Starting a job often means adjusting to a different routine, getting to know a new team of coworkers, and dealing with a mountain of paperwork. And while some of the forms you'll fill out are relatively standard (think W-4s and the like), you may be presented with a number of legal documents that throw you for a bit of a loop. One such example is the non-compete agreement, and it's a contract that could get you in trouble if you're not careful.
A non-compete agreement is a document wherein one party -- typically an employee -- promises not to compete with the other for a preset period of time. For example, if you come on board at an IT company, you may be required to sign a non-compete stating that you won't start your own similar business, or work for another IT company offering similar services, within six months of leaving your current job.
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It's a smart move for companies looking to protect their best interests. But these contracts rarely, if ever, favor the employees who sign them. Yet countless workers are presented with these documents as a prerequisite to employment, and if they don't comply, they risk having their offers rescinded.
Of course, the non-compete is nothing new; these contracts have long been common among high-level professionals. But nowadays, a growing number of companies are trying to spring them on mid-level, or even entry-level employees as well. In fact, as of 2014, an estimated 20% of employees were found to have signed a non-compete agreement.
If you're presented with a non-compete, you should think long and hard about the consequences before putting your name on that agreement. Otherwise, you might have a seriously difficult time finding a new job should you leave or get fired from your current one.
What's in a non-compete?
The theory behind non-competes is that companies often possess proprietary systems or information that give them an edge over the competition. Say you're hired by an online marketing company that's developed a unique algorithm for targeting web searchers. If you were to leave your job and get hired by a competitor, you might then use your knowledge of that algorithm to help your new employer develop its own system, even if you're not actually divulging trade secrets in the process. To prevent that from happening, your company might require you to sign a non-compete stating that you won't work for a similar company within a 50-mile radius for six months after your current role is terminated.
Keep in mind that a non-compete isn't the same as a non-disclosure, another document you'll commonly be asked to sign when you start a new job. A non-disclosure prohibits you from sharing trade secrets or proprietary information with parties outside your company, and while it's something restrictive, it's not nearly as limiting as a non-compete. In other words, with a non-disclosure, you might have to keep certain information you know under wraps when you start a new job, whereas a non-compete might prevent you from getting that new job in the first place.
Are non-competes really enforceable?
You may have heard that non-competes aren't something to worry about because they're mostly non-enforceable, and while there's some truth to that statement, it's not completely cut and dried. Different states have varying standards for upholding non-competes, so before you sign one, it pays to do some research to see whether local laws lean in your favor.
What you should know, however, is that the more reasonable the non-compete, the better its chances of being upheld in court. For example, if your agreement states that you can't work for a competitor for a six-month period, it's more likely to be enforced than a document covering a two-year period. Still, if your local court sides with your employer, you could be out of work for half a year's time.
That's why if you're asked to sign one of these documents, it's critical to review it thoroughly and bring up any concerns you might have before agreeing to its terms. You might even consider consulting with an attorney to ensure that you're not locking yourself into what could be an extended period of unemployment. Remember, people leave jobs for a variety of reasons, and the last thing you want is to limit your chances of finding work because of an agreement you felt you had no choice but to sign. You should never hesitate to protect your own best interests -- because that's the opposite of what a non-compete is designed to do.
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