WFJ Presents: What Every Employee Should Know About Noncompetes: Part 2 – Negotiating a Noncompete When Asked to Sign One
Employees are often asked to sign noncompete agreements that limit the employee’s legal right to work for other employers or for themselves during and after their employment.
This is the second part of a three part blog pertaining to noncompetes. The first part discussed the enforceability of noncompetes. This second part discusses considerations and negotiation tactics when an employee is asked to sign a noncompete. The third part will discuss considerations and options when an employee has already signed a noncompete and they “want out” of it.
If you are being asked to sign a noncompete, you should scrutinize the terms carefully and consult with an attorney to make sure you fully understand the scope of what will be prohibited. The attorney can also advise you if there are any unreasonable provisions or “red flags” in it.
Generally, you should not sign the noncompete if possible — it does, after all, limit your ability to seek other employment and opportunities.
If you do sign a noncompete, you should only do so if being adequately compensated. Typically, if being asked to sign a noncompete at the time of an employment offer, that means you are being offered a job with sufficient wages or opportunities to warrant agreeing to the restrictions. Typically, if being asked to sign a noncompete after you are already an employee, that means getting a bonus, promotion, or increased wages sufficient to warrant agreeing to the restrictions.
Please see part one of this blog for a discussion of whether continued employment is adequate consideration to enforce a noncompete. While this may vary depending on the circumstances, generally if you are an at-will employee an employer can terminate your employment if they ask you to sign a noncompete and you decline.
If there are unreasonable terms, you should negotiate those terms. Terms that could be unreasonable include the scope of work prohibited, the geographic range of work prohibited, the time period that the work is prohibited, etc.
Above all, you should assume that the non-compete is going to be enforceable if you sign it. Even if it is ultimately determined by a Court to be unenforceable, if an employer sues you for a breach of the agreement, you will likely spend thousands in attorney’s fees defending. Also, it is common for a Court to award a temporary injunction prohibiting you from the conduct that is an alleged violation of the noncompete while the case is being decided. This means you have to quit the new job or conduct that your former employer is alleging to be a breach of the noncompete.
This blog is not intended as legal advice but merely to provide general information. Consult an attorney in the event you are asked to sign a noncompete prior to agreeing to it.