What is a Non-Compete Agreement?

2024 update: Non-competes have been ruled as enforceable by the FTC. This was challenged by district courts and is now back in flux. Many states have adopted specific rules on non-competes, defining some limits based on how much money you make and/or based on your profession. 

Non Compete Agreements or Non Compete Clauses (NCAs or NCCs respectively) are designed to protect an employer’s business through limiting an employee’s access to rival/other businesses. Historically they were used most frequently in executive level employment or high tech companies where competition is fierce; now they are popping up everywhere from “event planners to chefs to investment fund managers to yoga instructors” according to a New York Times Article—and yes, they are even in the pole industry.

Some details about NCAs

Generally a NCA is signed upon hiring or completion of training and enforced for a specified amount of time (such as 6 months to 2 years) and potentially a specific geographic region (such as a 50 mile radius) prohibiting the employee from directly competing against the business either by starting their own similar business or through employment at an existing, rival company.

The restrictions, legalities surrounding NCAs and their enforcement vary wildly between states and industries: “Only California and North Dakota ban them, while states like Texas and Florida place few limits on them” (NYT) and not all of them are enforced. Sophie Murphy in her blog for International Pole Convention notes: “Because lawsuits are incredibly expensive and time-consuming, the employer may or may not consider the potential damage done by the former employee enough to take them to court, but either way a bad situation is created for both the employer and the employee when the non-compete contract is too severe, ignored or broken.” Forbes echoes this sentiment with an article about a recent staffing firm that that lost a court case against five former employees citing that the NCA was not enforceable, the provisions were unreasonable and the industry was commoditized making many issues seemingly prohibited in the NCA irrelevant.

Some, but certainly not all, pole studios use NCAs for their regular instructor staffing in relation to studio-specific courses or even types of classes.

For touring artists, according to Kristy Craig previously of Poles on Tour, studios aren’t always aware of location-based exclusivity that may be included or purchased for an additional fee depending on the artist for workshops conducted at their studios. This exclusivity may help studios that choose to bring in outside talent distinguish themselves from other local offerings.

Other relevant legal agreements/clauses

A NCA is not the only type of agreement or clause you may encounter in employment or need to protect your business, nor is it potentially the most relevant. Here are the two other common agreements/clauses (with several variations of their common names) that may be present in your employment agreements or perhaps should be present in your agreements:

• Non-Disclosure Agreement (a confidentially agreement, a proprietary information agreement or other names), also traditionally used in high tech or intelligence-based work, may be more relevant to your business especially if you have a very specific methodology or content. This agreement prohibits you from disclosing proprietary information or trade secrets you gained from the company.
• Non-Solicitation/Proselytization/No Hire Agreement limits the hiring or direct solicitation of other employees/consultants that you meet while employed. This can prevent a former employer from taking an entire staff with them when they leave, potentially to open a competing studio.

How this affects you/your studio

NCAs can limit a pole instructor’s ability to make a reasonable income from one studio, particularly in locations that pay a low(er) hourly rate or have a limited amount of class times available. On the other hand, it can protect studios from having their content and investment in training from being exploited by a competing studio. Recognizing and codifying the content, certification and professionalism of the industry as well as specific studios for it to be legitimately non-compete-able and with realistic compensation is an entirely separate and tangential challenge to this discussion. Unionizing provides different levels of protection such as collective bargaining and representation for employee members grouped by profession.

A recent INC. magazine article recommends against signing a NCA: “If a new job is asking you to sign a noncompete agreement, then what should you do? “The smart answer is: don’t take the job,” says Robert Ottinger, an employment attorney whose law firm is currently dealing with a non-compete lawsuit filed against several gym trainers. He likens noncompete agreements to economic slavery. “You’re trapped,” he says. “They can treat you poorly; they can pay you poorly. Why give someone a raise if you know they can’t leave? You’re really doing yourself in if you sign these things.””

Some tips if you must sign a NCA (as an employee)/having a defensive NCA (as an employer) which apply whether you are a taxable W-2 employee or a freelancer/consultant.

Remember, all details of ANY contract are negotiable.

Do NOT feel forced to sign a contract. If it doesn’t feel right, then likely this is not the right place for you to work. If you can have a lawyer or a lawyer friend review any contract before you sign it. If neither of those is possible, do some quick research online for information specific to your state. Many employment law firms have blogs with helpful and understandable information.

1. Be specific in what is prohibited. Saying that your employee can’t teach “pole dance classes” ever again isn’t reasonable nor defensible, especially if your teachers are coming up with their own curriculum and/or if their income is dependent on teaching.
2. Be specific in the timeline. A less than 12-month timeline is more defensible/reasonable, particularly if you are limiting someone’s ability to earn a living.
3. Be specific in location. An employee may be forced to move states and may still be covered under the NCA even though they in no way compete with your business. Or they may move and your NCA is null anyway (such as if they moved to another state or country). Distances in a metro area may be smaller than in a more rural or suburban area. Consider how many people are teaching from their home or a public place like a park due to COVID-19.
4. Be specific in circumstances. Is the NCA only enforceable upon termination? Or does it apply while they are currently employed which would enable them to work at multiple studios in the same region?
5. Be specific about fees. Employment contracts as part of or separate from a NCA may include the jurisdiction and other details (such as who is responsible for lawyer fees) if something happens and you do go to litigation. Do your research, especially if you are in a multi-state area to choose a jurisdiction that may be most favorable to you.

So what now?

Confused? Worried? Well, you should be.

NCAs and their adjacent contractual documents can hold serious consequences for employees and employers—or not if they aren’t enforced or if they aren’t enforceable. Educate yourself on the laws that affect fitness and dance professionals since we straddle both as well as the legal statutes and relevant case law in your state. If you are an employer make an educated decision on whether or not to include a NCA as part of your employment contract at all by talking to counsel and doing your own research. Dance Teacher magazine recommends spending your time not on how to enforce a NCA but how to foster an environment that keeps good talent in the fold, whether that’s in the studio or in a franchise type arrangement providing career-ladder type advancement for those that have “outgrown” your studio. If you are an employee or a potential employee and if you are presented with an NCA, use it as an opportunity to start a dialog with your to-be boss. Spend time understanding why your new studio might want to have an NCA in place with specific restrictions, perhaps they’ve had some previously negative experiences, and through open, honest and professional discussions hopefully you can arrive at a mutually agreeable situation for all involved.

Whatever you decide to do as an employer or employee with regards to NCAs, document any discussions/negotiations involved and keep organized written records of contracts. If you do have to go to court—and hopefully you don’t—documentation is key to supporting your case, whichever side of the issue you end up on.