Non-Compete and Nondisclosure Agreements
Non-Compete and nondisclosure agreements have long been included in job offers and they play separate roles. Non-disclosure agreements are narrower in scope than non-compete agreements, restricting the sharing of information or processes. Requiring a new hire to sign a nondisclosure agreement (NDA), also known as a confidentiality agreement, is quite common and an understandable requirement. Companies have a vested interest in keeping their client lists, operating procedures, intellectual property (IP), etc. confidential; especially when it comes to their competitors. Consequently, I have never found NDAs to be burdensome. If I owned a business, I would want protection for my internal workings and IP that took a great deal of time and money to develop.
But non-compete agreements have often irked me, especially when it involves a career coaching client of mine that is terminated without cause or lost their job due to a downsizing or re-organization. The company cuts the employee loose without cause (i.e., a violation of company policy) then prevents him or her from working in the field and job they were hired for? Pretty unfair; in fact, many would say it’s downright un-American :(
The U.S. Federal Trade Commission (FTC) agrees and is acting on a directive from President Joe Biden, that seeks to eliminate non-compete agreements from U.S. workplaces. If implemented, nearly all employers regardless of size or industry, will be covered by the mandate although some employers would be exempt such as banks, airlines, meat packers, and certain nonprofits.
Unlike NDAs, most non-competes are not about safeguarding proprietary trade information, they are aimed at controlling the worker. Most employees don’t even have visibility to trade secrets such as formulas, recipes, etc. but in today’s environment they do know which companies pay better, provide better benefits, or have a better work environment. A non-compete agreement restricting their ability to work for a competitor helps ensure they don’t act on that knowledge. While I feel this is a counterproductive retention strategy many companies use it so it’s best to be ready to deal with it. I realize some people feel these restrictions are unenforceable but I have seen well-funded companies tie a worker up with expensive legal challenges to the point the employee ultimately wins but hasn’t been able to work for months and is out thousands in legal bills.
If the FTC proposal isn’t enacted and there is a non-compete clause in an offer letter, be sure to understand what you are agreeing to when you are accepting a job offer and keep these recommendations in mind:
1. Take a day or two to review the non-compete and the offer before signing it.
2. Check with the Department of Labor in your state regarding the enforceability of non-compete agreements.
3. Consider having an attorney or friendly HR professional review it to determine if your state prohibits non-compete agreements and if so ask that the agreement be based on the state you live in versus one of the employer’s locations or headquarters out of state.
4. Be sure to carefully review the distance and length terms. Many non-competes will stipulate you can’t work within a certain distance of the place you worked. For a field sales rep that could be an entire state or even several states. When it comes to the length of the agreement, one year is common and can be a career-killer forcing you to change industries or relocate. And if the restriction is stated as “xx miles from any of the employer’s locations,” you need to know where those locations are.
5. If you do decide to sign a non-compete, try to negotiate a concession on the employer’s part. Ask for something in exchange, for example 3–6 months of severance pay should you be dismissed without cause. They may balk at this but it’s worth a try.
Frank Manfre www.frankmanfre.com/career-coaching