Must I sign my employer's noncompete agreement?

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Question:

My employer is insisting that I sign a noncompete agreement, preventing me from working for competitors if I leave. Is there anything I can do to make it less onerous, or do I have to sign whatever my employer hands me?

Answer:

You certainly aren't alone. Many employers ask employees to sign noncompete agreements promising they will not work for a competitor after leaving their current job.

These agreements are legal in many -- but not all -- states. (One notable foe of the noncompete agreement is California, where such arrangements are prohibited except in connection with the sale of a business.)

Even states that allow these agreements impose some limits on them because the legal system puts a high value on a person's right to earn a living. A noncompete agreement won't be enforced if a court find that it is unreasonable. An agreement may be held unreasonable because it:

  • lasts for too long
  • covers a geographical area that is too large
  • is too broad in the types of business it declares off limits to the employee, or
  • applies to employees who never had access to the employer's trade secrets or other valuable information in the first place. (In this situation, there's no compelling reason to allow the employer to prevent the employee from working for a competitor.)

If you're asked to sign a noncompete agreement, your best first step may be to negotiate the finer print with your employer. Here are a few pointers for crafting your arguments.

  • If your employer asks you to sign a noncompete when you're promoted to a new position, it's reasonable to ask for money to compensate you for the rights you are giving up. Keep in mind, though, that this will almost certainly prevent you from later claiming that the clause should not be enforced against you. Because you got something valuable for signing the agreement, you probably won't be able to get out of it later.
  • If presented with a noncompete clause, demand that it take effect only if you leave the job voluntarily. Otherwise, the clause could limit your employment opportunities if you are fired or laid off.
  • Ask for the prohibited competition to be clearly identified and limited. Many employers fear competition with only one or two specific companies and will readily name their names in your agreement.

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