By Omar Singh, president and founder, Surge Transportation
As we navigate our way through the Great Resignation, which is happening at the same time our nation is facing supply chain challenges of all kinds and thus creating intense competition for talent, I thought it would be worth taking a moment to consider competing for talented logisticians in a fair and reasonable way.
As an employer, I frequently encounter the issue of restrictive agreements when interviewing prospective candidates and subsequently making offers. I will say that in my experience there is a lot of confusion surrounding the differences between nondisclosure agreements, nonsolicitation agreements and noncompete agreements. Also in my experience, most people are terrified that they’ve signed something but aren’t really sure what they’ve signed because they’ve never been walked through the document in a collaborative way.
Finally, these terms lend to confusion because they are often used interchangeably and contain language that references different degrees of protection or violation — hence not all noncompetes are equally restrictive. At a high level, there are four restrictions these agreements encompass: Don’t take our secrets, don’t take our employees, don’t take our customers, and don’t work in this industry at all. So here is my take on what we do, what we’ve seen and where I think this conversation is going in the future.
We are going to meet, talk and exchange information that is not readily available to the public — it’s confidential — and we both agree not to share that information with anybody else. Nondisclosure agreements (NDAs) are generally the least restrictive of all the “non” agreements and can be the most widely used. They also can be written for short or long periods of time depending on the nature of the meeting. I’ve seen these used most frequently for employees, prospective employees and vendors such as attorneys or accountants who have access to your finances and customer relationships.
For employees, I think this is a no-brainer. We agree not to share your confidential information and you agree not to share our confidential information. For prospective employees, this may not be as naturally intuitive, but it is certainly a two-way street. For example, we often like to bring candidates into the office for a working interview. We sit them at a workstation to cover some loads, meet the team, answer calls and send some emails — see if this is something they really want to do, ask if this feels like a place they truly want to be.
The interview itself is not confidential, but as a result of the working interview they may inadvertently be exposed to customer lists, customer contacts, pricing and strategy, and it’s generally best practice to ask them not to share that information outside of our organization because it is our own. On the other hand, we work with contractors such as accountants, trainers and consultants who work with many brokerages and they also desire to have a mutual NDA so that information is protected and we can have an ongoing long-term business partnership.
In our company, this means don’t try to take the employees we’ve introduced you to. Think of it like this: I know that my wife — like my employee — can leave me at any time for any reason, but it’s really not cool that you are texting (soliciting) her at night after I fall asleep — especially when I’m the one who introduced you two. If we break up, then let us break up on our own accord, not because you are over there waiting in the grass. Go chase some of the thousands of other candidates out there.
Trust me, I know that it is the employer’s responsibility to create a compensation plan, culture, opportunities for growth and benefits package that make people want to join and stay, but this is a stressful industry with lots of competitors and there is some turnover at all brokerages. The accepted ask is that if we bring you into this company (relationship) and introduce you to well-trained co-workers (family members), you don’t try to destroy our family should we part ways for some reason.
As far as nonsolicit agreements go, this is considered to not be very restrictive and it is widely used across many industries. I will say that I have hired people who had a simple nonsolicit but didn’t really understand it and were very concerned about getting another job in the industry. It should not strike fear into the heart of anybody who decides to look elsewhere for a job. You don’t need to hide your true new employer on LinkedIn or be afraid somebody is going to see an email with your new company name on it. You do you and we’ll do us — no hard feelings, it didn’t work out.
In many companies, including mine, this merely means do not take customers we’ve introduced you to and especially do not take private information and use it to compete against us. An example of this would be that we were awarded business on a lane at $2.25 per mile and you undercut us at $2.24 because you worked with us previously and know our awarded pricing. A lot can be said here about whether we want customers who would do that, free market, the wife can leave me at any time, the customer can leave me at any time — I’m kind of hanging out here at 30,000 feet discussing the idea of these agreements. Do not take our customers and trade secrets to compete against us. That does not mean to not work in this industry at all.
Overwhelmingly most people I’ve met who have signed a noncompete agreement are not really certain how restrictive it is and think that it means you cannot work for a competitor at all. I use the example here of lane and rate information because certain large shippers have a footprint all over the country and work with many carriers and brokers. An argument can be made that just because an employee worked with ABC shipper at one company and moves to another company that also works with ABC shipper, he or she is not competing against the previous employer if it’s a different business unit or different lanes or different region. Generally we stay away from this altogether. The recommendation is just not to work on that account at all at the new employer.
The idea that a prospective employee or an employee should agree not to use confidential information that he or she learned while working at your company to compete directly against you is considered by most to be fair and reasonable. The idea that this now former employee cannot work in our industry at all is neither fair nor reasonable, but the agreements go by the same name — it really depends on how restrictively they are written.
If nothing else, I am sometimes accused of asking people to work too hard, so the last thing I would ever do is ask somebody not to work at all — I’m not programmed that way. If you consider time spent on the job to be learning a skill or trade, then it is especially unreasonable to ask somebody who just spent three years learning a new skill/trade to leave the industry altogether and start over again.
Down the road I don’t really forecast much change with the “don’t take employees we’ve introduced you to and don’t take customers we’ve introduced you to” restrictions. They are widely considered to be fair and reasonable. I do forecast a lot of pushback and reduced attempts to force prospects to sign the most restrictive version, which does not allow you to work for a competitor or in the industry at all. Recently we’ve seen a couple of large brokerages lay off hundreds of workers, leaving them without the ability to earn a livelihood in their industry due to no fault of their own. This is unappealing for their customers to watch, unattractive to prospective candidates and a real challenge with respect to a company’s ability to attract talented candidates.
We also are starting to see some growing brokerages speak out against noncompetes and even advertise their “fairness” as a recruiting tool to attract talent. If an employer’s business model is to recruit prospects from outside of industry and train them, they can likely get away with making the noncompete seem to be irrelevant in the employment agreement without walking them through the document collaboratively.
However, if part of the business model is to attract and retain seasoned logisticians who can help build a better company, to be honest with them, then I think we are going to see a lot of companies dial down the restrictiveness to something fair and reasonable.
