Non-compete agreements can negatively impact your career. We’ll cover the basics of non-compete agreements and what you should know before signing one.
Non-compete clauses restrict an employee from working for one company after leaving another. Employers increasingly use non-competes to protect themselves from their employees moving to a competitor and taking secrets that could damage the business.
When a clause is part of a contract offer, it’s important to understand if agreeing to the non-compete clause may result in restrictions later. Courts sometimes may apply harsh consequences if the contractual agreements aren’t followed.
But don’t think of non-compete agreements as something that will stop you from making a career change. We will cover what a non-compete agreement is and how to deal with these agreements if they’re part of your employment contract.
What Is a Non-Compete Agreement?
Non-compete agreements are contracts those employers use to limit their employees’ ability to work for competitors or start their own businesses after leaving their current jobs. These agreements are also known as “non-compete clauses” or “non-compete covenants.”
In this agreement, the employee agrees not to compete with the employer’s business after leaving their job. Or they won’t join the competitor’s company.
How Do Non-Compete Agreements work?
The basic idea behind using a non-compete agreement is that employers want to keep their employees from competing with them after they leave the company. These agreements work by specifying which jobs an employee cannot take if they leave their job.
For example, if you worked as a salesperson at a clothing store and signed a non-compete agreement, it would prevent you from working for another clothing store even if you quit your job voluntarily. Non-compete agreements usually last for one year after leaving employment and are typically enforced through court orders.
Besides employment contracts, non-compete agreements can also be included in a sale agreement or as part of an exclusive distribution deal. The contract must be signed before employment begins or any agreement with another company.
Why Would You Need to Sign a Non-Compete Agreement?
Non-compete agreements can limit your ability to work freely after leaving one job for another.
So, why would anyone want to do this? Well, there are several reasons why employers would want to restrict employees from getting jobs elsewhere:
- They may want to protect business assets and not want their employees stealing their trade secrets or client lists (aka their “secret sauce”). For example, Coca-Cola wouldn’t want Pepsi to know its secret recipe.
- They don’t want their employees taking clients away from them or undermining their sales efforts by giving clients better service than they currently provide.
- They don’t want their employees leaking confidential information about their business plans to competitors who could use that information to undercut them on price or offer better services than they currently do (which will cost them money).
What is the Difference between a Non-Compete and a Non-Disclosure Agreement?
So, what’s the difference between that and a non-disclosure agreement? Both are agreements between two parties that restrict one party from disclosing trade secrets or confidential information from their previous employer. Still, they have different restrictions on when they can be used and how long they last.
A non-compete would prevent someone from entering into competition with their former employer. In contrast, a non-disclosure agreement would only prevent someone from disclosing confidential information after leaving their job.
How to Know If You Have a Non-Compete Agreement?
If you’re not sure whether you have a non-compete agreement or a non-disclosure agreement, there are a few things you can look for.
First, check the agreement itself. If it includes terms like “location,” “time,” “period,” or “competition,” preventing you from working for a competitor or starting your own business, then it’s likely a non-compete agreement. If it only prohibits you from disclosing confidential information, then it’s probably a non-disclosure agreement.
Another way to tell the difference is to look at the purpose of the agreement. Non-compete agreements are typically designed to protect a company’s business interests, while non-disclosure agreements are usually put in place to protect sensitive information.
If you’re still not sure, your best bet is to consult with an attorney who can help you determine which agreement you have and what your rights are under it.
What’s The Best Way to Approach a Non-Compete Agreement?
There are a few different ways to approach a non-compete agreement. The best method depends on the situation and the parties involved.
- One way to approach a non-compete agreement is to have an attorney draft it. This can be expensive, but it ensures that the agreement is legally binding and enforceable.
- Another way to approach a non-compete agreement is to use a template. This is a less expensive option, but ensuring that the template is appropriate for the situation and the parties involved is essential.
- A third way to approach a non-compete agreement is to negotiate it yourself. This can be a good option if you are familiar with the law and the parties involved are willing to negotiate in good faith.
No matter how you approach a non-compete agreement, it is important to ensure that the agreement is unambiguous. It should be specific as to what is prohibited and for how long. It should also be fair to both parties and not unduly restrictive.
What Are Some Ways to Break Out of a Non-Compete Agreement?
Assuming you are unable or unwilling to negotiate an amendment or release from your non-compete agreement, here are five ways to break out of a non-compete agreement:
1. Talk to a Lawyer
There may be options available to you that you are not aware of. An experienced lawyer can review your non-compete agreement and advise you of your best course of action
2. Move to a Different State
If your non-compete agreement is only binding in the state it was signed, moving to a different state may be a way to break out of the agreement.
3. Start Your Own Business
If you are prevented from working for a competitor, opening your own business in the same industry may be a way to get around the non-compete agreement.
4. Find a Loophole
Carefully read the terms of your non-compete agreement and look for any loopholes you can exploit.
5. Wait It Out
Non-compete agreements typically have a limited duration (6 months or one year), so waiting out may be an option if you are patient. You can just freelance till then, depending on what’s your job!
How Do Non-Compete Agreements Impact Your Career?
Employees subject to a non-compete agreement may be restricted from taking a new job in their field. It can negatively impact your career in the short term as well as the long term.
However, there are some steps that an employee can take to minimize the impact. For example, an employee can try to negotiate the terms of the agreement before signing it. Employees can also consult with an attorney to understand their rights under the agreement.
Conclusion
Learning about non-compete agreements can help you understand what they are, why you might be asked to sign one, whether or not a non-compete agreement is valid, how to approach a non-compete agreement, and what is the best way to get out of one.
If you are subject to a non-compete agreement, it is vital to understand how it will impact your career. Understanding the agreement and its implications can help you make the best decisions for your career.
