Should you tell a future employer about a non-compete? Let’s say you’ve signed an employment agreement or an independent contractor agreement that included non-compete. And in this scenario, you’ve likely given the notice to terminate the agreement. Then you’ve decided to move on to a new job. So, what is your duty to inform your new employer about your old non-compete?
First, many contracts will include language that states you must disclose the non-compete in the agreement you’ve signed to any potential employer. Not just someone you’ve signed with, but any employer you’re going through the job search or interview process with. You must also consider the repercussions if you’ve signed a non-compete. You’ve decided to break it and then start with the new employer. What could those repercussions be?
Repercussions if You Signed a Non-Compete
Let’s say you’ve signed the non-compete, and you’ve decided, for whatever reason, I’m going to violate it and see what happens. And so, you start with the new employer. Well, your old employer gets wind that you’re violating the non-compete, and they’re likely to do two things. One, well, they know now who you’re working for. So, they’re going to not only send a cease and desist letter to you, but they’ll likely send it to your new employer as well.
And suppose your new employer gets that, and they’ve had no idea that you are under the terms of a previous non-compete. In that case, they’re not going to be super excited about that. And they very likely could decide to terminate you based upon the termination language in your employment agreement. Or perhaps they could also say that you are in breach of contract due to your old non-compete. And then could terminate you for-cause immediately, potentially.
Is It Required to Let Your Employers Know About the Non-compete in Your Previous Job?
So, I would suggest it just makes sense that if you have a non-compete from a previous job, you let your new employer know about it. Let’s say you’re in a circumstance where you’re working in a state and then getting a new job out of state. Well, if there’s no language in your agreement, you must disclose this to them, and it’s clearly well outside the limits of your non-compete. There’s no reason to bring up a non-compete unless they ask. You’re not legally obligated to let a new/potential employer know about an old non-compete unless it is stated explicitly in your signed contract.
But as I stated before, if you violate the agreement, you’ll probably get fired once your new employer finds out that you’re in violation. So, it just makes sense to bring it up to them. But, if you’re going to take a new job and then tell your new potential employer, hey, I have a non-compete. Still, I’m going to ignore it. You likely won’t get that job anyway. The strategy that makes the most sense is don’t sign any employment agreement with the non-compete you’re unwilling to accept.
Is Non-Compete Enforceable?
Now, there are some states where non-competes are entirely unenforceable. I will check to see if your state is one of those. And any state will only enforce a non-compete that they consider reasonable in scope. It means that the state precisely what you’re not allowed to do, for how long within a specific geographic radius.
If it is out of bounds, a court will likely not enforce it. But I would talk to a professional about that before signing any non-compete. So, do you have to let a future employer know about a non-compete? Unless it is stated explicitly in the contract that you must do so, although, on a practical level, it would make sense to let them know either way.
Other Blogs of Interest
- Does a Non Compete Hold Up if You Are Laid Off?
- Can a Non Compete Prevent You From Working? | Non Compete
- Does a Non Compete Hold Up If You Resign? | Non-Compete Clause
Can an Employee Refuse to Sign a Non-Compete? | Employees Non-Compete
Can an employee refuse to sign a non-compete? If you’re a professional, it’s very likely the employer will make you sign an employment agreement or perhaps an independent contractor agreement. And most of the time, a non-compete will be included in the employment agreement. A non-compete is a restrictive covenant, and a restrictive covenant essentially stops the employee from doing something either during or after the employment relationship has been terminated. Suppose a professional has been presented with an employment agreement containing an amount of non-compete. In that case, the potential employee can undoubtedly say, I’m not going to sign the non-compete if you want me to be a part of this company. And then, the company can tell you that unless you sign the non-compete, we will not offer you the position.
So, it’s a matter of negotiation and leverage. Most employers will not say, fine, you don’t have to sign a non-compete unless the employee is going to give something up. It is standard in the healthcare profession, sales, and other industries to have a non-compete. It’s just a standard part of being a professional. So, because your employer is asking you to sign an employment agreement containing a non-compete, they’re not out to get you. It’s just a normal part of doing business. Now, another question is whether that non-compete is reasonable or even enforceable or not. There are a few states where non-competes are entirely unenforceable. First, you need to check and see if your state is one of those. And then next, any state will take a reasonableness standard in determining whether the non-compete is enforceable.
Is Non-Compete Enforceable or Reasonable in your State?
So, they’re going to say, alright, what is the scope? Meaning, what is the non-compete stopping you from doing? And then how long does it last? And then what is the geographic restriction? Like, how far? What is the territory where you cannot continue doing what you are doing for that employer? There will be a point for many of the people I assist with contract review where they say.
