Employees may encounter “non-compete clauses” in their employment contracts. Often, they don’t even think about the problems before signing contracts containing such onerous clauses and bind themselves with devastating consequences. But what is a non-compete clause, and how could it help, or hurt, your employment?
A non-compete clause, or a non-compete agreement, is a clause in a contract that prohibits an individual from engaging in business in a certain industry or geographical location for a set period after he/she stops working for an employer. Usually, this means prohibiting the employee from working in the same field as their employer, or at least from doing so in the same market where their employer generates revenue. This could also include preventing the employee from starting his/her own business in the same or a similar industry as the one the previous employer occupies.
The reason non-compete clauses exist is to prevent employees from simply leaving their employers with the client base, skills or intellectual property they’ve developed over the course of working for their employer. Without non-compete clauses, every employer would need to worry that they’re training their competition in-house or waiting for their existing competitors to poach their employees once they’ve taken the time and resources to train them. In professions that rely heavily on specialized skills or developed client bases, non-compete clauses are helpful in allowing businesses to maintain a competitive edge.
For employers, if you are in a field where competitors might use non-compete clauses, you need to be sure that any employees you hire aren’t bound by one, lest you or your employee face potential litigation. Second, you need to be careful about not being too overzealous with your non-compete clauses, as potential talent might be chased away if they feel you’re locking them into working for you indefinitely. And finally, it’s worth noting that non-compete clauses aren’t absolute, and can always be revoked by mutual consent of the parties to the agreement (i.e. the employer and employee agree to release the employee from the terms of the non-compete clause) or if a court finds the clause to be overbroad.
For employees, watch out for clauses that restrict your ability to work in an industry you are familiar with or restrain you from prospecting customers you introduced to the former employer. Additionally, watch out for clauses that prohibit you from working in the industry post-employment for more than one year, or clauses that are too broad in determining where you can geographically work. As a fallback, ask to receive garden leave (i.e. continued severance) for the period you will be restrained.
If you’re negotiating an employment contract that requires you to sign a non-compete, or fighting the terms of a non-compete clause, contact the Law Office of Andrew Ross Sack. He has the knowledge and skills you need to protect your rights and achieve the relief you deserve. Give him a call at (516) 526-3319, or visit his contact page.
