How to hire without creating competition?

[chrisj]

How can a small (web)start-up hire independent workers, without turning them into competition?
Do non-compete contracts work? What can a small business person, with a low amount of capital, do to keep from getting zuckerberged?

[Freelancier]

Yes, non-competes can work, depending on your local laws and the laws where your worker resides. Write it tight enough that the non-compete is clear about exactly who they cannot contact. Also you want a non-solicitation clause, a non-disclosure portion, and a trade secret portion to the contract.

Really, you need an attorney to help protect your future business. Don't skimp on this step if it's important to you.

[vangogh]

Realistically the people you hire aren't likely to steal your idea and run with it. Most of the people you hire just want to get paid for the work you hire them to do and want to have a good relationship with you so you'll hire them again. I think the best way to not have the people you hire compete with you is to build a good relationship with them.

Is it possible some might want to compete with you? Sure, but the truth is if you have a decent idea then you're going to have competition. I'd worry more about building your business and not as much about whether or not someone will compete with you.

You can definitely ask people to sign non-competes and NDAs and. Make sure you own the copyright/patent to any work you hire someone to do. An attorney is probably the best person to ask about these things.

However, if you've yet to get your business up and running I'd spend more time doing that than worrying about someone else taking the idea. Odds are if your idea is good someone else has thought of it too and is already working on it. Ideas themselves aren't worth much. The value is in the execution. Most people aren't going to steal your idea and you might find it difficult to hire someone if you're requesting everyone signs all sorts of paperwork before you talk to them about what you want to do. Someone recently called me wanting to hire me. He wouldn't tell me anything about his idea or what he wanted me to do. After 20 minutes I told him I had to leave for a meeting just to get off the phone. I never called him again and I didn't pick up the phone the one time he called me. I also wasn't the first person to respond to him this way. All I could get out of him in those 20 minutes was that a half dozen other people all stopped taking his calls. He may have a great idea and no one he's spoken to can steal it, but he also has no one working on it.

[nealrm]

You didn't mention what type of company you are running. If you are planning on running a website and hire contractor to design the site, then a non-compete clause would work. Keep in mind that different states have different levels of adhering to non-compete agreements. Also, the agreement basically go out the window once you cross national borders. (ie: the cost of enforcing it international would be prohibitive in most cases).

However, if you are starting a company to supply websites and want to hire independent contractors to make those sites, then I doubt they would be willing to agree to the terms you would expect.

[billbenson]

The facebooks of the world seem to buy smaller companies rather than steal their designs.

In my case, I recently took on a partner. But I own the website which is the primary source of leads. It's the core of the business. Also, I don't care if my partner makes more money than I do. I want him to help me expand the business and grow into something we both can retire from. He, like me is a career salesman, but has different skill sets that I lack. There are plenty of ways to protect yourself.

If you are worried about an employee taking your business and doing it better than you, it seems to me you are doing something wrong in your business. Why would he take your customers and ideas if your business is the best option for your customers?

Also non disclosure and non compete agreements help, but if you are doing your business properly, I would think they would have little impact on your long term success.

[Paul]

Realistically the people you hire aren't likely to steal your idea and run with it. .

Absolutely true.
Employees aren’t likely to steal your idea. The more important purpose of an NDA or other restrictive agreements is if a competitor hires your employee. Then they may have access to your proprietary information, customer and vendor lists etc. I’d focus more on that.

[Harold Mansfield]

How can a small (web)start-up hire independent workers, without turning them into competition?
Do non-compete contracts work? What can a small business person, with a low amount of capital, do to keep from getting zuckerberged?


Unless you have something proprietary, non-compete contracts won't do you any good because no freelancer or independent contractor would sign it.

Let's look at what you are asking:
You are asking people who specialize in something, and are already doing it for a living, not to compete with you in the same field. That's not going to work because you can't legally protect an idea. Only physical things. Zuckerberg can't legally protect the idea of a social network, only the proprietary coding , operations and company specific things that make Facebook operate..and of course the name, domain, security scripts and so on.

