Some people like to think of non-compete clauses as the business version of a prenuptial agreement. It's likely that the shock you experience when you are presented with a pre-nup is similar to the shock you might experience when you are asked to sign a non-compete document.
What are non-compete clauses?
Every business has information that it considers both integral and invaluable to its success. Therefore, restricting the use of this information by employees following the termination of their employment may be vital to protecting their business. An ex-employee who has knowledge of a previous employer’s customers, processes and technology can be an attractive asset to a competitor.
A non-compete clause is either a paragraph that is contained within an employment contract or a completely separate document that new employees must sign as a condition for hire. They are designed to prevent employees, particularly those within a sales environment, from taking vital information or contacts to rival businesses. Upon signing a non-compete clause (NCC), an employee agrees not to enter into or start a similar profession with a competing organisation.
As an employee, it may be strange to think about leaving a company that you've not even started working for however with the average employee’s duration of employment getting shorter and shorter, it is quite often the reality of today’s working environment.
Are non-compete clauses enforceable?
It's thought that a one size fits all policy when drafting non-compete clauses, risks them being unenforceable. In order to enforce such a clause, an employer must be able to prove that it is reasonable, necessary to protect business interests and not for a duration that is longer than necessary to in order to protect those business interests. It is often thought that because an employee has signed a non-compete agreement, it is automatically enforceable however this is not the case. In some cases, a non-compete agreement may not be valid or enforceable because it is too constricting.
What is reasonable?
Defining what is reasonable when it comes to non-compete clauses depends on the nature of the business. A clause restricting an ex-employee from soliciting with a previous employers’ customers or clients that they have done business with is more likely to stand up in court than one which prohibits contact with any customers of which the employer may not have had any contact with. The duration of the non-compete clauses is also relevant. A typical NCC would normally last no more than 6 months and any longer than 12 months are unlikely to be enforceable unless there are exceptional circumstances.
As well as a non-compete clause, an employer can also include a provision in an employee’s contract of employment entitling them to place you on gardening leave prior to the termination of your employment as another way of protecting its confidential information. As an employee, if you are placed on gardening leave, you will remain an employee and receive pay and benefits, but you will be prevented from attending work and carrying out normal day to day duties for the duration of your notice period.
Should I sign a non-compete agreement?
Only you can answer that. Before signing, it’s important that you take some time to evaluate the pros and cons. You may be able to negotiate the terms of the agreement including the names of specific competitors, the geographic scope, the length of time following termination of employment and whether the agreement is in effect if you are fired rather than if you resign.
What if I’ve signed a non-compete and I want to resign?
It’s important to disclose to potential employers that you have signed a non-compete however it is not necessary to do so until later in the interview process when you know they are potentially interested in hiring you. If a prospective employer is really interested in having you join their team, they may assist you in getting out of your previous agreement.
It's important to note that we at FGS Recruitment are not trained legal professionals therefore we advise that anyone seeking legal advice relating to a non-compete clause, do so via a professional law-firm.
Have you encountered any problems with non-compete agreements? Perhaps you’ve signed one and would like a sounding board from a non-legal, recruitment professional. If so, get in touch, we’d be happy to hear from you.
FGS Recruitment is a boutique recruitment agency specialising in recruiting sales and marketing jobs in our core markets of Digital Media, Learning & Development and Market Research. Keep up to date with our latest career advice articles and jobs by signing up to our newsletter and be sure to follow us on LinkedIn, Twitter and Facebook.