We want volunteers, not hostages

It’s 1997. I’m wearing a brown suit that I very much like. But that suit is likely sitting a little oddly on me: after all, I’m still early in my ‘suit-wearing-legal-career’ andhaven’t worked out how to look comfortable in it.

I’m right in the middle of the trainee solicitor’s core activity: photocopying bundles of documents. I’m moving like a well-oiled machine, churning out copies like a pro, knowing exactly how many pages the copier will comfortably take without having a meltdown. I’m feeling as much like the man as you can while photocopying.

I’m copying trial bundles for a court case that’s due to start the following day. The claim in question: breach of a non-compete clause by an employee who has left and joined our client’s key competitor.

This full-blooded use of ‘the law’– and the tens of thousands of pounds of legal fees that goes with it – to enforce the non-compete clause and stop this person who clearly no longer wants to work for our client from working somewhere else all sounds sensible enough to ‘junior me:’ after all, this employee could take trade secrets off to this competitor.

But tomorrow we’ll find out if that strategy and spend will work...

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If you’re expecting a business arrangement to be a great success, it’s common sense to want to lock that deal or arrangement in for as long a period as possible, isn’t it? After all, you’ve got a ‘good thing’ that you want to keep going, that you don’t want to lose. And a long contractual duration removes that risk by tying both parties together for a long time, doesn’t it? Simple, innit?

Well, no, it isn’t. Because that misrepresents what a contract and ‘the law’ can really achieve on the ground.

Because a contract isn’t a guarantee that something will definitely happen.

Contracts get breached up and down the country, every day of the week. Sometimes that’s inadvertently. More often than you’d think, its deliberate.  Either way, that’s no guarantee.

Those breaches happen because all a contract does is give you the right to sue someone. That’s it. Nothing more.

And as we’ve already established, suing someone requires you to be willing to spend £50k+ in legal costs and incur a boat load of stress and wasted time, to get into a situation where you’ll never ever have a guarantee that you’ll win and where you’ll create a definite enemy if you even try. (Repeat after me, litigation is gambling in wigs.)

Suing that other party might make sense in certain absolutely critical situations. But mostly it won’t. Mostly, if you stand back and set the passionate reactions aside, your business will have much better things to do with your limited time and money. 

So trying to lock someone into a deal doesn’t really work from a legal perspective.

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Trying to lock someone into a deal also doesn’t really work from a practical perspective, for either you or the other business or individual.

I vividly remember the first time I was asked by a client to help write the contract for a 10 year long deal. I remember thinking “what a deal!” and was excited to underpin this important arrangement for the business. 

That excitement lasted until I started wrestling with how you write a pricing clause that will work across 10 years. Given the fluctuations in inflation, technology and the competitor & customer environment, there’s no way the price on Day 1 will still be the right price on day 3,650.  Pretty soon, I’ve had to write so many ‘get outs’ into the agreement that I was breaching the Trade Descriptions Act in calling it a ten year deal.

And even if your contract pricing clause could work ‘lock the other business in’ for 10 years (or even if you were willing to incur the costs, stress and time needed to sue the other party), you’re effectively tying yourself to a business that may not want to work with you anymore. 

Be honest: why on earth would you want to do that? Why would  you want to ‘lock in’ to a party that doesn’t want to work with you? How is that going to get the level of excellent service that will keep your venture a success? 

One of the NFL’s greatest coaches can help here. Mike Tomlin, the Pittsburgh Steelers Head Coach has never had a losing season in his 19 years as a head coach. He’s also great for a quote or three.

And one of my favourites of his is that “you want volunteers, not hostages”.

You want people alongside you who actively want to be alongside you.

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Not to get too morbid or anything, but unexpected things also happen to businesses and people every single day. None of us are guaranteed to be here tomorrow. For a variety of reasons. It is therefore completely unrealistic for any contract to assume that a steady state can and will be made to continue.

Simply having someone locked into a contract won’t remove the risk of you unexpectedly losing the ‘good thing’ you’ve built.

And when you recognise that, you can stop putting time & energy into trying to agree a long-term contract. And instead you can put that time & energy into the one thing that does maximise the chances of your ‘good thing’ lasting as long as possible: success itself.

Simply put, if something is working for both sides, they’ll want to keep doing it.

And that is why we preach focussing on building and maintaining your relationships, over focussing on contracts and ‘the law’.

So, to sum up, you don’t need to ask for a long duration in your contracts. You can forget your three years, five years or longer. Because they don’t give you security.

Instead, do these two things to maximise the changes of you both working successfully together for a long time:

· Focus on what is needed to make your trading arrangement a success on the ground: a tight relationship built on trust and respect, where issues are raised quickly so they can be dealt with before they become big issues; and .

· For the contract itself, agree how much notice each of you would need to get alternative arrangements in place, in the (hopefully unlikely) event of your business partner no longer wanting to work with you. 

As always, please just hit me up if you’ve got any questions or comments. Till next week

A

PS: There is one important exception where trying to lock someone into a deal does actually work from a legal perspective. And that’s if you’re an employee.

At one point in my career, I was asked to change the notice period in my employment contract from 6 months to 12. My immediate reaction was to laugh, and then immediately sign on the dotted line before they could change their mind.

I knew that employment law would hold my employer to 12 months. If they wanted to move on from me for whatever reason (hey, it happens!), they were now going to have to pay me a lot more upfront.

But I also know it would be a different story if I wanted to leave.

No matter how diligent, dedicated and hard-working I was (and I was!), no-one was really going to want me hanging around six, seven or however many months after my departure has been put in chain. As soon as departure is announced, everyone in a business quickly adjusts to the new normal, and the departing person quickly finds themselves cut out of the loop, whether they like it or not. 

Also, even if they did want me to hang around six, seven or however many months into my notice, what were they really going to do if I simply said “that’s it, I’m not coming in any more, it’s time to move on”? Were they really going to spend tens of thousands to hold me in place? 

Enforcing it legally only potentially makes sense for someone like a CEO (that’s who my story at the start related) – and even in that case, spending the money to go to court ultimately didn’t make sense.  Because just before we walked into the court hearing, more sensible heads prevailed and a practical pragmatic deal was struck to manage the confidentiality aspects and allow the CEO to go to the new company. That saved future fees – but it couldn’t avoid the tens of thousands they’d already incurred.

Employers: don’t fall for the trap of defaulting to lock your most senior people up on the longest notice period possible. Because the only winner from that really is the employee.