Because of the situation that they’re in, meaning they’re in a city that they grew up in, that they have family in, their kids go to school there. There’s no scenario where they would be able to move away from the city. The non-compete can be an absolute deal breaker. And others are moving to the city specifically for the job. They have no ties to the town, and they could care less if they have to move away after the contract ends.
Scenario Where the Non-Compete is Important
And so, in the first scenario where the non-compete is extremely important, as I said before, it can be a complete deal breaker. They can say, look, I’m not signing a contract with a non-compete. And most of the time, the employer will say, well, we’re going to find somebody else. Whereas it could be someone who could care less about the non-compete, it’s not even an issue. So, can the employer force the employee to sign a non-compete? Absolutely. They can make it a part of the employment contract.
And obviously, the employee will have to sign the employment contract before they start. But it certainly is up to the employee whether to sign it or not. If you’ve signed the non-compete, you must be willing to live up to and deal with that non-compete. I mean, many times, I get calls from people who have signed an employment agreement that contains a non-compete. Then after the contract terminates, they say, oh my God, this is such a terrible non-compete.
How to Get out in a Terrible Non-Compete?
How do I get out of it? Well, it isn’t easy. If it’s in a state where they’re entirely enforceable, that’s easy. We can work out a deal with the employer, and almost always, it’s an amount the employee has to pay to get out of the non-compete. Or if it’s considered unreasonable in some respects, meaning, as I said before, it’s too long. It restricts too large of a territory. The scope of it is like, let’s say you’re in software sales, and then the non-compete thinks you can’t make sales anywhere in any industry for a period. Well, that probably would not be enforceable. It should be specific to what you’re doing for the employer.
And let’s take a physician, for example. Maybe you’re in internal medicine, and you could be a hospitalist. You could be doing urgent care, ER, or primary care. Well, suppose you’re a hospitalist for an employer. In that case, you should be able to do those other things, not just stop you from practicing medicine. So, you want to ensure it’s specific to your scope in that particular employer. Well, that is a little breakdown of whether an employee must sign the non-compete or what are some ways to get around it.
What Are Non-Compete Agreements? | Noncompete Agreements
If you are a healthcare professional about to take on a new job, you may be wondering about non-compete agreements. What are they? Who needs them? What should you look out for when signing one?
While non-competes may seem like overly severe restrictions to most people, you need to abide if your state enforces them. This then forces every worker to seek to understand non-compete agreements. Here is everything you need to know about non-compete agreements.
Employer vs. Employees: What Are Non-Compete Agreements?
A non-compete agreement is a contract between an employer and employee in which the employee agrees not to compete with the employer during or after employment within a particular geographic area for a specific period. Non-competes are usually signed when an employee first starts working for a company, but they can also be signed later. Noncompete agreements are also known as a covenant not to compete, restrictive covenants, or non competition clauses.
Before signing a non-compete agreement, it is important to review the clause thoroughly with the help of a physician contract lawyer. This is primarily because non-compete restrictions can have significant impacts on your career. For example, it can prevent you from getting a job in your field within a specific radius for years if you leave your position- which may happen due to unavoidable circumstances.
How Does a Non-Compete Employment Agreement Work?
Noncompete agreements are most common in fields where there is a lot of competition, such as sales, marketing, and technology. They are also common in industries where employers want to protect their trade secrets or other confidential information.
In the field of medicine, a non-compete is often used to prevent physicians from leaving their jobs and opening up a competing practice nearby. Non compete can also be used to prevent:
- Nurses from starting a competing home health care business
- Pharmaceutical sales representatives from going to work for a competitor
- A veterinarian from opening up a competing animal hospital
- Dentists from opening up a competing dental practice
- Pediatricians from going to work for a competing pediatric practice
What Are the Legalities of Non-Compete Agreements
Non-compete agreements are governed by state law. This means that the terms of a non-compete agreement can vary depending on which state you practice. For example, some states require that non-competes be in writing, while others do not.
State laws require the employer to provide valid consideration, reasonable time frame, geographical scope, and activities to be restrained to have a legally binding agreement. There are also states that don’t make a non-compete enforceable at all. For example, North Dakota, California, and Oklahoma.
What to Look Out For in a Non-Compete Agreement?
When you are reviewing a non-compete agreement, there are a few key things you should look out for:
The Time Period of the Non-Compete
The non compete length should be a reasonable amount of time, such as one to three years. The longer the time frame, the more likely it will affect you if you leave your job.
The Geographical Scope of the Noncompete
The non-compete geographic scope should be limited to the areas where your employer does business. The radius can vary depending on the location where you work. For example, if you practice in rural areas, 15-50 miles could be reasonable. While if you practice in urban areas, 2-15 miles can be considered appropriate.