If, for instance, you are running a web design firm and hire subcontractors to work on projects, you can probably get them to sign something that prevents them from using anything from your company, even if they designed it on your behalf (that should be a given). Or even trying to sponge your customers once they go out on their own.

But you can't stop them from also going into the web design business. Yes, technically you can ask, but who would sign that? And what would your expectations be? That they can't open a web design firm AT ALL? Just in your city? How do you enforce that in an online world where anyone can go to any website and hire someone from anywhere in the world?

As VG said, ideas are a dime a dozen. Execution is everything.

If you have proprietary info, coding, software, design and so on, you should absolutely protect it. But just an idea? I'm with VG on this one. No one has ever come to me with an idea so original and ground breaking that I, as a web designer, have never thought about, seen before, or tried. And as a general rule, am not really interested in your idea, I just want to get paid for the work. And honestly, if you are dependent on contractors who have the skills that you don't for the entirety of your idea, and you aren't offering any reason for them NOT to compete, you can't stop them.

Westinghouse didn't invent the first lightbulb.
Ford didn't invent the first car.
Zuckerberg didn't invent social networking.

[IADS]

Non-compete contracts are illegal in Right To Work states, and California. People have a right to earn a living in their chosen field. It however does work as a scar tactic to the uninformed.
:o

[Freelancier]

Non-compete contracts are illegal in Right To Work states

I'm in a right-to-work state and non-competes are definitely valid here. However, they have to be pretty strictly constructed to be upheld (in other words, you have to define a time period, geographic boundaries that make sense for the businesses in question, and specific competitive actions for the court to uphold it). On the other hand, a company usually has more $$ to chase a bad contract than you do to defend yourself from it. Been there, done that, won the case by getting the bad contract tossed after spending about $15K in atty fees... and this was a while ago, so it's going to cost more now.

[Harold Mansfield]

I've only seen non compete as part of employment agreements. Even know of a local chain of taverns that make ( or used to make) managers agree not to work at any competing bars within a certain radius of thier locations ( which to me is rediculous).

I've signed non disclosuers before discussing a project with someone, but I doubt I would ever sign a non compete unless the rate of pay was way above my normal rates or it was a long term contract or full time position.

[Freelancier]

I doubt I would ever sign a non compete unless the rate of pay was way above my normal rates or it was a long term contract or full time position.

I actually have non-competes with a few of my clients, just because what I do for them is something that basically drives their business processes, so to hand that knowledge to a competitor would be problematic for them. And I'm ok with that, because they keep coming back to me for more work because what I do is so integral to their business success. It just depends on what you do and who you do it for and the risks involved for the client that you're willing to work to reduce.

[Harold Mansfield]

I actually have non-competes with a few of my clients, just because what I do for them is something that basically drives their business processes, so to hand that knowledge to a competitor would be problematic for them. And I'm ok with that, because they keep coming back to me for more work because what I do is so integral to their business success. It just depends on what you do and who you do it for and the risks involved for the client that you're willing to work to reduce.

I'm actually looking at this the other way around, as I think the OP is.

A non-compete not to build another website in the same general industry or to use any parts of the idea for myself. That's is just impossible to enforce, because very few people have truly original ideas..they are just spin offs of existing ideas. So if the project in question isn't even original, then the non compete is rediculous.

Personally, I'd never sign anything that promises not to build a certain type of website. And if we are talking about freelancers or temporary workers, that's just unrealistic.
Typically a non-compete is for employees in critical positions. I suppose it could extend to programmers on a temporary assignment, but I just don't see it.

Let's say you are building a new car app buyer thingy. You want to hire temporary workers to build it, but want them to sign an agreement not to work on any other car app buyer thingy? I just don't see that happening. Programmers go where the work is. If they signed a non-compete agreement with every project they've ever worked on, they'd eventually be prohibited from working on anything and be out of business.

