Human Resources

Do I Have to Sign My Employer's Non-Compete Agreement?

When your employer requests that you sign a non-compete form, do you really have to sign it? It all depends on which state you’re in.

A non-compete agreement is a form that prohibits someone from starting a competing business within a certain time period. Originally, it was meant to prevent those who sell a business from turning around and starting it up again under a different name. It would be a simple matter to get the same clients back and that would defeat the purpose of the other business buying the company. Today, however, more and more companies are asking employees to sign these forms.

Due to the rapid pace of technology and the relative ease with which you can start your own business or switch to the competition, it has become necessary for employers to take measures to protect their companies.

Types of Non-Compete Agreements

There are four different types of agreements that fall under the theme of non-compete.

Basic non-competition agreement - This agreement ensures that the employee will not go off and start his own business in the same industry nor will he be able to work for the competition. It’s a fairly basic contract that ensures no one will be creating direct competition after learning the company secrets.

Non-solicitation agreement - When you sign this, you are agreeing not to take clients with you from the company or to solicit the company’s clients. This is a fairly straightforward agreement.

Non-disclosure agreement - This agreement prevents you from sharing secrets of the trade with the competition. Whatever you learn in the company has to be kept a secret.

Confidentiality - Not only does this cover the same territory as the non-disclosure agreement, this one also keeps employees from talking about their employer. People who work for celebrities, for example, are asked to sign this in order to prevent them from discussing what goes on behind the scenes.

All four of these agreements can be requested by employers, if they are worried about employees leaking information to the competition.

Do You Have to Sign?

In a word, no. You are not required to sign anything you don’t wish to, but this could mean the difference between getting the job or not. In some cases, employers will ask you to sign a form before they fire you, in which case, you are not under any obligation to humor them; these forms should be presented at the beginning of the job.

In some states, such as California, the non-compete agreement is not enforceable. While not illegal, it is simply something that the laws do not enforce, so you can avoid signing and still get the job, or keep your job if you are already working for the employer.

Elsewhere, the employer is within their rights to ask you to sign, but the agreement must be for a reasonable amount of time and not cover too much geography. They can’t ask you not to work for anyone anywhere for the rest of your life, for example. Also, if you have no access to company information or trade secrets, there’s no reason to have you sign the agreement and you can refuse on these grounds and it will stand up in court. An employer cannot unreasonably prevent you from earning a living.

Things to Consider

If you choose to sign the agreement, you will want to keep a few things in mind. First, look at how long the contract is for. In most cases, you will be prohibited from starting a similar business for the next five years, which is a fairly reasonable term. However, if it is longer than this, you may want to contest it. Contracts can be tweaked, so there is nothing wrong with going back and negotiating the terms before you sign.

Don’t accept the agreement at face value. It’s a good idea to have someone experienced in legal matters take a look at the agreement. They will be able to spot potential issues far easier than you will, though you should read the agreement carefully, as well.

Is the agreement specific as to the terms? A general blanket statement will be difficult to understand and while it may not hold up in court, you want to be sure of exactly what you can and cannot do, so ask for specifics to be included in the contract.

You should also consider the penalty for breaking the agreement. What if you work for another company that is considered competition? Will you have to pay a fine or do something else? Be sure you understand all the terms before signing anything.

Whether or not you need to sign the agreement will depend on what state you’re in and whether you are willing to risk your job over a non-compete agreement. Think it over, check out the laws in your state and then make your decision.