A non-compete agreement is a contract that prohibits you from working for your employer’s competitors. It is estimated that one out of every five employees in the labor force has committed to a non-compete. Most of those employees don’t even remember signing the agreement. This is why it is important to try to negotiate the terms upfront so that they are more favorable for you in the event you leave the company. Here are some tips.
Don’t Sign
Before you start to negotiate the contract, try to get out of it altogether. If you are a highly valuable employee, your employer may forego the non-compete rather than lose you. Your skills and knowledge may be more important than the contract. Let your employer know you are uncomfortable with the agreement and see their response.
If you are unsure of how valuable you are or just starting out in the industry, you won’t have as much leverage. However, wait until the employer requests the signed contract. Sometimes the employer has so much to do in the hiring process, they may forget about the agreement. Also, there are many states that have restrictions around whether an employer can require an employee to sign a non-compete agreement. Most of these restrictions are income based, so check your state laws on whether you fall within those restrictions. The non-compete agreement will not be enforceable if the employer is not abiding by the state laws.
Time
Your non-compete agreement will most likely have a time clause. The time clause restricts you from working for a competitor for a specified time. Make sure you are comfortable with the time specified and that it is reasonable. A reasonable time period will depend on the industry, company and job. The more access to confidential information and client lists, the more time a company may request. Either way, try to reduce the requested time. The worst case is that they say no. They will most likely not rescind your offer or fire you for trying to negotiate a contract.
Geography
Geography clauses are common in non-compete agreements. These clauses restrict the location of where you can work. Employers include this clause so that their clients and/or partners don’t follow you to the new employer. For example, if you are a beloved doctor and you start working for a competitor down the road, patients may follow you to the new location. The farther away you work, the less likely patients will follow you. Again, this clause really depends on the industry, company and job in which you work. If you do not have access to confidential information or relationships with clients, you should try to remove this clause. It’s not reasonable to restrict how far you have to work if there is not much of a threat.
Severance
If there is a time clause in your non-compete agreement, try to negotiate a severance package for the same amount of time in which you are restricted to work for a competitor. It will be difficult for you to find work and making sure that you are financially compensated until you can work is important. Severance is not something that most employees think about when starting a new job, but you should prepare for the future. At some point you may want to leave your current employer and you don’t want to find yourself in a stressful financial situation.
Exceptions
If you bring your own confidential information, clients or patients, to the company, consider including exceptions in the non-compete. You want to ensure that you keep your right to the information or clients in the event you leave the company. It is best to have a qualified attorney draft this language.
Disclaimer: This article is intended for informational purposes only. It provides general information and is not intended and should not be construed as professional advice. The author is not your attorney, accountant, financial planner or any other professional and no professional-client relationship is created. We do not represent that the information provided is accurate or up-to-date as laws and regulations are always changing. If you have an issue that requires professional help, you should contact the appropriate professional to help you on your specific set of facts. Please read the Terms and Conditions for additional information.