Lets say you do that 10 times. That's it. Because now just about anything you do can be said to be simular to any one of those 10 programming jobs. Again, nothing online is that original. It can all be considered "alike".

[Steve B]

Non-competes are definitely legal in ALL states. "Right to Work" states is about union issues, and has no impact on non-competes.

I have every employee I hire sign one and nobody has ever hesitated. Of course, an independent contractor has a whole different perspective. The important thing to make sure they are enforceable is that they must not be too broad and have an unreasonable impact on an individuals ability to earn a living. They should have a time limitation aspect of it as well and the time limit must be reasonable. Typically only 1 or 2 years after the work relationship has ended.

For instance, in my business (pet fence installations), I limit my document to prevent someone from starting a similar business or working for a direct competitor in my local area (50 mile radius) for a period of one year after employment ends. If I said they couldn't work for a competitor in the U.S. for 5 years, a judge would consider that unreasonable.

[chrisj]

Thanks for all the replies. Much appreciated. My idea isn't the most original idea ever dreamed-up, buy my intent is to at least try to stifle competition if possible.
How about this, an independent subscontractor contract that states, essentially, roughly: "if, after being hired by me, you, or an affilate of yours, create a similar business, within X years, you agree that I am entitled to half of any proceeds/profit/compensation that is generated by that similar business." This might simply separate the workers I'd like to hire from the would-be competitors that i don't want to hire. I look forward to any feedback.

[Harold Mansfield]

How about this, an independent subscontractor contract that states, essentially, roughly: "if, after being hired by me, you, or an affilate of yours, create a similar business, within X years, you agree that I am entitled to half of any proceeds/profit/compensation that is generated by that similar business." This might simply separate the workers I'd like to hire from the would-be competitors that i don't want to hire. I look forward to any feedback.

Um, no. You're not going to be able to find a subcontractor, who by nature works on other people's projects, to sign anything like that...unless they are from India or China where it won't mean jack squat anyway.

Besides, you can't sue a company just because they have a simular business and someone that now works for them, used to work for you. How would that even work? You hire me. Job is over. Next month I work for someone with the same or simular business, and you sue them?

Competition is part of business.

I wouldn't trust working with anyone who would sign something like that.

And no one is going to sign anything that promises anyone half thier profits for any reason what so ever.
If you beleive in your idea, and your abilities you'll go for it. You want to beat competition? Be better than them.

[chrisj]

I appreciate your feedback. However, I'm not talking about hiring skilled professionals, I'm talking about hiring students, for example. And I'm not talking about suing another company that hires someone I hired, I'm talking about someone I hired creating a similar business - after learning about it - by working for me. I understand not everyone would sign an agreement like this, its for narrowing down the candidates, and hiring the ones that would sign it.

[Harold Mansfield]

Look, all I can do is give advice as a person who works as a sub contractor all of the time and have seen more than my fair share of these. And my advice is that you are worrying about something that you can't control and are trying to come up with a way to create a contract that is unenforceable.

You already said that your idea is not original, and there are probably 100 people or more either doing it, or building it as we speak. That ends it right there.

Unless you have some proprietary coding, you have nothing worth protecting. You can't stop people from competing with you. In a way, I'm competing against a guy I worked for 5 years ago. Using some of what I learned about the business when I worked for him.

The chick that is now running Yahoo, came from Google. The guy in charge of Obama's Social Media came from Facebook. Lee Iaccoca used to work for Ford, before he ran Chrysler.
That's business. That's life. You can't stop people from using their experiences just because you hired them for a week to write some code.

You CAN stop them from stealing. You CAN ask that they not share inside information about your company. But that's about it and that's usually a given anyway. I have no reason to talk about your company with my next client. It's not even something that crosses my mind.

You can't stop someone from taking or competing with an idea, especially one that others are already doing. You're the one that is late to the party here. Now get in there and make yours better. And if you do come up with some proprietary system, then yes, protect it.