The activities that are restricted should be clearly defined. They should not be more than what’s needed to protect the employer.
Advantages of a Non-Compete Agreement on Employees
There are some advantages to signing a non-compete agreement, such as:
- You may be able to negotiate a higher salary or other benefits, such as more vacation days. This is due to the consequences that follow if your contract is terminated and you need to get a new job.
- If you do leave your job, you will have a clear understanding of what you can and cannot do. This can prevent you from getting into legal trouble down the road.
- Your employer may be more willing to invest in your training because they know you are less likely to leave the company and use the acquired skills to compete with them.
- Non-compete agreements can give you a sense of job security and stability.
- If you are laid off or fired, you may be entitled to severance pay.
Disadvantages of a Non-Compete Agreement to an Employee
There are also some disadvantages to signing a non-compete agreement, such as:
- It can limit your ability to get another job in your field within a specific region if you are laid off or fired.
- You may be stuck in a job you don’t like because you are afraid of breaching your contract.
- If you do breach your contract, you may be sued by your employer. This can be expensive and time-consuming, even if you win the case.
Note that you don’t have to agree to the non-compete agreement as presented to you by your employer. You should evaluate which parts are critical to you and which parts you’re more flexible with. Next, aim to negotiate on how you and your employer can meet in the middle. Remember, you need a strategy and a reasonable one to do this successfully.
If you are asked to sign a non-compete agreement, it is crucial to make sure that the agreement is fair and reasonable. The reasonableness of a non-compete agreement depends on many factors, such as the duration of the agreement, the geographic scope, and the type of job you have.
Before signing a non-compete agreement, make sure you understand all these terms and conditions. This way, you can protect yourself and your future career. The first step to doing this is by consulting an experienced employment lawyer who can review and advise you on the agreement.
Chelle Law has helped many healthcare workers review and negotiate their non-compete agreements. He would be happy to help you understand your rights and options under the law.
Employment Contract Questions?
Contract Review, Termination Issues and more!
Hiring someone with a non-compete can be risky for the new firm as well if you're hiring from a competitor. The previous employer can sue their former employee and the new employer. Even if they lose, if can cost the employee and new firm a lot of money in legal fees, and may prevent the person from working for a time.How do you get around a non-compete clause? ›
Typically, the only way to fight a non-compete agreement is to go to court. If you are an employee (or former employee) who signed such an agreement, this means you must violate the agreement and wait to be sued. It may be that your former employer has never sued another employee to enforce the non-compete agreement.Does a non-compete mean I can't work for a competitor? ›
Non-compete agreements are clauses in employment contracts that prevent workers from working for “competitor” companies during or after their current employment. These contracts typically restrict workers through time, industry, and/or geography.Do employers really enforce non competes? ›
California - Non-compete clauses are not enforceable under California law. However, LegalNature's non-compete agreement may still be used to prohibit the employee from soliciting customers and other employees away from the employer.How serious is non-compete clause? ›
Non-compete clause is prohibited in India, and may not be enforceable in the country. “Such non-compete clauses in an agreement are unenforceable and customarily demonstrated as a disincentive for the former employees from joining the competitors,” Urja D Sharma, a corporate lawyer said to The Hindu.Can my previous employer stop me working for a competitor? ›
No matter what's in your contract, your old employer can't stop you taking a new job unless it could lose them money. For example if you might: take customers to your new employer when you leave. start a competing business in the same local area.What states ban non-compete? ›
In California, North Dakota, the District of Columbia, and Oklahoma, non-competes are either entirely or largely unenforceable as against public policy. Other states, including Maine, Maryland, New Hampshire, Rhode Island, and Washington, have banned non-compete agreements for low-wage workers.How strict is a non-compete? ›
These restrictions mean you can't compete with your previous employer or solicit clients that were doing business with that employer within a specific area. Although this is a common feature of non-competes, there are limits to how wide an area they can prohibit you from working in.What can void a non-compete? ›
Voiding a non-compete contract is possible if your employer promised you something in exchange for signing the agreement and did not intend to fulfill this promise.Can you get fired for interviewing with a competitor? ›
Employment at will means you can be terminated for any reason without any notice. This would include a situation in which your employer believes you are interviewing with other companies or exploring the job market in any way.
