Non-Compete Agreements Explained

Non-compete agreements restrict your ability to work for competitors or start a competing business after leaving a job. They are common in many industries, but they are also among the most misunderstood employment documents. Knowing what they typically contain and how they are treated can help you make informed career decisions.

A standard non-compete usually has three main components. The first is the scope of restricted activity, which describes what kind of work you cannot do. The second is the geographic area covered, which might be a city, a state, or a radius around the employer's location. The third is the duration, which is how long the restriction lasts after you leave. Common durations range from six months to two years.

The enforceability of non-competes varies dramatically by location. Some states enforce them routinely as long as they are reasonable in scope, geography, and duration. Others have banned them entirely or limit them to specific situations like the sale of a business. A growing number of states have passed laws restricting non-competes for lower-wage workers. Because the law is changing in this area, what was enforceable a few years ago may not be today.

Courts that do enforce non-competes generally require them to be reasonable. A restriction that prevents you from working in your field anywhere in the country for five years is unlikely to hold up. A narrower restriction protecting genuine trade secrets or customer relationships for a limited time in a defined area stands a better chance.

If you are asked to sign a non-compete, read it carefully before agreeing. Consider whether the restriction could realistically affect your future job prospects. In some cases, the terms are negotiable, and an employer may agree to narrow the scope. For significant career decisions involving a non-compete, having an attorney review the agreement is a wise investment.

Related reading: Non-Solicitation Agreements: The Basics

This article provides general information only and is not legal advice.

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This article is general information, not legal advice. It does not create an attorney-client relationship.