Believe me. Not many web designers or programmers are interested in your idea. If any. We hear a million ideas from people that all think thier idea is original. Countless, "I'm looking for someone with technical expertise to join as a partner for a percentage of the profits".

Our only interest is in doing the job that you want done. Doing it well. And getting paid.

I'll go step further and say that, the day someone calls me and pitches an idea that I have truly never heard before...I'll do the work on it for free. Cause it's never happened before. I long for the day that it does.

I've probably signed 5 or so non-disclosures from people who wouldn't even discuss their project with me until I did. And each time, it was just the same old, same old idea. Absolutely no reason for all of the fan fare and drama.

Besides, it's not necessarily the original ideas that are successful. It's the well executed ones.

[Harold Mansfield]

I"ll just add that, if this is something that is location or industry specific, and no one has applied it to what ever location or industry you want to tackle yet, you may go for a Trademark to at least prevent people from branding it in a way that is directly competitive.

Kind of like how Vegas.com claims dominion over everything "Las Vegas" online that has anything to do with travel, tours and show tickets. I didn't know trademarks could be that broad, but judging by the amount of people they sue or send letters to, apparently they own rights to the name "Las Vegas". Or they're just bullying everyone.

[chrisj]

Thanks again. Yes, everything you said is true and already understood. You're talking about Ford and Google, and about emloyees going to work for other employers.
I'm talking about teaching someone who hasn't worked for a web site before, about the processes of the site, and then that person starting a similar business (not going to work for someone else). I'm not saying I have the most original idea, and I'm not saying I'm going curtial competition in the western world, I'm just floating an idea that might hinder direct competition in this type of specific situation, by having them sign a contract that may lay claim to their future earnings if that person decides to go for it. It may psychologically make them think twice before going to all the work of competing.

[Harold Mansfield]

I understand. It won't work. The only thing you can protect is proprietary and internal company information. You can't stop them from going out on their own, and no one with half a brain would sign anything like that, if it's even enforceable.

[Dan Furman]

Thanks again. Yes, everything you said is true and already understood. You're talking about Ford and Google, and about emloyees going to work for other employers.
I'm talking about teaching someone who hasn't worked for a web site before, about the processes of the site, and then that person starting a similar business (not going to work for someone else). I'm not saying I have the most original idea, and I'm not saying I'm going curtial competition in the western world, I'm just floating an idea that might hinder direct competition in this type of specific situation, by having them sign a contract that may lay claim to their future earnings if that person decides to go for it. It may psychologically make them think twice before going to all the work of competing.

The problem you have here is this sounds like an online business. I believe these issues are still very murky there. I can see Steve with the pet fences and a certain mile radius. That makes sense.

But to stop someone from learning your business, and saying they can't start a similar business, when your "area served" is the entire world? That's not reasonable.

By the way, the guys who got Zuckerberged made out fine in the end. Probably a lot better than if it never happened (who is to say Facebook explodes under someone else's direction?)

[vangogh]

Chris I wouldn't put your energy into worrying about stopping the competition before you have a business. Right now it's more important you get the business going than preventing people competing with a business that isn't quite there yet. Like I said before, very few people are going to try to steal your idea and become your competition. Even if they did your success isn't really about their business. It's still about yours. Unless your business requires being first to market and someone you hire leaves and gets to market first, it won't affect you.

If your idea is a good one then people will copy it. I'm not talking about people you hire, but people in general. That's how business works. Anything successful is going to be copied and you'll have competition. It won't be that hard for people from the outside seeing what you're doing and doing the same thing themselves. And again if you're doing things you can be successful regardless of what the competition does.

All businesses large and small face competition. Part of what it means to be in business is growing and changing. Business is about adjusting. Don't worry about people stealing your ideas. Worry about executing your ideas as best as you can. If you do that then you have nothing to worry about from the competition.