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Home  > Article

Reading the Fine Print on Your Non-Compete

By Martin Lieberman

Increased "information theft" has forced many companies to add non-compete agreements to their regular contracts, restricting employees' future career plans, as well as their spare time activities while on staff. Do you know what you're signing up for?

Job seekers have enough power in this job market to negotiate the agreement so that it's not detrimental to their career.

Joining a high tech or multimedia company can be one of the surest routes to a lucrative career. All you have to do is work a few months, soak up the tools and tricks of the trade, and then get hired away by another company at a higher salary or apply your skills to a new venture.

But there's just one catch: increased "information theft" has forced many companies to add non-compete agreements to their regular contracts, restricting employees' future career plans, as well as their spare time activities while on staff.

"When I was hired, I wasn't really thinking about what would happen when I left," says Kristin Barker, who signed a non-compete agreement when she started with Envision, a production company. Like many young employees with little experience in the working world, Kristen didn't worry much about the clause. "It was just something I had to sign, like another piece of paperwork." But as non-compete agreements become more common in other industries besides high tech, it is important to recognize what they mean and what your rights are.

The Fine Print
Most non-compete agreements stipulate four main points:

  • You will not leave the company to work for a competing business
  • You will not solicit former coworkers or clients after you have left the company
  • You will not share confidential information with others who are not affiliated with the company
  • You will not have a side business that competes with the company

The length of time that these clauses are in effect differs by company, but one year following the termination of an employment contract is standard.

Your Rights
If you are asked to sign a non-compete agreement, make sure you know what you're agreeing to. Marcus Courtney, a cofounder of the Washington Alliance of Technology Workers, says that job seekers have enough power in this job market to negotiate the agreement so that it is not detrimental to their career. For example, a candidate can ask the employer to clarify in writing exactly what types of companies it considers competitors. Or, if the employee feels that the agreement's duration is too long, that can be negotiated as well.

"These situations are going to become a lot more prevalent," Courtney says. "All of a sudden people are going to be bound to one employer at a time when it's very common for people to have three or four employers in a year's time."

What the Courts Say
Non-compete agreements sound threatening, but their enforceability is questionable. We learned from Courtney that in some states, including Pennsylvania and Florida, courts have ruled that they are binding contracts, while courts in California will not enforce them. And just last year, a U.S. District Court found that EarthWeb, an Internet publishing company, could not prevent a former employee from working in the same field during the year following his employment. "When measured against the information technology industry in the Internet environment, a one-year hiatus from the workforce is several generations, if not an eternity," Judge William H. Pauley III wrote.

Until there are more legal precedents, or until non-competes become more standardized, your best bet is to read the fine print on your non-compete agreement before you sign it. Protect your rights where you can, or at least be aware of the ramifications.

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