The modern knowledge economy depends on the fast flow of talented people and open competition, but more and more employees are being asked to sign non-compete agreements that can later hinder their ability to work for a competitor or start their own business.
If you think non-competes are just for top executives, think again. Everyone from CEOs to sandwich shop employees have been asked to sign a non-compete agreement at some point. A survey I conducted with colleagues showed 38 percent of U.S. workers have signed one, and 12 percent of those without a bachelor's degree who are earning less than $40,000 a year had one in 2014.
Why are non-competes popular despite some well-publicized abuses? Mobile talent means mobile knowledge, and companies feel pressure to keep proprietary information from falling into the wrong hands. That's a legitimate concern, but in the hands of vindictive and overreaching employers these agreements can limit innovation throughout the economy.
State court rulings are all over the map on this issue and policy makers are still trying to find the right balance between company and personal rights. But you don't have to wait for lawmakers to sort this out.
Here are five things you should do if you're asked to sign a non-compete agreement:
1. Read it! And read ALL of it!
It sounds like common sense, but you'd be surprised how many otherwise savvy business people skip this step. We're all enthusiastic when starting a new job, and sometimes these are slipped in among the other first-day paperwork. But chances are you won't be spending your entire career in one place, so it's critical you know what you're agreeing to do--and not to do--after you leave.
2. Avoid surprises.
The first day is not the time to find out if your employer will spring a non-compete agreement on you. This is something to ask about before you accept a job. You can then negotiate for a larger salary, since you're being asked to give up future rights. It also could affect which job you'll accept if fielding multiple offers.
3. Know the laws in your state.
States vary widely in how they enforce non-compete contracts and even the circumstances under which they do. For example, these agreements are unenforceable in California, while Florida is more company-friendly. So research the law in your state and consult a local attorney, especially if the salary stakes are high.
4. Don't assume the terms are standard.
Our survey showed most workers don't negotiate their non-compete agreements because they think the terms are set in stone, or they don't want to seem uncooperative and disloyal. But employers might consider compensating you in some other way for these restrictions. If done right, negotiating terms shows your new employer that you are diligent and thoughtful.
5. Keep a copy.
Make sure you keep your non-compete agreement, and all of your other employment paperwork, in a place where you can find it. Review what you've agreed to before you leave your current job. You need to know what's allowed and not allowed in regard to specific clients and competitors, and if you can recruit co-workers. Refreshing your memory can save you and your new employer from receiving a nasty letter from your former company's lawyers.