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What is a non-compete agreement?

Posted by B&F System Admin | Feb 28, 2022

In the rush of onboarding, it's sometimes easy to overlook an important new hire document—the non-compete agreement. Employers often put forward non-competes to maintain their edge against competitors. But while these contracts are common, they're not always fair to employees. When does a non-compete become abusive, and are non-compete agreements always enforceable?

What is a non-compete agreement? 

A non-compete is a contractual agreement between an employer and an employee, contractor or consultant. In a non-compete, the employee agrees to not work for a competitor or start a competitive company for a specific period of time after the employment ends. Restrictions might focus on a market or region, and they also usually prohibit an employee from sharing company secrets or other proprietary information.

While non-compete agreements are usually presented to new hires (when bargaining power drops), they're sometimes offered later. In such cases, they should be coupled with some consideration for employees—perhaps more pay, additional vacation time or a new title.

While common in certain industries, especially media, manufacturing, IT and finance, non-compete clauses are now widespread in the corporate world and have even extended to companies seeking to limit the job mobility of their hourly low-wage workers.

With that ubiquity has come pushback. Several states and the District of Columbia have made non-compete agreements unenforceable. Other states have made it illegal to ask low-wage employees to sign such agreements. Last year, President Biden signed an Executive Order asking the Federal Trade Commission to limit unfair non-competes. The FTC and Department of Justice began workshops on the issue in December, signaling potential future action in this area.

But for now, in Georgia and Alabama, non-compete clauses are still very much on the table, and with reputations as employer-friendly states, it's important to understand what you're signing when you agree to sign a non-compete clause.

What to know before signing a non-compete agreement

We often hear from workers wondering how to get out of a non-compete agreement. Maybe they want to start their own business but realize they're under a three-year non-compete. Others struggle to land a job in their industry due to the prohibitive nature of a contract they may have signed years ago.

While it is sometimes possible to come to an agreement with a former employer, breaking a non-compete can be a risky move and expose you to legal action. It's a safer approach to thoroughly evaluate a non-compete clause on the front end and question whether it's overly restrictive or lopsided.

If you're offered a non-compete agreement that seems unfair, always consult with an employment lawyer. You'll be able to determine how enforceable the agreement is or whether it could be negotiated. A non-compete shouldn't leave you with limited job options in your region. While employees are usually eager to start work and kick off a good relationship with a new employer, it's smart to take steps to ensure you won't be essentially forced out of your industry should you choose to leave your job down the road.

At Barrett & Farahany, we are happy to answer any questions about your situation. Please contact us to speak to one of our attorneys.

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