ANALYSIS <b>The Agency Business</b>: PR firms put new thought into clauses of employee contracts

Now that PR agencies have begun beefing up their staffs again, many are becoming more cautious about who they hire and are rethinking the stipulations of their employee contracts.

Now that PR agencies have begun beefing up their staffs again, many are becoming more cautious about who they hire and are rethinking the stipulations of their employee contracts.

After cutting staff to the bone and working with skeleton crews during the downturn, many agencies are starting to hire again. But they are being much more particular about who they hire. And more thought is being put into employee agreements, which stipulate conditions of employment and what employees can and can't do if they leave for another agency. These situations can get messy. Porter Novelli recently sued two employees who left to start a boutique agency, Ink PR, accusing its founders of planning the agency on company time and taking a client with them. "Agencies are looking to protect the key assets of their business, which are their people, client relationships, and ideas," says Michael Lasky, a partner with the law firm Davis & Gilbert, which works with several PR agencies. "They aren't looking to stifle competition. But they do want to protect their relationships." The most common agreements Lasky sees are restrictive covenants, which limit employees from working with clients of their former firm for a certain period of time. Also common are confidentiality agreements, which keep employees from disclosing confidential and proprietary information. There are several issues agencies need to consider when drafting contracts and agreements. Since it's taking firms longer to find the right employee, they're demanding in these agreements that employees give more notice when leaving, from three weeks for an account executive to six weeks for an SVP. "To avoid abrupt transitions, since it takes time to get a new person up to speed, the agencies are saying, 'The more senior you are, the more notice we expect,'" adds Lasky. Agencies often have said what employees can't do if they leave, says Lasky, but they don't provide remedies for violations other than lawsuits, which can get messy and expensive. Lasky sees more documents stipulate that a departing employee can't work with a certain client after leaving, and if they do, they must pay a fee, which Lasky says is intended to be a deterrent, but shouldn't be punitive. Agencies also should check to see if any potential employees are bound by such contracts before hiring, advises Ellen Shedlarz, Hill & Knowlton's chief talent officer. "I bend over backwards to make sure they adhere to their non-compete [agreement]. You have to respect that because what goes around comes around. Your human resources department has to understand the non-compete [agreement] of the person they are hiring." Shedlarz also advises that agencies should make employee agreements that include non-competitive clauses and that are as "friendly" as possible. Shedlarz argues that PR is about trust-based relationships, and agencies do not want to start off on the wrong foot with employee contracts that are laced with suspicion. "Only put things in that you know will hold up in court," she says. "You don't want something so broad that you end up sounding like an idiot. It needs to be specific concerning certain issues. You can't make it so broad because it might not hold up in court, if it comes to that." Companies have every right to pursue legal options if a departing employee poaches a client, but that could turn into more trouble than it's worth, particularly as the agency runs the risk of damaging its reputation in the long run, says Judith King, principal and partner at Andy Morris & Company. "The PR industry has matured a bit, and as part of the maturation, it's looking at ways it handles one of its key assets - its people," says Lasky.

Drafting employee agreements Below are key aspects to consider when crafting employee contracts.

  • The agreement should dictate how much notice the employee must give before leaving the agency. SVPs need to give more notice than account executives.
  • Contracts should stipulate what an employee can't do upon leaving, such as work with a particular client, and should lay out specific ramifications for breaking the clause, such as a fine. Such clauses are meant to deter, not punish.
  • Make such documents as "friendly" as possible, not antagonistic.
  • Only put conditions in the document that can be held up in court.

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