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4 Steps to Take Before You Sign a Non-Compete

non compete

In your excitement about landing a great job, you may not think much about the non-compete you’re asked to sign.

You have no intention of leaving the company—you haven’t even started! And the agreement looks harmless enough. Not to mention that you don’t want to tick off the people you will soon be working with, or worse, have the company rescind the job offer.

Once common among tech companies or with employees who have direct access to a company’s “secret sauce,” non-compete agreements are increasingly widespread. Hair stylists, writers, even interns are asked to sign them.

There’s plenty of debate about whether the agreements stifle economic development by discouraging people from starting their own companies. California is one of the few states that ban the agreements, which some say has helped fuel entrepreneurship in Silicon Valley.

Regardless of the broader implications, if you are asked to sign a non-compete when you accept a new job, you should try not to. The agreements benefit employers, not employees. They can limit your options down the road and potentially leave you trapped in a bad job because you can’t leave to work for the competitors who are most likely to hire you.

If you must sign, don’t do so before you negotiate better terms. While not all agreements are enforceable, you really don’t want to get into a legal battle with a former employer, so best to do as much as you can before you sign to limit potential difficulties down the road.

4 Steps to Take Before You Sign a Non-Compete

Find an attorney

Consult with a labor or employment lawyer about how enforceable the agreement is and what terms you can try to negotiate. If don’t know an attorney, search the listings of the National Employment Lawyers Association.

Try a different agreement

If your job doesn’t involve access to a company’s trade secrets, and even if it does, ask to sign a non-disclosure agreement instead. Those forbid you from sharing proprietary information. A non-solicitation agreement might also be a better option. Those prevent you from attempting to do business with clients of the company you are leaving, but should not prevent you from working with other clients or with those you know from previous jobs, for example.

Ask for compensation

The agreements may prevent you from working for a time before you can launch your own similar business or work for a similar company, but they don’t compensate you for your lost wages. Ask for a bonus for signing the agreement, or to be paid if you are unable to work after leaving the company.

Limit the scope

Non-competes are enforceable if they are fair and reasonable, protect legitimate business interests, and do not impose substantial hardship. Use those criteria to narrow the scope of the agreement. Among the things to negotiate:

Tailor to your specific job–Many employers ask all employees to sign the same boilerplate agreement, so narrow the terms to be directly applicable to your particular job. Recast the agreement to apply only to specific projects or with specific companies.

Limit the duration–Aim for an agreement to last six months to a year. You can argue that a longer period would cause economic hardship.

Clearly define the consequences–Many agreements have vague language about what happens if you violate the terms, with phrases such as “causing irreparable damage.” Make sure the penalties are clear, and also negotiate for any disagreements to be worked out through arbitration instead of the courts.

About the Author

Susan Price has been writing about careers, entrepreneurs and personal finance for more than a decade. She’s been an editor at BusinessWeek, Money, and iVillage.com, among others.