When we enter a new job it’s very common that we have to take care of various documents and procedures, such as the pre-employment drug test, medical examination (disability cases), non-compete agreement (NCA), among others.
Each of these documents is subject to its own regulations, either through federal or state laws, and although in many states there is the “at-will” employment regulation, there are certain matters that are part of public policy and therefore are binding. Later we will review more deeply what this is about.
If you have been asked to sign an NCA, in this article you will find key information to make the best decision and consider whether or not you should sign it.
Non-Compete Agreement Definition
A non-compete agreement is a contract between an employer and an employee which’s objective is to not allow the employee to compete with their current employer during their job and until after the employment relationship ends (usually between 6 months and two years).
This means that when an employee agrees to sign an NCA, he agrees to not work in another company that is dedicated to the same field as his previous employer or even to create his own brand since that may be a direct competition to the employer.
This type of contract can also prohibit workers from hiring their former co-workers when the employment relationship ends. Even independent consultants may be required to sign an NCA to prevent them from trying to compete with it, after learning about the strategies of the company they advised.
Many times, employers may ask their employees to sign confidentiality agreements instead of asking them to enter into an NCA in order to prevent them from disclosing secrets or important information about market strategies, formulas, ideas, future products, customers, and so on.
Non-compete agreements must be fair, possible and equitable for both parties (employer and employee) and although the subject of the contract may vary depending on the type of company and work performed by the worker, there are certain aspects that cannot be ignored in this type of contract
Effective date and duration
The contract must indicate from which date the contract is binding and for how long the employee is obliged to fulfill the promise not to compete.
Scope of application
The geographic space covered by the agreement it is the indication of where the contract is enforceable. An example could be that a worker in a medical laboratory located in New York, after the employment relationship has ended, cannot work in another laboratory in the same state for a period of 6 months. This means that he can do it if she or he moves to Minnesota, for example.
Purpose of the contract
The reason why the NCA is being signed. An example could be if the employee is a programmer and they want him or her to avoid offering a competitor the same software.
The employer must specify which companies are considered as competitors so that the employee knows what his limitations are.
This part mentions what is offered to the employee for signing the contract and renouncing to obtain better jobs or even to start a project of his own that may be a direct competence of the current employer.
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How Does An NCA Work?
When a worker is asked to sign a non-compete agreement, he is being asked to postpone his future plans in the workplace. Although it is not a prohibition to choose any type of work, an NCA effectively restricts the possibility that a person has to perform in the professional field in which they have skills; if you worked in a company doing a certain task and you sign a non-compete agreement, you will not be able to offer your services to another company that is dedicated to the same field.
Because of this, your employer should offer you something in exchange for signing an NCA. An example may be an additional payment or special training so that at the end of the contract’s enforceability time, you are more prepared to return to the labor field.
What If I Refuse To Sign A Non-Compete Agreement?
Many states, such as Pennsylvania, are employment “at-will” states, which means employers are free to terminate the employment relationship with any employee and for any cause unless you have signed an employment contract and it has not yet expired its duration time.
On the other hand, there are states with regulations related to if an NCA may be enforceable or not.
At first, an employer can fire you if you don’t agree to sign a non-compete agreement since they are free to terminate you for any reason, and not signing an NCA is a valid cause in these cases.
However, although a state has “at-will” policies related to employment, there are cases in which dismissals can be considered unlawful and that is when they violate a public policy. If the non-compete agreement is an overly broad contract and your employer is asking you to comply with things that are very unfavorable for you (for example, that you cannot work for a competitor company for 10 years), a claim for wrongful dismissal or wrongful termination may be possible.
It’s also possible that a prospective employer asks you to sign an NCA before starting to work, therefore, it’s your choice if you refuse to sign but this would be taken as an indirect declination of the job.
In consequence, each case is worthy of analysis, and we recommend you that if you think the NCA that you are being asked to sign exceeds reasonable limits, hire a lawyer specialized in this matter and ask for help; perhaps you can negotiate the terms of the contract with your employer. Curley & Rothman LLC is a law firm you may contact if you live in Pennsylvania.