Beware of the Noncompete

Thanks to MSNBC columnist Eve Tahmincioglu for revisiting the issue of the noncompete agreement.  I address this topic briefly in Success for Hire, and I think it’s an important one to be aware of if you’re job hunting or thinking of making a career transition anytime soon.  Says Eve:

“Among the flood of forms you get when you’re first hired, or paperwork a boss asks you to fill out as part of a new company policy, a noncompete clause or agreement may be lurking. If you sign it, you could be shooting yourself in the career foot.  Such legal documents can preclude you from going to work for a competitor or even keep you from starting a business  in a similar industry.”

In Eve’s article, Barbara Poole, CEO of Employaid, an online resource for employees and HR executives, likens noncompete agreements to prenuptial contracts.  Too often, employees get caught up in the elation of getting a job offer and “don’t think about what they’re signing.”  However, legal experts say, you sign at your own peril. Given the tough economy and intense competition among most industries today, employers increasingly are taking workers to court over violations of these agreements.   “We see far more attempts to enforce these,” says Poole.

For example, there’s a very public battle going on right now between IBM and Apple over an employee who signed a noncompete agreement. IBM is suing a former employee who took a job as senior vice president overseeing iPhone and iPod development at Apple earlier this month, claiming he violated his noncompete agreement.

There are a couple of things to keep in mind before you do sign a noncompete agreement, reports Eve.  It’s a good idea to contact your local labor department to find out if noncompete clauses are applicable in your state. If they are, Daniel Levine, an employment attorney with Shapiro, Blasi, Wasserman & Gora in Boca Raton, Fla. advises employees to spend some time reading the document and maybe even have a lawyer take a look so you fully understand what you’re agreeing to.

If you decide not to sign a noncompete agreement, an employer can decide not to hire you, and that’s within their rights.  You also have to take into consideration the scope of the agreement is. In many cases if a noncompete clause is too broad it won’t hold up in court.  And nothing precludes you from altering the noncompete agreement before you sign it. An employer may not accept it, but what do you have to lose?

Comments

[Dan Schawbel]

The interesting thing is that legal "stuff" typically happens when the stakes or high (when it's an executive). Companies aren't going to fight a non-compete if it's an intern or associate.

[Alexandra Levit]

Hey again Dan! In my experience, not necessarily. I agree that an intern is not worth the effort to most organizations (interns usually don't have noncompetes or even contracts anyway), but I've seen them enforced with entry to mid level folks before. Even if the company doesn't end up suing, it's not unusual for them to threaten someone out of taking the other job.

[Erika with Qvisory]

Great point, Alexandra! When I worked in HR, the non-compete clause was part of our NDA, and I always made sure to explain it really carefully during paperwork signing appointments.

One person actually refused to sign the NDA, because he didn't like the restrictions, so we had to withdraw the job offer. Non-compete clauses are a big deal!

[Angelique Keenley]

Good post, Alexandra.

We tend to think of them as so prone to unenforcability that we don't even bother using them. Hopefully we're good enough to keep our top performers around.

I think they might be valuable for sales positions. I've seen companies that have written them for 2 years anywhere in the country. That's crazy and most certainly unenforceable.

By the way...you've been tagged...pop into my blog to see what I mean http://inspiredhr.blogspot.com/

Thanks,
Angelique

[Alexandra Levit]

Erika, thank you for sharing that story. It illustrates that noncompetes are not just a formality and that companies still do take them seriously.

Angelique, great to meet you and thanks for tagging me. I will try to get around to that post. :) As for unforceability, I think that sometimes it's just too expensive and too much trouble to try to enforce an agreement. Better just to let the person go.