Employment Contract from Hell

Every once in a while, I am surprised by how far some people are prepared to push the envelope.  Today, I am meeting with a client who was presented an offer to buy his business.    As part of the process, he was to be offered employment with the new company for 5 years.  He brought in the employment contract for my review.

I have kept a copy for my “museum” of strange things.  It now has a place beside the “No Bitching” policy that another employer had created.  (That policy says that if you feel the urge to bitch, ask to be sent home, before you get sent home for bitching.  Failure to follow the policy would result in termination.  “Bitching” was not defined.)

So what was in this contract that makes it worthy of being in the eclectic collection? 

First, the contract allows the employer to fire the employee for cause for not meeting sales targets.  The employer has the unilateral right to set and change those sales targets. 

Second, the employee’s commission has a bonus provision that, if he meets a “benchmark” of sales, entitles him to a higher commission rate.  Sounds good, except the company can unilaterally change the benchmark.

Third, when the employee leaves the company, he is subject to a 10-year non-competition covenant. 

Fourth, if the employee is fired for cause (remember, that includes not meeting the arbitrary sales targets) or IF HE RESIGNS, he agrees to pay the employer one year’s salary!

There were many other objectionable parts of the contract.  It was clear to me that this potential employer was intent on purchasing this guy’s business and then using the combination of the arbitrary performance targets and the penalty clause to get a $50,000 discount on the acquisition of the business.  They would keep him around for long enough to learn what they needed and then can him.  I’ll bet their plan to purchase the business included payment over time, so that they would already have his fifty grand in their pockets. 

It was also obvious that the contract was drafted by a lawyer.  That bothers me.  The contract is so one-sided, so ridiculous and so unreal that it likely would not even be enforced by a court.  I’ll tell you this:  I would be embarrassed to admit that I had authored such a document. 

The result of such a terribly one-sided contract is that the lawyer for the employer has tanked the deal.  Who would do business with people that want you to pay them a year’s salary if you quit?  By offering up this draft contract, they have assured themselves that my client will sell his business to a competitor, not to them.  Surely that cannot have been their goal.  My advice was not to even negotiate with these people.  They clearly cannot be trusted and you don’t negotiate against ridiculous positions.

It is a good example of one of life’s lessons:  if you get too greedy, you will get nothing at all.