So you’ve found a new job that seems very promising, but the HR department has asked you to sign a noncompete agreement.
You’re far from alone. Still, you’re aware that signing such a document could be a hindrance to your future employment options. Can you refuse to sign it and still keep your job?
Probably not. But certain legal limitations are applied to such clauses by state (California has the most). Further, if you ever need to contest your agreement in court, the law may find in your favor if the agreement is too lengthy, covers too wide a geographic territory, guards against too many types of employers, and/or is pointlessly applied to workers not privy to company trade secrets or other valuable info.
By the same token, the court could choose to award damages against you for losses suffered by your employer. In rare cases, it might even prevent you from working for your new employer over the lifetime of the clause.
Your best bet is to scrutinize and negotiate the terms of your noncompete contract before you sign it.
- Ask if you can sign a non-disclosure or non-solicitation agreement instead. The former dictates you can’t take valuable research when you leave, and the latter dictates you can’t pursue your employer’s clients unless you cultivated them yourself prior to joining your firm.
- Ask that the clause take effect only if you leave your job voluntarily; otherwise you’ll be at a real disadvantage if you’re fired or laid off and must search for new employment.
- Ensure the agreement is specific about what other employers are restricted. The range should be narrow enough you could find another job in your general field without violation. Your employer may be willing to list just a few major competitors so you’re not unnecessarily limited.
- The standard time limit on a noncompete clause is six months to two years; longer terms likely won’t hold up in court.
- Check the agreement’s geographic limitations. They should make sense depending on the nature of your job and the degree to which your employer depends on local trade.
- When asked to sign a noncompete clause because of a promotion involving more insider information, ask to be compensated financially for the freedom you’re forgoing. You might be able to secure a portion of your salary for that time frame.
- Consider hiring a labor and employment lawyer to conduct your negotiations. Such services could cost $200 to $500/hour, but a trial defending a violation could cost in the tens of thousands.
Be smart about advocating for yourself when it comes to your future employment. Signing an overly restrictive noncompete agreement might not seem like a big deal when you’re enthusiastic about a new job, but it can easily come back to haunt you if things go south.