Can a Company Force You to Not Work for a Competitor? | Can an Employer Stop You From Working?
Can a company force you not to work for a competitor? Suppose you’re working for an employer and haven’t signed an employment contract, or maybe some binding letter of intent containing a non-compete. In that case, they can’t stop you from working anywhere. A normal employment relationship with healthcare providers or sales is the two industries where non-competes are expected in the employment agreement. It will have a section called restrictive covenants. And those are things the professional is prohibited from doing either during or after the contract ends. Restrictive covenants could be a non-disparagement clause, a non-solicitation clause, and, more importantly, in this scenario, a non-compete.
Non Competes for Health and Sales Professionals
And so, non-compete stops the professional from working in a specific role within a particular amount of time within a specific geographic region. Let’s say you’re a doctor. The non-compete would likely tell you that you can’t practice in your specialty for one year within 15 miles of your office location. That would be a typical non-compete for a physician. In sales, it’s generally more extensive than that because any sales professional is typically not selling within a very tight area, and it’s larger. It could be half of a state, or it could be an entire state. So, non-competes for sales professionals usually are much broader than for healthcare workers. You have to keep that in mind.
Scenarios Where an Employer Can and Cannot Stop You From Working
If you don’t have an employment agreement and are just in a position, maybe you had an offer letter or something that outlined the compensation. No, they can’t stop you from working anywhere after the contract ends. But if you’ve signed a non-compete as part of an employment agreement, or perhaps an independent contractor agreement. The language in that contract can stop you from working in several places. Generally, it doesn’t specifically list businesses.
Occasionally you’ll see that, but for the most part, it’s based on geography and not the employer. Let’s say you’re in software sales and there’s a direct competitor within the community. Maybe it would say you can’t work for them, but you can work anywhere else. It’d be rare to say you can’t work in these ten contiguous counties in addition to X company as well.
Severance Package Agreement
Now, the sneaky way companies get around situations where an employee has not signed a non-compete is after the employment relationship ends. So, either the professional gives notice and says, hey, I’m leaving, or if the company decides to terminate the professional without-cause for whatever reason. What they will typically do if they are concerned about competitive behavior from that professional is they may offer a severance package. Severance agreements are not typical in healthcare or sales, for that matter. Still, some organizations will offer them. A severance package would be they would pay you some agreed-upon amount for a period after the relationship ends. It rarely ever happens in healthcare. So, it would be exceedingly rare to see a severance package.
What Will an Employer Do if They Failed to Have the Professional Sign a Non-compete?
But what will an employer do if they either failed to have the professional sign a non-compete before starting work, or maybe they did negotiate? The professional was able to get the non-compete kicked out. At the end of the contract, they may say, hey, we’ll offer you three months’ salary. Still, then you must sign the severance agreement. And in that agreement, there’ll be a release of claims, meaning you can’t sue them for anything. And then, in that severance agreement, there may be a non-compete attached.
And so, the professional must decide, alright, do I accept these three months of salary? But sign the non-compete or move forward without getting the three months salary. Still, not having the restrictive terms of the non-compete? So, to be clear, unless you’ve signed a contract with a non-compete or binding letter of intent, which is very rare, they cannot stop you from working anywhere.
There are a handful of states where non-competes are wholly unenforceable across industries. I would check and see if you’re in one of those states. But for the most part, if you haven’t signed an agreement that contains a non-compete, you are good to go as far as working for competitors.
Other Blogs of Interest
- Can a Company Make You Sign a Non-Compete After Employment? | Employees Noncompete
- Should You Tell a Future Employer About a Non Compete?
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.
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.
Employment Contract Questions?
Contract Review, Termination Issues and more!