survive and support his family is absurd. hearing him talk about the great job offer that found him including educational and personal development opportunities along with the added benefit of having his earnings substantially increased, to being unemployed not knowing how to pay his bills has really got me boiling over in disgust. The system needs to change and these employers need to stop hiding behind lawyers and have some compassion. The mere fact that he was honest enough to both tell his employer why he was leaving the company and where he was going should have been enough to show them that he is not a threat and had no intentions on defying the company. The movement of having these clauses eradicated for low level employees needs to be a priority as this is being seen more and more. I would hate to see this happen to another individual in the same predicament. What department is responsible for spearheading this?

  11. Anon says:

    There are always two sides to a story and it appears this is only one side reported. An employer protecting a company via a covenant may also be protecting the livelihoods and interests of existing Caymanian staff (i.e. many) within that company. If the information that an employee regardless of position holds is confidential, a company should have every right to protect itself, its employees (Caymanians and permit holder alike) and its interests. A Non – compete is also just that, a noncom and doesn’t close off the entire IT market or industry for that individual to get a job.

    • Anonymous says:

      A non-compete is not enforceable in the Cayman Islands – especially with a junior employee as this is considered a ‘restraint of trade’. If it was non-solicitation then that is a different matter but there are precedents already in the Cayman courts about non-compete. This happened to me so I am speaking first hand…

      • Anony says:

        From what I have learned about this company, the owner seemed to be very insecure and suspicious which would probably then explain why he was so threatened by the situation. Perhaps you’re right.. there very well could be more to the story. Do these IT outsourcing companies get audited for controls? If not they should. Seems shady.

      • Anonymous says:

        Made up law.

    • Anonymous says:

      If the individual is a threat now, he will be a threat in six months. This is just malicious and should be illegal. Shameful.

    • guest says:

      I think that’s what they are saying, that it does close off the entire IT market, he was barred from working in similiar positions, seeing as his chosen field was ‘fixing computers’ that’s a bit of a broad title to have as a non-compete.

  12. Anonymous says:

    He may have been junior level at his previous job, but what if he was privy to the internal working of his organisation, including its client base? In that instance I can see why they would have a non-compete clause in his contract, no matter how junior he is. If he is computer technician, I suspect there might be issues relating to intellectual property which his former employer is seeking to protect. As someone said up top, there is much more to this story than meets the eye and I doubt any organisation would go to the time and trouble of inserting a non-compete clause into its employee’s contract without some form of legal advice being taken on this issue.

  13. Caymans List says:

    Sound like this is way to control Caymanian employees the same way they hold Work Permits over the heads of Expats..

    • Anonymous says:

      nope…I’m expat and I had a no compete clause with my last employer on island and that wasn’t IT or law or accountancy..

  14. Caymans List says:

    Get proof that they did this and sue them..

    • Anony says:

      From what I understand he has proof and he is in the process of dealing with his lawyers currently.

      • Anonymous says:

        or perhaps he should not have signed the contract in the first place, with the clause included
        Here is some free* advice for you:
        “Always read anything you sign”

  15. Salty Dog says:

    Some positions do require non-compete & confidentiality clauses because it would be detrimental to their company to have a higher level employee go to a competing firm and pass along everything he has just learned from his previous company. Being a small Island, this could well lead to the competitor gaining an undue advantage. On the other hand, it wouldn’t be a requirement to have this type of clause in a junior position. It sounds like the individual left on poor terms from the previous employer, because quite often, despite having those clauses in their employment contract, most employers would choose not to enforce them and allow the ex-employee to seek work elsewhere. There is likely more to the story than what the article indicates.

  16. Anonymous says:

    If he received an offer that’s called a job in waiting therefore he has a legal claim against his potential new employer

  17. Anonymous says:

    The point is this: Lower level employees should not be asked to agree to a non compete clause. Junior staff in most cases do NOT have access to confidential information that could pose any kind of competitive threat. Government need to protect their Caymanians and see to it that these kinds of agreements are abolished for staff who are below managerial positions.

    Many people are affected by this and don’t even know! I’m happy that this article brought some awareness. I myself am a lower level employee and I have the same stipulation in my contract however if I were ever to leave where I am at currently I’d like someone to tell me where I could go!

  18. Unnoninious says:

    I dont want to be the one to call an early Election but I hope people will wakeup and realise that we should have had that 6 months after the election because nobody cares for us excepted Mr. Al Suckoo and Mr Bernie Bush. God help us to give them until 2017 we won’t be able so say a word because that FOS will be taken away from us too

  19. Anonymous says:

    In principle they are not illegal but enforceability can be an issue. Why would they need this for a junior technician?

    http://www.steenandco.co.uk/thomas-v-farr-plc—important-court-case-on-non-compete-clauses-_60/

    • Anonymous says:

      It seems like they knew they would not be able to enforce this clause especially on a young Caymanian trying to better himself. That is why they sabotaged him from his prospective employment. It angers me that situations like these exists and the lackadaisical legal system or respective board here in Cayman does not protect! Labour board is absolutely pointless!! Who do you go to in a situation like this?

      I hope that the company who destroyed this young man’s future becomes exposed! My son is in IT and I would hate for him to experience a situation like this.

    • Anonymous says:

      Meant to say they ARE LEGAL …

  20. Anonymous says:

    I see the issues here as twofold (1) unreaasonable given the size of the island especially if you are a Caymanian and cannot go elsewhere to work (2) this is normally reserved for people with company secrets such at top level managers. Why is it being enforced against the juniior staff? Seems to be this company should be called out for being really petty. Imagine if every company in Cayman did this – who would anyone be able to survive? I agree the employee needs to sue them!

  21. Anonymous says:

    There is nothing wrong with having a non-compete clause. It’s understandable that any company would not want their competition to have current inside information about them. However, by no stretch of the imagination could a supermarket claim that a duty-free store or law firm is their competitor. The only reason for asking someone to sign a non-compete clause in a contract is because they will have access to time-sensitive information.

  22. Sim G says:

    Department Of Labour has no real use to be honest. So many Employers violate Labour Law and are never fined or disciplined. So what purpose does that Department serve? Companies are not even paying “Holiday Pay” the rate of double time yet they are never fined or made to pay the employee back. I would ask CNS to do a Survey on how many persons who went to the Department Of Labour got their issues resolved. How long did it take to resolve them. You would be shocked at the numbers. CNS I implore you to do this survey and it will show that DLP has been ineffective in resolving matters. It takes them one calendar year to resolve even the most simple issues. Where is Mrs. Rivers or Mario Ebanks to answer “Crickets”.

  23. Anonymous says:

    If any employee considers a non-compete clause is unreasonable they should go to the Courts whose job it is to decide whether the clause is enforceable or not. These clauses are enforced in most countries but only if they are reasonable in all of the circumstances. They are harder to enforce if they seek a ban on working for a competitor for too long a period or in too wider an area (e,g, the whole country). I do not know of any country that has legislation that prohibits restrictive covenants in contracts of employment.

    • Anonymous says:

      Try California : In California it is a bright-line rule: Employee noncompete agreements are void. It does not matter how reasonable or well-intended they are

  24. Anonymous says:

    Not just Caymanians. Many experienced expats are unable to change jobs without leaving the Island which messes with the local labor market. These clauses are illegal in most other countries.

    • Anonymous says:

      Really, name one?

      • Anonymous says:

        I don’t believe that they are illegal they are just not easily enforceable. The ‘burden’ falls on the employer (not the employee) to prove their case in the court of law which historically must be proven to be ‘reasonable’ and avoid a ‘restraint of trade’

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