What Is a Non-Compete Agreement and What To Consider
By Indeed Editorial Team
Updated October 23, 2022
Published September 29, 2021
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
During your onboarding process, your new employer may ask you to sign a non-compete agreement. These agreements protect their business interests and intellectual property if you terminate your employment contract in the future. By learning about these agreements, you can communicate more efficiently with employers about your needs, and make informed decisions about your professional career. In this article, we discuss the definition of a non-compete, explain what to expect from these agreements, provide you with tips for signing them, and answer frequently asked questions about the topic.
What is a non-compete agreement?
A non-compete agreement protects an organization from competition if the employee quits at a later date. The employees who sign these agreements are unable to join or open competing businesses for a specific period of time. The goal of this agreement is to protect the company from losing business by preventing the employee from engaging in similar activities after leaving the role.
It usually prohibits them from bringing their clients from the previous employer to a new business, or encouraging their colleagues to do the same. Some employers require employees or candidates to sign these agreements before joining or leaving an organization. They can also address the topic of intellectual property to protect the company's trade secrets and strategies.
What can you expect from a non-compete?
Every agreement contains different terms and elements, including:
When you read the contract, there are several terms you can negotiate with your employer. For example, the contract may state that you're unable to work in the same city as your employer for a year after the termination of your employment contract. You can negotiate these terms to reduce or eliminate the time constraint. Another example of negotiable terms is whether you start your own business following termination of your employment contract.
These agreements typically provide a geographical radius that prevents you from working in the area surrounding the employer. You can negotiate the radius to work in neighbouring cities or towns. The contract might also request that you not work in the same industry. Contracts can outline several variations of these terms, but you are within your right to negotiate them before you sign.
By signing the agreement, you're more likely to receive a job offer from the employer. Some employers may withhold job offers to protect the confidentiality of their business if a candidate refuses to sign an agreement. Show the employer that you're willing to respect the company's well-being by signing it if requested. If you're unsure of the terms, you can discuss them before committing with your signature.
Rewards and gratitude
Employers sometimes send messages of gratitude or gifts to those who sign agreements. These agreements demonstrate your intention to build a professional relationship with the employer, and they might choose to thank you for doing so. They may reward you with a bonus, gift, or additional employment benefit.
Your agreement becomes a reference when you have questions about other job opportunities or if you want to start your own business. Check your agreement if you want to apply for a job and are unsure about whether the other employer is a competitor. Place this document somewhere accessible to ensure you can find and read it quickly when you have questions.
Tips for accepting the agreement
Here are some tips to consider before accepting this type of agreement:
Consider your career goals
Consider how the agreement might affect your professional goals in the future. For example, the agreement may include terms that require you to refuse to work for the employer's competitors for one year following the termination of the employment contract. If you know you want to change employers within that year or have an interest in working for a specific competitor, it may be best to refrain from signing or negotiate those terms. If you plan to wait before working for a competitor, the non-compete doesn't impact your career or goals and is reasonable to sign.
Related: Setting Goals to Improve Your Career
Consult an attorney
When an employer wants you to sign an agreement, you may need to consult an attorney. These professionals can help you determine whether the employer's expectations are fair and lawful. They can also advise you on sensitive matters. For example, employers may be outside their rights to ask that you sign an agreement without also offering you a full-time job position. Your attorney has knowledge of the details involved with these agreements.
Think about geographical location
When negotiating the terms of your non-compete, consider how this might affect your living arrangements. If you plan to live in your area in the long-term, consider negotiating the scope of the non-compete and the area in which you're unable work in if you end the employment contract. Discuss your intentions to work in neighbouring areas if you leave the employer.
Consider your current employment
Before making the decision about whether to sign a non-compete, there are a few aspects to consider. Think about whether signing the non-compete puts you at risk of losing the job offer. If so, consider whether you have other job offers available and whether this job offer interferes with your career goals. If it does, consider how much you need or want this job and whether it's worth the potential future consequences of signing the agreement. Another factor to consider is whether the terms of the agreement are fair.
If you read the agreement, or have your attorney read it, and are uncomfortable with some terms outlined, consider discussing this with your employer. They have the power to change terms within the agreement or remove them. When asked, the employer may elaborate on their reasoning for particular elements of the agreement.
Ask for additional time to read through your agreement
Before you decide to sign a non-compete, ask for more time to read through the terms of the contract. This also provides you with the time to consult your attorney. If you're unsure about how to ask for more time, thank them for the information they provided and ask them if it's appropriate for you to review the contract before signing it. This demonstrates your dedication to understanding the terms of the agreement and ensures you're serious about the role.
Highlight passages that require clarity
When reading your non-compete agreement, identify sections that require clarity. You can then ask your attorney for more information about their meaning, or ask the employer directly. This is important to ensure that you know which terms you agree to and that you understand any terms expected of you.
Frequently asked questions about non-compete agreements
Here are some FAQs about these agreements to help answer any questions you may have:
What is the difference between a non-compete and a non-solicitor's clause?
The primary difference between a non-compete and a non-solicitor's clause is that the latter prevents you from signing your employer's clients following the termination of your employment contract. They also prevent you from contacting your former employer's clients. Non-competes are more elaborate and include multiple clauses that impact your future career. They mostly pertain to preventing you from working with the employer's competitors.
Related: What Is an Employment Contract?
What voids a non-compete?
The best way to void a non-compete is to find ambiguity in its wording. The contract is also void if there is no proof that you did or didn't sign it. If you want to void the contract, you can also prove that it works against public interest.
What happens if you break your non-compete?
Breaking your non-compete can lead to lawsuits. Employers may seek damages from those who intentionally break their non-competes. For example, they can pursue a lawsuit if you open a business in the same city as your former employer.
What if you have difficulty finding work after terminating a contract with a non-compete?
If you have difficulty finding work following the termination of your employment contact because of a non-compete, consider discussing this with your previous employer. Employers then determine whether they can release you from the contact. Alternatively, you can look for employment outside your industry or the geographical radius outlined by the agreement.
Who needs to sign a non-disclosure agreement?
Employers have their own rules and regulations for when you need to sign these agreements. Typically, those who work with sensitive or confidential information need to have these agreements. Law firms and organizations in the medical field are common industries where you might experience a non-disclosure agreement.
Is the agreement valid if I'm fired?
Employers are unable to enforce a non-compete if they terminate your employment contract. This is because, in this situation, they directly benefit from firing you and also from the agreement. Only those who leave their place of employment willingly need to follow the terms of their agreement.
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