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During the course of the last few months I’m sure that I’ve read at least a half dozen articles discussing non-compete/non-disclosure agreements.
In my opinion these articles, which were all from major business related magazines, did a great job telling the story from the perspective of the business owner.
Unfortunately they did a poor job of tell the story from the point of view of the employee, which is what I intend this post to do.
I have signed 4 non-compete agreements that I can remember. Unfortunately there weren’t any people around to advise me on how to handle them, so I probably signed a couple that I shouldn’t have. I have had to turn down work because of a non-compete I signed in the past. So, I hope the information in this post will help others avoid some of the traps these agreements can put people in.
Note: I am not a lawyer and can not be held responsible for anything you do after reading this post.
The Non-Compete/Non-Disclosure Agreement
Non-compete agreements are intended to protect employers from losing trade secrets, confidential information and employees. A non-compete agreement could stop an employee that leaves from starting a competing company. It could also prevent an ex-employee from sharing confidential materials or knowledge with others.
These agreements will specify a time period (usually 6 months to 2 years), a geographic location and the type of work that the employee can not engage in after they leave a company. It will also give the company a cause for litigation should the employee share trade secrets with others.
When it comes to non-disclosure agreements, I have 3 rules:
Avoid signing non-compete agreements like the plague
If it is at all possible for you to avoid signing a non-compete agreement, do it. Or rather, don’t do it.
Non-compete agreements give businesses a grounds to bring a lawsuit against you that could cripple you financially. Businesses usually have lots of money and can afford high priced lawyers. The employee usually cannot.
I have a designer friend who worked at a company less than 3-months and then took a job at a different advertising agency in the same city after her relationship with the boss at the former company grew sour. The company she used to work for sued her because she broke her non-compete agreement by taking a design job in the same city within 3 years of leaving the company. That’s quite a lot to give up for working at a company for less than 3 months.
You never know what will come of your relationship with your employer, so it’s best to avoid giving them grounds to come after you.
Negotiate non-compete agreements before you accept the job
The first day of work for most employees involves a lot of filling out papers for the business department. This is usually the time when the company sneaks in the non-compete agreement.
During negotiations most companies fail to mention that they will want you to sign a non-compete agreement. They do this because it is much harder for you to not sign it once you’ve already quit your old job and are working for them. If you say no, they might let you go and then you will be unemployed.
Before accepting a position with a company, negotiate any agreements that the company will want you to sign. The future employee has way more leverage in this situation before they accept the job.
Try not to sign one after you are on the job and if you have to, get something in return
Let’s say that you’ve been working with a company for six months and you’ve never been asked to sign a non-compete agreement. After reading one of the non-compete articles I mentioned in my intro, your boss asks you to sign a non-compete agreement.
In my opinion, it is not fair for an employer to ask this of an employee at this point. I would try to avoid signing the agreement.
If they insist that you do sign it, try to have it be on your terms and make sure they give you something in return. By signing the agreement the employee is giving up future freedoms, so it should be fair to expect a small raise or an extra couple vacation days in return.
My parting thoughts
I HATE the practice of companies not informing employees that they will be required to sign a non-compete agreement after they accept the position. This is very unfair to the employee. Next time you are asked to sign a non-compete, remember that they are designed to protect employers and not the employee.
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