Look around. The use of non-compete agreements has been on the rise, and the fashion industry is hardly immune. It was this specific contract provision that was at the center of the lawsuit that Hedi Slimane filed against initiated a lawsuit against YSL’s parent company Kering in June 2016. The same goes for the ugly battle between rivals Oscar de la Renta and Carolina Herrera in late 2016, and the war that Nike waged against 3 high-level creatives who jumped ship to adidas before that. Still yet, it was an ironclad non-complete that prevented Raf Simons from making a swift transition from his role as creative director of Christian Dior to the top position at Calvin Klein, and former Celine CEO, Marco Gobbetti, to Burberry.
The inclusion of non-compete agreements in employment contracts is not new. It has long been the case that high level employees with access to top-secret information are forced to sign non-compete agreements – which place limits on the types of work an individual may accept for a certain period of time upon departing from a company – in order to prevent them from leaving for a competitor company (with valuable, proprietary information in hand) and/or to ward off rivals from poaching high-level executives.
However, the specifics of these terms and the parties expected to be bound by them have changed over the years, as have the norms by which the fashion industry operates.
As Betsey Pearce – the behind-the-scenes deal maker for fashion figures like Nicolas Ghesquière, Rick Owens, and Phoebe Philo – wrote last year, the duration of non-competes has increased substantially, from the traditional norm of 6 months between jobs “to 9 or 12 months or more.” In Europe, the terms tend to be even longer: In France, non-competes can legally last for up 24 months. In the United Kingdom, where the law is the most restrictive in this respect, non-compete covenants are permitted for up to 12 months. Italy’s civil code states that the maximum duration for a non-compete is 3 years for regular employees and 5 years for executives.
Such a lengthy duration may have once been necessary in order for brands to ensure that their impending designs, marketing strategies, and other trade secret information was shielded from competitors. But there is an argument that the lengthy non-compete brands no longer meet the needs of most of the fashion industry’s participants (save for maybe Nike, which notoriously works years in advance). This is, in large part, because the timetable as a whole has changed. Instead of turning out collections just twice a year, the new fashion calendar – which includes pre-seasons and more frequent “drops” – sees new collections turned out on an increasingly frequent basis, as often as every 3 to 4 months.
As a result, the window needed for secrecy is arguably much shorter than it was in the pas, patricianly given fashion brands’ already heavy reliance on non-disclosure and non-solicitation agreements (the latter of which prevents an employee from soliciting a company’s clients or customers, for his or her own benefit or for the benefit of a competitor, after leaving the company) for employees across the board.
This lengthy “time-out” period is regularly pared with an increasingly broad definition of “competitor.” Pearce says that companies’ definitions of the competition have been “extended beyond reason,” thereby enabling them to “hoard talent by locking in workers who might otherwise move to more attractive positions elsewhere.”
And still yet, the pool of individuals required to sign employment agreements that contain non-compete clauses has expanded significantly in fashion and beyond. In the relatively recent past, as the application of non-competes has gone from pertaining only to top execs to including “event planners and chefs to yoga instructors,” as well as entry-level employees and in some cases, even interns, as the New York Times revealed in 2014, a growing number of states have taken to reevaluating the merit of the increasingly common provisions.
Taken together, these changes – which come as fashion brands have become more profitable, more corporatized, and more competitive – make it so that the companies with the most bargaining power (i.e., the industry’s biggest brands and conglomerates) can require their talent, whether it be executives or creatives, or an ever-growing pool of lower-level employees, to sign stringent non-compete provisions as a condition of employment.
Not only are fashion’s giants “stifling competition, entrepreneurism and ultimately creativity,” per Pearce, while simultaneously making it difficult for employees to seamlessly move from one job to another, as a result of such broad and restrictive provisions. “Excessive non-competes are harmful to the industry as a whole. Talent is squandered. Workers can find themselves locked in dead-end jobs, whatever the level, and cannot advance to increase their skills. Workers with unique skills sitting on the bench represents a waste of precious resources.”
With the potential for lessened competition that results from the use of overly restrictive non-competes, paired with significant limitations that tend to be placed on a former employee’s ability to earn a living, states have taken to enacting legislation that restricts or otherwise limits the enforceability of non-compete agreements.
Just this month, Massachusetts passed a new law that, when enacted on October 1, will limit the duration of non-compete agreements to one year (or less), and bans their application when it comes to certain employees, including hourly workers eligible for overtime, full-time students, employees age 18 and under, and those fired without cause or laid off.
However, for real change, the efforts by stateside law makers must be reflected by their European counterparts because European giants – the real leaders of the fashion industry – have no real onus, as of now, to re-fashion the terms of their typically ironclad non-compete agreements.