What to Know About Non-Compete Agreements

Certain companies may ask their prospective workers to sign a non-compete agreement (NCA). The Federal Trade Commission estimates that 30 million workers were subjected to non-compete clauses. Non-compete agreements can restrict the post-employment opportunities of an individual.

According to non-compete lawyer Emanuel Shirazi, if an employer attempts to force you to sign a non-compete or non-solicitation agreement before working with the company, they might be subject to punishment by the state. Familiarizing yourself with the nature of non-compete clauses will help you make informed decisions to safeguard your rights and career. 

Here are a few things to keep in mind before signing a non-compete agreement. 

Understanding Non-Compete Agreements

Non-competition agreements prohibit employees from joining competitors or starting businesses in the same industry or location. 

Non-compete agreements protect an employer's trademarks, intellectual property, and confidentiality. If you have access to sensitive business planning, customer relations, or other information, the company will most likely require a non-compete agreement to prevent a legitimate competitor from obtaining it.

Non-compete agreements may damage an employee's career. Time and geographic restrictions vary greatly in valid non-compete agreements. 

These clauses carry serious penalties, including litigation and monetary damages. It is strongly advised to know what you are getting into before signing any agreements. A non-compete lawyer can help you clarify your contractual rights and obligations. 

Key Components of a Non-Compete Agreement

One of the most important features of a non-compete agreement is the duration of the restriction. The duration usually ranges from a few months to several years, depending on the type of employer in a given industry. 

A non-compete agreement also has a geographical scope that defines the area where the non-compete clause can be enforced. The scope can be local, involving a city, or statewide or regional. If one worked for a corporation in one city or region, a nationwide restriction may not be necessary. 

Check if the non-compete agreement restricts particular activities after leaving the company. The agreement should clearly state which activities are considered competitive and prohibited after leaving the organization. It's important to describe the non-compete precisely and without ambiguity to avoid confusion.

Compensation for non-compete compliance may be included. An employer may offer a severance package or financial incentive during a non-compete in cases of incorporation. Keep in mind that not all non-compete restrictions come with compensation. 

Legal Enforceability and Limitations

Non-compete agreements' enforceability depends on the jurisdiction and a few key conditions. Courts evaluate their scope, length, and geographic limitation. If the restrictions are too broad, the court may declare the agreement invalid. 

Some jurisdictions, including California, have rules that make non-compete agreements unenforceable. California does not enforce non-competes except in particular industries or job activities. States that allow non-compete agreements strictly enforce them. Knowledge of whether your state’s stance on non-compete will help you determine its enforceability. 

Your employer-employee relationship may affect non-compete enforceability. If you have trade secret information that could harm the company if released to a competitor, courts will likely enforce the agreement. Courts may reject the agreement if it is being used unfairly to limit your career.

Tips for Negotiating Non-Compete Agreements

If asked to sign a non-competition agreement, negotiate the conditions for your benefit. Study and understand the agreement's conditions, including its duration and geographic restrictions. If possible, negotiate time and geographic limits. Your chances of finding another job in a similar industry are determined by the exceptions you negotiate.

Specific exceptions may be warranted, such as an ability to work with certain clients or on certain projects on which you had worked during your association with the company. This makes the agreement easier to live with and far less restrictive to one's future employment. 

Seek legal advice if you have questions concerning your employment contract. A lawyer can advise you on your employment contract and identify any unjustified restrictions on your opportunities. If the non-compete agreement's terms are incompatible with your interests, you may leave or negotiate better conditions.