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What You Need to Know About Non-Compete Clauses

When it comes to landing a new job, it pays to be prepared. Most job seekers know this, and properly arm themselves with information about the company and the position prior to an interview, but there’s one curve ball many applicants aren’t ready for: What to do when asked to sign a non-compete clause.

While non-compete clauses aren’t standard procedure for many jobs, that doesn’t mean they aren’t real or are unenforceable. Here are some key things to know before signing a non-compete clause, and some tips in case you already have.

Be careful what you sign

When asked to sign a non-compete clause, it may be tempting to quickly glance through the document without reading the fine print. However, it’s crucially important to read and understand the agreement to make sure you do, in fact, agree to the terms.

“Just like any other contract, a non-compete agreement has to be backed by adequate consideration, i.e. receiving a raise, promotion, bonus, etc.,” says Jamal Jackson, JD/MBA, managing attorney, Jackson Corporate Law Offices. “Although being hired can be the beginning of adequate consideration, some provinces have held that unless there is continued employment for a minimum amount of time that consideration will not be held as adequate. For example, some courts have held that continued employment of at least two years is necessary to have adequate consideration for a non-compete.”

Determine if it’s enforceable

Non-compete clauses are often the subject of strict scrutiny, and judges look at a number of factors when determining whether a particular non-compete is enforceable.

“Generally non-competition agreements have to be limited in both subject matter and geographic scope to be enforceable,” says Thomas M. Gray, III, attorney and president at The Gray Law Firm. “This helps ensure that in the event of termination the employee still has a meaningful opportunity to pursue work in his or her field.”

“For instance, a plastic surgeon’s reasonable non-competition clause might prevent him from opening up a similar plastic surgery practice in the same city or county,” Gray adds. “But a non-competition agreement preventing him from practicing medicine altogether, or preventing him from practicing in the same province, may not be enforceable.”

Consider the duration

Another thing courts will consider is the clause’s expiration date – or how much time after the worker leaves the company before the clause is no longer enforceable (assuming it is enforceable to begin with). Clauses that are set for longer than six months aren’t often enforced, although in these cases the court will typically reduce the clause’s duration rather than strike it down entirely.

Be transparent

If you have signed a non-compete agreement with your current or previous employer, it’s crucial that you let prospective employers know up front.

“It is a common misconception that the new employer is not implicated in a non-compete agreement between a newly-hired worker and his or her old employer,” says Benjamin Johnson, employment relations attorney, Michael Best & Friedrich. “If a worker does not inform his or her new employer of the existence of an agreement, the worker risks upsetting both his new and former employers and triggering a legal dispute. If the new employer is aware of the agreement, it can help to evaluate risks and make an informed decision.”

Don’t be afraid to negotiate

Whether legally enforceable or not, non-compete agreements usually aren’t ironclad. If you’re considering leaving a job for which you signed a non-compete, don’t be afraid to discuss the matter with your employer.

“Many employees leave their employment under the mistaken impression that their former employer would not agree to limit or modify the non-compete agreement under certain circumstances to accommodate an employment opportunity that would otherwise violate the terms and conditions of the non-compete itself,” says Howard Matalon, head of employment practice at OldenderFeldman LLP. “In a number of cases, a candid discussion with the employer might very well accomplish such result.”

Matthew Tarpey is a career advice writer for CareerBuilder.

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