12 month non-compete restriction is enforceable - Stevens & Bolton LLP. The High Court recently found that a 12-month non-compete clause in a solicitor's employment contract was enforceable.Does getting fired affect non-compete? ›
Does my non-compete clause still hold if I leave my job involuntarily? In most cases, the non-compete clause still holds even if you are fired or laid off. However, you may be able to request that your former employer waive the clause. In such circumstances, employers are sometimes more open to waiving the clause.Will noncompetes be banned? ›
Noncompete clauses are already banned in several states, including California, where some — but not all — of the notoriously noncompete-heavy tech companies are based. The FTC estimates the proposed rule could increase wages by $300 billion a year and impact 30 million Americans.Why are noncompete agreements potentially bad for employees? ›
In many cases, employers use their outsized bargaining power to coerce workers into signing these contracts. Noncompetes harm competition in U.S. labor markets by blocking workers from pursuing better opportunities and by preventing employers from hiring the best available talent.Why are non-compete agreements bad? ›
In its thoroughly researched proposal, the FTC described the negative effects of non-compete contracts in rich detail. They depress labor market mobility and reduce wages and wage growth (regardless of whether employers can or do enforce them in court) and contribute to racial and gender wage gaps.How long is too long noncompete? ›
As for a time limit on a non-compete agreement, most employers see between six months and two years as a reasonable non-compete time frame, with one year being quite common. However, the time frame depends on the industry and type of career path the individual has.How common are non-compete clauses? ›
About half of all employers use non-competes, according to a 2019 survey from the Economic Policy Institute, while about a fifth of all American workers are subject to the agreements.What are the consequences of a non-compete? ›
If you violate a valid non-compete covenant that is in place, your former employer could pursue legal action against you. This could involve an injunction, lawsuit, or monetary penalties. You could face civil penalties and additional consequences for violating your non-compete agreement as well.Can I join competitor company after resignation? ›
As per the 'Non-Compete Clause', post termination, the employee is not allowed to work for the direct competitors of the company for a reasonable period of time.Can I leave to work for a competitor? ›
But you should definitely get legal advice before giving notice of your resignation. Some non-competes are written very broadly, suggesting an employee cannot go to work for a competitor at all. However, most businesses are really only concerned about protecting customer relationships and confidential information.
An employee who leaves to work for a company's competitor may be sued if their employer believes they've broken the written or unwritten terms of their employment contract.Did Biden ban non-compete agreements? ›
Biden directed the Federal Trade Commission to ban or limit noncompete agreements in 2021 as part of a wider effort to improve competitiveness for workers.Why dont non-competes hold up? ›
Many Non-Competes are unenforceable because they restrict competition across too broad of a territory. Non-Competes usually describe a restricted area in which the employee cannot compete.Are non-competes constitutional? ›
The legality of non-compete agreements differs from state to state. In the majority of states, noncompete clauses are allowed so long as the scope of the restrictions are reasonable.How do you negotiate out of a non-compete? ›
Ask for an explanation of the company's interests in having you sign a non-compete agreement. If the company is concerned about protecting trade secrets, it might agree to replace a non-compete clause with a beefed-up nondisclosure clause that would prevent you from taking research with you.How do you ask for a non-compete release? ›
If You Feel Comfortable, Ask For A Release
– stress your desire to leave the company on good terms. Your employer will appreciate your openness and willingness to come to a mutual understanding, and they may release you from the agreement. This release should be in writing and signed by both you and your employer.
In certain circumstances, it is possible to find non-compete contract loopholes that may void the contract. For example, if you can prove that you never signed the contract, or if you can prove the contract is against the public interest, you may be able to void the agreement.Do non-competes hold up? ›
For example, unless they relate to selling a business, non-compete agreements are not legal in California. In most states, the non-compete agreement cannot be enforced unless the employee receives a payment or benefit in exchange for signing it.Are non-competes going to be banned? ›
Noncompete clauses are already banned in several states, including California, where some — but not all — of the notoriously noncompete-heavy tech companies are based. The FTC estimates the proposed rule could increase wages by $300 billion a year and impact 30 million Americans.What are the pros of a non-compete? ›
Employers use these agreements for a variety of reasons: they can protect trade secrets, reduce labor turnover, impose costs on competing firms, and improve employer leverage in future negotiations with workers.
In contrast, in many industries, a Non-Compete with a duration of 6-months will be considered reasonable, and therefore enforceable. The general rule is that the duration of the agreement should not exceed the time reasonably necessary to protect the employer's legitimate business interests.Why non-compete agreements are unethical? ›
Simply, a non-compete cannot be ethically justified if the employer lacks any legitimate business interest.How binding are non-compete agreements? ›
Like other contracts, a noncompete agreement is a binding document, and employees who sign them can't enter into direct competition with their former employer after leaving their job. Usually, this means that an employee can't work in certain industries or at particular companies for a set period of time.Can I renegotiate my non-compete? ›
Employees often think non-compete agreements are non-negotiable, but companies will negotiate with you if they really want you on their team.