If you are in the market for a new job or freelance gig, don’t be surprised if you’re asked to sign a noncompete agreement as a condition of employment. Problem is, a noncompete could hamper your ability to earn a decent living down the road.
What exactly is a noncompete? It’s a legal contract from your current (or soon-to-be ex) employer that prevents you from going to work for a competitor or starting a competing business for a specified period of time.
Noncompetes are great for employers; they help protect intellectual property and retain — well, maybe lock-in — employees. But for workers, they can be a nightmare.
Traditionally, noncompetes were reserved for high-level execs with access to trade secrets. But in recent years, as the workplace has grown more mobile and workers have been changing jobs with greater frequency, the use of noncompetes has broadened dramatically.
These days, employees from warehouse workers to writers are sometimes forced to sign these contracts. While tech occupations have the highest percentage of noncompetes, nearly 20 percent of American workers are currently bound by these agreements, including 14 percent of workers earning less than $40,000 per year, according to a study by University of Michigan and University of Maryland researchers.
Laws governing noncompetes vary state-by-state, but in general, they are usually enforceable. So unless you’ve got other job offers in your back pocket — and nearly two-thirds of job applicants have no alternative job opportunities when asked to agree to a noncompete — your options might be very limited if you’re told to sign one.
Nonetheless, here are six steps you can take to help minimize the pain of a noncompete agreement, two for when you leave a job and four for when you’re asked to sign one:
When You Leave a Job
Check to see if you have a noncompete in force. It’s possible that you might have signed one when you got hired and you’ve forgotten about it. So check your files, or with HR (carefully!), before assuming you’re in the clear. If you do have one, consult an employment lawyer for advice on how the contract might restrict or impact your plans before making your exit.
Don’t leave an incriminating digital trail. If you signed a noncompete and your employer suspects you’re about to leave your job, it might look at your emails to see if you’ve communicated inappropriately with customers or downloaded confidential files. Your employer has the right to monitor your corporate computer use, but don’t make it easy for it to find damaging evidence that could be used against you if the company later decides to sue you for violating a noncompete. Keep any conversations about new opportunities limited to your personal electronic devices.
When You’re Asked to Sign a Noncompete
Prepare to answer questions from prospective employers about noncompetes you signed that are still in force. During the interview process, you might be asked if you have one. Craig Bonnist, an employment lawyer with McCarter & English, in Stamford, Conn. and New York City, says you must disclose this information if the subject comes up. Even if you’re not asked directly, you should raise the issue.
“A misrepresentation on the employment application or in the interview process can be grounds for subsequent termination, and that termination would probably be for just cause if an employment contract exists,” warns Bonnist.
Once the hiring employer is aware of the agreement, it can then determine if the job you’re applying for could be tailored to be outside the noncompete restrictions. The employer can also ask its lawyer if the noncompete would be legally unenforceable.
Know what you’re signing. As tempting as it may be to quickly glance at and then sign the noncompete — especially if you feel like you have no other job prospects — be sure you understand the terms of the document. Since it’s legally binding, have an employment attorney review the noncompete prior to signing.
If possible, ask for modifications. Bonnist says success in narrowing a noncompete when you get hired depends on your negotiation leverage. If you’re being recruited, you have more leverage and can try to use it to narrow or eliminate the noncompete rules.
You might be able to make the terms of the agreement more favorable by narrowing the definition of competitive conduct, limiting the geographic scope to a specific city or mile range or restricting the duration of the noncompete (such as changing it from lasting six months after you leave the employer to three months).
Don’t end your job search until you’ve completed all your onboarding paperwork. At least 37 percent of workers are asked to sign a noncompete after accepting the job offer, according to a 2016 White House report. So keep all your options open in the event the noncompete proves to be a deal breaker and you need to look for work elsewhere.
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