Employment Agreement Gone Awry

The set up. Chip recently took a job with a company that presented him with a bound employee handbook, some other corporate paperwork and a non-compete agreement. Not uncommon. However, for most of his career, Chip has been a residential HVAC technician (heating and air conditioning). In recent years, Chip has been a successful residential sales person. His success is not due to a pushy, sell at all cost manner. Chip shoots straight with his customers. He lets them know when they don’t need to replace their unit, and helps them find an appropriate solution within their budget. After all, air conditioning unit prices just might make you gasp for air!

The corporate gotcha. So Chip joined a company in which most employees do not have more than a trade school education. And then Chip was asked to sign documents with the following language:

  • We can fire you and stop paying immediately, but we would like you to give three weeks’ notice if you quit. After an employment at will statement, the document sets forth “If employee elects to terminate his or her employment under this subsection, Employee is requested to provide a minimum of fifteen (15) business days’ written notice of said election. If Company elects to terminate this Agreement at any time, the Employee shall be entitled to receive accrued compensation that may be owed to the Employee up to the date of termination.”
  • Unenforceable non-compete clause in Texas. Employee cannot work for any other HVAC contractor within 100 miles for one year. “Employee will not directly or indirectly engage in or work in any way with any business that relates to or offers the same or similar products or services as the Company, at any time prior to the first anniversary of the termination of Employee’s employment with the Company and at any place within one hundred (100) miles of any location owned or operated, directly or indirectly, by the Company.”
  • If anything goes wrong during employment (for example someone is injured or property damage to a customer’s home), then the employee is on the hook NOT the employer. “Employee agrees to indemnify and hold harmless the Company and its affiliates, owners, directors, and other officers, employees, agents and permitted delegates (together, the ‘Indemnified Parties’) against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, claims, demands, suits, costs, expenses, or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against any of them (‘Losses’) in connection with the rendering of the services under this Agreement by Employee, except to the extent the Losses resulted from the gross negligence or willful misconduct on the part of the Company or any other Indemnified Party.”

No one’s ever complained” says the owner. Chip gave the company the benefit of the doubt. He asked the owner about the provisions. The owner said it had never been a problem in the past. Really? Maybe that’s because it’s non-negotiable, no one reads the documents, and non-lawyers/non-business persons do NOT understand what indemnity means.

Giving business owners and lawyers a bad name. I really don’t have a huge issue with clause number one, other than it says so much about the employer’s mentality. However, the non-compete language should never have been included in the agreement. The lawyer drafting the document knows that over broad, non-compete language is unenforceable in the state of Texas. The most egregious paragraph is the indemnity provision. In all my years I have never seen that clause in an employment agreement, and I hope I never do again.

I’m proud to say this kind of behavior is actually rare among all the employers with whom I’ve worked through the years. And, Chip is no worse for the wear, other than having to listen to me rant about a stinky employer.

I applaud employers for using employment agreements, but not in this way! Make sure you read any employment document before signing on the line.

I sneeze on all these legalese.

LK Greer, HR Dallas, LLC dba Press One for HR