4 Key Conditions of a Non-Compete Agreement

Early in your career, you may take a job where you can learn the industry and grow as an employee. However, you may find yourself unhappy at the company or wanting to pursue other positions elsewhere. If you are ambitious enough, you may one day feel that you have the skills necessary to start your own company within the same industry.

Not so fast. In some professions it may be a standard practice for companies to try and get employees to agree to a non-compete agreement either at the time of hiring or pre-departure. This agreement if signed prevents employees from assuming another similar role elsewhere or starting a company within the same industry. In doing so, the company restricts the competition that they face.

Below are some factors to consider before signing a non-compete agreement. Doing so will allow you to pursue your career goals without worrying about legal implications.

1. Where it applies

It is a common mistake for employees to think that non-compete agreements are far-reaching, applying to every place that you may start a business or assume another role. However, it is possible to do so if there is no stipulation in regards to the location.

When considering agreeing to a non-compete agreement, read through the details in the contract first to determine whether there is a way you can navigate through it. Establish whether it limits you to a certain radius. For instance, will you be allowed to set up the same business in another part of the country? Or does it restrict you in a way that you can never think of starting up a business or commencing another similar position in any part of the world. Once you know, you can make an informed decision. Conforming this information at the start will save you significant issues later on.

2. The consequences of breaking the contract

You may sign a non-compete agreement with every intention of abiding by its terms. However, circumstances change and one day you may find yourself determining whether it is in your best interests to break the contract and whether the consequences will be long-term and damaging.

Before you put your sign a non-compete agreement, review the consequences of non-compliance. Determine what will the company will do when you decide to leave and set up your own business or join a competitor. Some may require you to compensate them, but there have been contracts that threaten to take legal action. Review every statement with your lawyer to see if it is worth signing. Remember once you sign, you are agreeing to the terms. Breaking contracts can have dire consequences.

3. Duration

The non-compete agreement proposed to you should stipulate how long you are to comply with the non-compete regulations. Read through to know if the terms can be loosened once you have stayed for a certain duration of time. You may need to re-negotiate if the employer wants to enforce a lifetime ban.

Think of your career progression, and decide if it conflicts with the time limit of the contract. If you have always nurtured ambitions to start up your own business after some time, then you should factor this in. Agreeing to a contract that has no timeline can restrict you and leave you at the mercy of your employer with no concrete way out.

4. Circumstances

Think of what would happen if you sign a non-compete agreement and a few years in, your employer lays you off. You are not voluntarily leaving, but you are being forced out. In this circumstance you need to determine whether the agreement is still binding. After all, you are unemployed and will probably seek a position in a similar if not identical field. These circumstances and details should be in your contract to avoid conflict when the time comes for you to leave.

You should also have a candid discussion on whether you are still bound by the agreement if the company’s policy changes. If for instance, your company starts behaving and operating in a way that compromises your work ethics, are you allowed to leave and terminate the contract? Never be afraid of asking questions so that you understand what you are agreeing to.