What Is a Non-Compete Agreement and What Should You Look for Before Signing?
You get a new job, your employer hands you a stack of paperwork, and somewhere in the middle is an agreement that says you can’t compete with the company if you leave.
You might think, “It’s probably just standard employment paperwork.”
But a non-compete agreement can have a significant impact on what you are allowed to do after your employment ends.
Before signing one, it is important to understand exactly what the agreement says and how it could affect you.
What Is a Non-Compete Agreement?
A non-compete agreement is a contract that may restrict an employee from working for certain competitors, starting a competing business, or performing certain types of work after leaving an employer.
The specific restrictions can vary significantly from one agreement to another.
Some agreements may restrict competition for a particular period of time. Others may include geographic restrictions or identify specific types of businesses or activities that are prohibited.
The language matters.
What Should You Look for in a Non-Compete?
If you’re reviewing a non-compete agreement, there are several provisions worth paying attention to.
1. How Long Does the Restriction Last?
Look at the length of the restriction.
Does the agreement restrict you for six months? One year? Several years?
The duration can make a major difference in how the agreement affects your future employment opportunities.
2. Where Does the Restriction Apply?
Some agreements contain geographic restrictions.
For example, an agreement might attempt to restrict competition within a particular city, county, state, or larger geographic area.
Consider whether the geographic restriction is clearly defined and how it could affect where you can work.
3. What Exactly Counts as “Competition”?
This is one of the most important questions.
An agreement may prohibit you from working for a competitor, but what qualifies as a competitor?
Does the restriction apply only to businesses providing the exact same services, or could it potentially cover a broader range of work?
The wording of the agreement can matter significantly.
4. Are There Other Restrictions?
A document that contains a non-compete may also contain other restrictive provisions.
For example, you may see terms involving:
- Non-solicitation
- Confidentiality
- Trade secrets
- Customers or clients
- Employees
- Company information
- Intellectual property
Don’t assume that the only important provision is the section labeled “Non-Compete.”
Can You Be Required to Sign One?
Whether a non-compete is enforceable depends on applicable law and the specific circumstances.
Employment restrictions are also an area of law that can change, and different states may treat these agreements differently.
That’s one reason you shouldn’t assume that an agreement is automatically enforceable simply because your employer gave it to you.
At the same time, you shouldn’t assume that a restriction is meaningless simply because you believe it is too broad.
The actual language and applicable law matter.
What If You Already Signed It?
If you’ve already signed a non-compete, don’t panic.
A signed agreement doesn’t necessarily mean that every provision will automatically be enforceable exactly as written.
If you’re preparing to leave your job, considering another position, or thinking about starting your own business, having the agreement reviewed by an attorney can help you understand the restrictions that may apply to your situation.
Don’t Wait Until You’re Leaving Your Job
The best time to understand a restrictive employment agreement is often before you need to know what it means.
If you’re considering signing a new employment agreement, negotiating your compensation, changing jobs, or starting a business, understanding the restrictions you’re agreeing to can help you make informed decisions.
You don’t have to wait until your former employer threatens legal action to ask questions.
LAWtica Can Help You Understand the Document
You don’t necessarily need to hire an attorney for an entire employment matter just because you have a document you want reviewed.
LAWtica connects consumers with independent, licensed attorneys who can review legal documents and provide legal guidance through the LAWtica platform.
If you have a non-compete, employment agreement, or other legal document you’re unsure about, having an attorney review it can help you understand what you’ve been asked to sign.
Don’t sign first and ask questions later. Understand the agreement before you agree to it.
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