What you should consider before signing a noncompete agreement

Requiring new employees to sign a noncompete agreement in order to land a position seems to be an upward trend for employers. People in essentially every type of job, from blue collar workers to senior executives, are being asked to sign on the dotted line as new employees.

The U.S. Department of the Treasury notes that agreements restricting how long an employee must wait to take a job with a competitor after leaving their current position have benefits as well as disadvantages.

For instance, when a noncompete agreement is in place, an employer may feel more comfortable sharing confidential information with employees, encouraging workers to become more motivated, productive and successful.

On the other hand, when these clauses lack transparency or fairness, employees may suffer, finding themselves stuck in their current positions or even being sued for taking new jobs. Stringent agreements can even hinder broader innovation and technology when they prohibit workers from finding new jobs.

If you’re considering signing on with an employer who is asking you to sign a noncompete agreement, first consider the following factors, and take steps to protect your own future.


1. Get Legal Input

It can be worthwhile to invest in an hour or two with an attorney, so they can look over the potential agreement with expert eyes. Noncompete clauses must be beneficial to both parties, and even then, they may not be binding. The laws regarding such clauses vary by state, so find a lawyer who can tell you whether the contract is legal.

2. Consider The Five Ws And One H

Just as journalists are taught to find the who, what, when, where, why and how of a story, you should dig in to discover these facts regarding your noncompete clause. Make sure it clarifies your limits, including the area, companies, time limits and circumstances that apply.

3. Make Sure It’s Reasonable

When you have clarified the extent of your limitations under the potential clause, determine whether they are reasonable to you. For instance, if you are unable to work in any similar position in your state or region for three years after leaving the current company, would you be able to find employment if the job didn’t work out?

4. Don’t Be Afraid To Negotiate

As with most other aspects of an offer of employment, the terms of a noncompete clause (or whether you must sign one at all) should be negotiable. If you are a desirable candidate, use your highly sought skills and experience as leverage. If you have already signed an agreement, you may even be able to negotiate the terms before finding a new job.

5. Request A Different Type Of Agreement

If you feel that the current clause is too restrictive, ask about the option of a similar type of agreement with fewer limitations. For instance, a non-solicitation agreement states that you will not try to take other employees, clients or customers when you leave the company. A nondisclosure or confidentiality agreement prevents you from stealing secrets, inventions or other inside information.

6. Ask For An Expiration Date

If you anticipate leaving to work for or even start a similar company sometime in the future, make sure the time parameters of the noncompete clause are not too lengthy. You might be able to get by on your savings for six months to a year, but an agreement with a lengthy end date (or none at all) could jeopardize your future. Negotiating a realistic period is wise.

7. Consider Compensation

You may be able to negotiate a buyout provision that allows you or a future employer to pay an established amount in order to cancel the agreement. Alternatively, you could request compensation for the period by which you are bound, which would allow you to have an income without breaching the terms of the clause.

8. Be Prepared to Walk Away

Ultimately, you must decide if the terms of the agreement are reasonable and whether the position is worth the possible difficulties it could cause you down the road. If you are unable to reach an amenable agreement, perhaps this is not the right job or the ideal employer for you.

About the Author

Tricia Goss

Tricia is a professional writer and editor who lives in North Texas with her family and one smelly dog. She is a wannabe problem solver, junk food maven professional coffee practitioner, web guru and general communicator. More.

More to explore