You Have An Offer, Now Read Your Covenant

Don't skim over your covenant not to compete - study and know it well.

Congratulations, all your hard work has paid off! You have finally received your offer letter. At first glance your compensation looks exactly as they stated it would, so no concerns there.  You can feel yourself taking that deep, uninhibited breath – a sigh of relief because YOU’RE DONE! The reality, on the other hand, is that you are far from finished.  It’s now time to look at the fine details.  Paragraph after paragraph with no concerns, then you come to the one. You know which one I mean: the dreaded covenant not to compete.

One Unfortunate Candidate

Let me deviate and share a story of what happened last week with one of my prospective candidates.  The client really liked her, the candidate really liked the proposed firm, and everything looked to be smooth sailing through the hiring process.  I was aware that she had a covenant not to compete; however, even I thought that we could get my firm comfortable with it as she was going from one area of public finance to another area (where she would be starting in essence over with new clients).  My hiring manager asked for a copy of her past offer letter, and there it was. It was the most onerous covenant not to compete. It literally precluded her from working anywhere in the United States in any area of public finance.  Needless to say, no job offer will be presented to her most likely by any firm.  Her alternatives? Leave the industry for a year or take a position as a non-client interfacing employee of an issuer or a bank. 

A Brief Look At Today’s Covenant Not To Compete

Let us examine what happens today when a firm provides a covenant not to compete, which incidentally is a standard of our industry.  Most covenants are reasonable and can be negotiated.  Garden leave is one way a firm can protect themselves from an employee leaving for a period of up to ninety days.  Another way is for an experienced banker, bond counsel or municipal advisor to offer an exhibit with the name of previous clients that were brought to the new firm.  Plus, if the new position does not work out, those previous clients are exempt from the covenant not to compete.  The reason we have been able to negotiate this is because they were previous clients and as such, they should not be considered the firm’s clients. They should be considered the exiting employee’s clients.  Also, we have been able to suspend a covenant not to compete for at least the first ninety days should a firm or a candidate realize they have made a poor choice of a new firm.

More Elements Of Protection In Your Covenant

Another example is to negotiate the locations that are protected.  For example, one of my recent clients was well known in a particular region of the United States, and we were able to carve out that particular area.  The new area that my candidate was going to open for this firm was an area that the firm has never serviced. It was obvious that this area could only be considered a protected area for our candidate. 

Don’t Just Read It, 

Study Your Covenant Not To Compete

Lastly, you need to be aware when you get a raise or when a bonus is paid.  Sometimes a new title can cause a firm to give you a title but ask you to sign a new covenant not to compete as you are now more valuable to a firm.  You may have gone from non-client interfacing to meeting clients, and the firm wants to protect those clients under a new covenant not to compete.  The gist of this article is: you need to read. Not only do you need to read, but you must understand the restrictions you are agreeing to when you sign your offer letter or any presented document that deals with this area.  Ignorance is not a defense. Work with your new firm. In the case of an existing firm, try to negotiate these conditions so that you too are not “stuck” at a firm for life or forced to leave our beloved industry.


If you would like to discuss your options, please reach out for a confidential conversation at 760-477-1284 or email at [email protected]. He can also be reached on LinkedIn. Subscribe to our monthly newsletter here, which is a compilation of our weekly blogs so you never miss one. 

About Harlan Friedman, JD & Founding Member, H. Friedman Search LLC. Harlan is a thirty-year veteran Public Finance Banker turned recruiter who specializes in the placement of all level Public Finance Bankers, Health Care Bankers, Municipal Financial Advisors, Compliance Officers, Issuers, and Bond Counsels.