Understanding Non-Compete Clauses

The use of non-compete clauses is on the rise in the business world, but even so many people are surprised when asked to sign one. Knowing what they are before that situation arises will help you understand what to do if it should happen.

A non-compete clause can be likened to a pre-nuptial agreement, except, instead of agreeing to forfeit your rights to your spouse’s property, you agree to certain conditions when you sign a contract with a new employer. The non-compete clause may be included as part of the contract, or may be a separate document, the signing of which is a condition of your being hired.

Non-complete clauses are used by employers for a variety of reasons, most of which relate to the protection of new or sensitive technology or manufacturing processes, and other trade secrets. In legal terms, a non-compete clause must protect the company rather than the owner or the company or another individual.

Most non-compete clauses will include three specific points, which are designed to prevent you from leaving your employer to work for a competing company:

·        You agree not to work in specific geographic locations

·        You agree not to use certain skills in the service of a competing company

·        You agree to the previous two points for the time period specified by the non-compete clause (one to two years is typical)

Most non-compete clauses are designed to favor an employer, and do not necessarily represent an employee’s right to choose where they work. Individual non-compete clauses will differ in their terms; therefore when faced with having to sign one, the best way to proceed is to seek legal advice with a labor attorney.

Depending on the situation and the terms of the clause, it may be possible to enter into negotiations that relax the restrictions in your favor. For example, if the non-complete clause stipulates that the conditions are effective even if you are fired or laid-off, you may be able to negotiate the terms so that the conditions are effective only if you resign. In other cases, you may be able to negotiate extra perks for agreeing to sign, such as extra vacation time or other bonuses.

If you’re in a situation where you have signed a non-compete clause and want to leave your company to work for a new employer in the same field, you will need to disclose the fact that you have signed the agreement—but you can delay the disclosure until you know the employer is interested in hiring you.

Also, please review our Tools to Find a Job section.  If you need more help, please consider using a Career Counselor.