Business attorney Jean Sifleet, successful entrepreneur and author of several books, offers tips for employees who have signed or who are asked to sign a "non-compete agreement."

Whether you’re searching for a new job or signing on to the job of your dreams, it’s important to be aware of the terms of the non-compete agreement that you are asked to sign.

NOTE: If you sign, or have already signed, a non-compete, retain a copy of the agreement for your records in your home or other safe place off your employer's premises.

These tips can help to reduce your risk of a legal battle.

Tip 1:  Be aware of your non-compete.

Before you sign, it’s a good idea to have someone knowledgeable review the agreement to assess the scope and enforceability of post-termination restrictions. You may be able to negotiate revisions.

If you’ve already signed a non-compete, you’ll want to be aware of what the document says so that you can assess how it may affect your future business plans.

Tip 2:  Be prepared to answer questions about previous non-competes.

Prospective employers are likely to ask about previously signed non-competes.  They don’t want to be surprised by a former employer seeking to enforce restrictions. 

Tip 3:  How enforceable is the non-compete?

The law favors allowing people to earn a living in their chosen profession.  Overly broad restrictions are not enforced.  

As a general rule, non-compete agreements are enforceable if they:

• are fair and reasonable   (in scope, duration & geography);
• protect legitimate business interests; and
• do not impose substantial hardship (preclude a person from earning a living). 

To make the agreement "reasonable," suggest that the restrictions be limited to direct solicitation of customers or working on specific projects of direct competitors.

Tip 4:  Has there been a material change in your employment since you signed the non-compete?

A non-compete may become invalid and unenforceable as a result of a “material change” in employment. “Material change” includes changes in compensation, responsibilities, direct reports and title.  If you have received a promotion or job change, the original non-compete may no longer be valid.

Tip 5:  Ask whether everyone is required to sign the same agreement.

The non-compete needs to be tailored to the specific situation. The type of position and duties involved greatly influence the individual’s access to company confidential information and the potential for harm to the company.  Hence, post-employment restrictions are appropriate to protect legitimate company interests for employees with access to key technologies or key customers.    A boilerplate, “on-size fits all” non-compete, is less likely to be enforceable.

Tip 6:  During your job search, don’t use company time or resources.

If you’re planning to leave, remember that as an employee, you have a duty of loyalty to your employer.  This means it’s usually OK to work on your job search or your next business opportunity on your own time (nights and weekends) but it’s not OK to work on the job search  during the employer’s work time or using employer resources.

Tip 7:  Exit carefully.

If you’ve signed a non-compete, and you’re going to work for a competitor, you’ll want to carefully plan your transition.  I encourage employees to leave on good terms, if possible. Sometimes the former employer can become a customer or potential business partner.  If that’s not possible, plan your departure and transition carefully to avoid a direct violation of the non-compete and hence reduce your risk.  Sometimes, departing employees position themselves to be “laid off” or “fired” or appear to be pursuing another activity. 

Tip 8:  Don’t take any company confidential information with you.

Do not take (or email) any company confidential information.  Use a personal email account (not the company’s email system) for any communications related to your next business opportunity.

Tip 9:  Keep a low profile (for awhile).

Sometimes employers want to “set an example” to keep other employees in line, so it’s better to keep a low profile and avoid provoking the former employer. 

In conclusion, to achieve a smooth job transition and reduce the risk of a legal battle about a non-compete, it’s wise to get experienced legal advice.  Reasonable non-competes are enforced to protect an employer’s legitimate business interests.   Departing employees can reduce their risk by using these tips to anticipate and prepare for issues related to their non-compete. 

© Copyright, Jean Sifleet, 2006. All rights reserved. Used with permission.
To use this article, contact Jean Sifleet through the Website linked below.

About the author:

Jean D. Sifleet, is a business attorney, CPA, 3-time entrepreneur and author. Her publications include:  "Advantage IP - Profit from Your Great Ideas" (Infinity 2005) and "Beyond 401(k)s for Small Business Owners" (Wiley 2004). Jean represents individuals and businesses on a broad range of legal and business matters.  For more information, checkout her website at SmartFast.com

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