5 Insider Tips for Negotiating a Non-Compete Agreement

8 min read

Competition for stellar employees is becoming stiffer worldwide. As a result, the need for employers to secure and retain highly effective employees is at an all-time high. The paradox of this situation is that these employees also know they are in high demand.

They are therefore transient, moving from one contract to another. To stem this tide, employers are wielding non-compete contracts in an attempt to not only stem high staff turnover but to also protect their trade secrets, critical research and their clients.

As an employee, you may not avoid signing these contracts; but you do not have to enter into a straitjacket non-compete contract that leaves you very limited wiggle room. The following guidelines should help you avoid getting yourself into such a situation.

1. Consult a Lawyer

In spite of the excitement of landing a job of your dreams, contact an employment lawyer before you sign that contract. Go through it with him or her to determine what is enforceable and what is not. The consultancy fee of a couple of a hundred dollars per hour is worth having an attorney tooth-comb your non-compete contract. It would be extremely costly if you were to end up in court defending yourself against a breach of a non-compete contract.

2. Limit Geographical Scope

An employer will attempt to make a non-compete agreement cover as much geographical scope as possible. Whenever you see such an unreasonable restriction, take a step back. Do not sign it since it can severely curtail your future prospects of getting a job. While reasonable restrictions exist, these vary from sector to sector. For instance, temporarily barring a beautician from working anywhere in the country is unreasonable. However, restricting a pharmaceutical sales rep in a particular area could be said to be reasonable.

3. Limit the Restriction Duration

As with geographical scope limitation, you should seek to limit the amount of time the non-compete agreement prohibits you from seeking employment in a particular geographical area. The standard restriction period is between six months to one year. A non-compete contract of more than two years is essentially hostile. It is not in good faith, and you should not sign it. In any case, such a draconian contract is unlikely to hold up in court.

4. Consider Alternative Restrictions

There are other restrictions that may be more favourable to you than a non-compete. Try to get yourself into a “non-solicitation” or “non-disclosure” agreement instead. These two allow you to continue working soon after leaving a job. With non-disclosure agreements, you are restricted from leaving with valuable company research. Non-solicitation agreements prevent you from going after clients of your former company, the only exception being those that you already had before joining the company.

5. Get a Financial Settlement

If you cannot avoid a non-compete agreement, then you might as well get paid for your trouble. This is especially important if you are not comfortable with certain clauses in the contract. While you may not be compensated for a whole year, if an employer is intent on locking you out of employment for that long, they should at least pay you for the inconvenience. Your employment attorney can negotiate a salary of up to 80%.

A non-compete contract should provide a win-win scenario for both the employer and the employee. If drafted with good intentions, which should usually be the case, it protects an employer’s business while at the same time reasonably restricting an employee from getting another job within a certain geographical scope and period. For it to stand scrutiny in court, it must be prepared in good faith and provide reasonable restrictions that do not seek to punish a former employee. In any case, the six months period a former employee may have to wait out could be a welcome time to rest and retrain before moving on to their next job.

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