What is a non-compete agreement? - Barrett & Farahany

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What is a Non-Compete Agreement?

What is a Non-Compete Agreement?

In the rush of onboarding, it’s sometimes easy to overlook an important document all new hires have to sign—the non-compete agreement. Sometimes these take the form of clauses in employment contracts. Sometimes they’re their own separate document. Some employers may even necessitate multiple non-competes as an employee rises up through the corporate ladder.

Employers often have employees sign 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? The employment law attorneys at Barrett & Farahany explain.

What is a Non-Compete Agreement?

A non-compete is a contractual agreement that can be made between an employer and an employee, contractor, consultant, or business partner. In a non-compete, the employee agrees not to 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.

They do not prohibit the employee from sharing company secrets or proprietary information – nondisclosure agreements do this. However, it’s common for non-compete agreements and clauses to go hand-in-hand with nondisclosure agreements/clauses. It is unheard of for a business to have an employee sign one but not the other, so you’re likely never to have a situation where you can reveal company secrets but can’t work for competitors, or vice versa.

When Do Employees Sign Non-Competes?

While non-compete agreements are usually presented to new hires, 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. If you receive a promotion, it may be necessary to change your non-compete since your experience, and therefore your employee opportunities improve, particularly among competitors.

Are Non-Competes Enforceable?

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 (FTC) 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. 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 garner questions from workers wondering how to get out of a non-compete agreement. Maybe they want to start their own business or apply for higher-paying positions 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.

What Should You Do If You Receive a Non-Compete?

If you’re offered a non-compete agreement that seems unfair, always consult with an employment lawyer before you sign it. 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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Barrett & Farahany

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