Non-Compete Agreements: What They Are and What to Consider Before You Sign One

By Indeed Editorial Team

February 22, 2021

When you start the onboarding process for a new job or prepare to leave your old job, you might need to sign important documents that demonstrate your loyalty or acknowledgment of confidential information about your employer to keep private. Employers use non-compete agreements to protect their business and their intellectual assets. By learning more about non-compete agreements, you can better communicate with an employer about their confidentiality needs and competitor relations and ultimately uphold their goodwill.

In this article, we provide a definition for non-compete agreements, highlight what to expect from a non-compete agreement and review helpful tips to apply when accepting a non-compete agreement with an employer.

Related: What Is a Non-competition Agreement?

What is a non-compete agreement?

A non-compete agreement is a document that employers ask job candidates or exiting employees to sign before joining or leaving their company. The purpose of a non-compete agreement is to protect a company's competitive advantage and success. In non-compete agreements, employers identify activities that would harm the company if an employee pursued them, including starting or joining a competing business while employed at or after employment with a company.

Related: What Is Employee Poaching? (Definition and Strategies to Prevent It)

What to expect from a non-compete agreement

Employers ask different things of employees in non-compete agreements based on their assessment of outside competition and talent. Here are some examples of what to expect after you read through and sign a non-compete agreement:

One or more negotiable terms

When you're in the process of reading over a non-compete agreement, there may be one or several areas in the contract that you can negotiate with your employer. For example, if an employer states that you cannot work for a competitor until a year after the termination of employment, you could persuade them to make it six months instead.

Another example of negotiable terms would be whether you could start your own business after completing employment with a company. Typically non-compete agreements outline a geographic area and time frame in which an employee can't start or operate their own business to protect the company. In this situation, you could negotiate to potentially operate your business within neighboring counties. You could also negotiate to lower the time-frame in which you couldn't start a business in their area.

Be sure to remain professional and respectful during negotiations to maintain your professional credibility and candidacy with an employer.

A job offer from the issuing party

Some employers may not want to hire candidates who don't sign non-compete agreements. This is usually because they want to protect their business and its confidentiality from those who could potentially share company information with competitors or use what they learned at the company to start their own business. Therefore if you sign a non-compete agreement, you might have a better chance of receiving a job offer from an employer.

A reward or gift to express gratitude

If you choose to sign a non-compete agreement, you'll likely receive a gift as an expression of gratitude from the company. This could come in the form of a job offer, a temporary bonus for one's starting salary or an addition to an employees' exit package when they leave the company.

Your referencing of the materials before applying to jobs or pursue opportunities

After signing a non-compete agreement, you can expect to reference the agreement each time you consider pursuing another job opportunity or starting your own business. This means checking to ensure a job you apply for isn't with a competitor listed in the agreement. It also means reviewing the document before you set-up a side business or service in addition to your full-time job at the company.

Related: 15 Tips For Negotiating a Contract

Tips for accepting a non-compete agreement

Before you accept a non-compete agreement, consider these tips:

Consider your future aspirations

When reading over a non-compete agreement and preparing to sign it, be sure to think about your overall career goals and how a non-compete agreement could affect your aspirations immediately following your exit from an employer. This especially important to think about when you're starting a new job that asks employees to sign a non-compete agreement.

For example, an employer asks you to refrain from employment with a competitor until six months have passed since employment. You know that you want to pursue a position with one of their competitors within the next five years. Because of the timeframe, you determine that accepting a job with the employer won't significantly affect your future aspirations and signing the agreement won't impact your goals.

Review your current employment situation

There are several factors to consider when deciding whether to sign a non-compete agreement. Consider asking yourself the following questions:

  • Am I attempting to get a job or am I leaving a job?

  • Do I have other job offers lined up?

  • How much do I want this job at this company?

  • Do the terms seem fair for the circumstances?

If you need a job to fulfill your financial needs, you might be more willing to sign a non-compete agreement than if you have other job offers that don't require you to sign a non-compete agreement. If you're in the process of obtaining a job with a company, but you aren't comfortable with the terms of the non-compete agreement, you should speak with your employer about it to learn more about their reasoning for what they include in the non-compete agreement and whether you can negotiate certain terms.

Ask for an extended length of time to read the agreement details in full

If you receive a non-compete agreement during a formal meeting with one or more company officials, you might be able to concentrate better and read the material in a quiet setting. To approach the situation, start by thanking them for the important information and ask them if you could have a few minutes alone to look over the agreement to gain an in-depth understanding of its contents.

Highlight confusing clauses and ask questions for clarity

When reading through a non-compete agreement, it's important that you make a note of any confusing passages or clauses and ask your employer to confirm their meanings. This ensures you understand what an employer asks of you in terms of confidentiality and professional courtesies.

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