Can an employer make an employee sign a non-compete after the employment relationship has been terminated? There’s a little to unpack here, so let’s start with if you’re a professional. You’re with an employer. They can only enforce a non-compete unless you’ve signed a contract containing a non-compete. Suppose you received an offer for an employment agreement or independent contractor agreement. If it does include a non-compete, the terms of that non-compete will dictate what happens after the employment relationship ends. In any employment contract, there will be restrictive covenants. These are things that professionals can’t do either during or after the employment relationship is either ongoing or terminated. And a non-compete is one of those restrictive covenants.
Most employers, and when I say most, I mean like 95% of employers, will put the non-compete in the agreement before you start employment with them. It doesn’t make sense for an employer to provide you with a non-compete after the relationship ends. So, can an employer give a non-compete after the employment relationship ends? Yes, and they would only really do that in, I guess, two scenarios. You’re not required to sign a non-compete after the employment relationship ends if you didn’t sign one. So, in that scenario, the employer will use one of two things to make you sign the non-compete. One, they’re just going to offer you a certain amount. And then, it would be like a separate negotiation regarding the terms of non-compete. Or two, they could tie severance agreement into an additional non-compete.
The Employer and Severance Agreement Offer
For instance, let’s say the employee gets terminated without-cause. The employer could offer a severance agreement with additional payment and continuing benefits for some time. And they could also say, we will give you the severance. Still, you’ll have to sign not only the severance agreement, which will have a release of claims. That means you can’t sue them for almost anything after you sign the severance agreement. But you will have to sign the non-compete too. And they can do this. They can tie a non-compete to the severance agreement unless there’s a document that states that they can’t.
It’s rare if you’re an employee that signed an employment agreement to get some severance anyway. In the medical or sales profession, you would rarely get a severance agreement or continued payment after the original employment contract ends. You do have the leverage if you haven’t signed a non-compete, and then after the contract gets terminated, they ask you to sign one. So, you’re going to have to do some math. Is whatever they’re going to pay you worth giving up your ability to practice in whatever specific profession you’re in for a period? Or is the severance agreement, meaning the ongoing payment and benefits, worth more than you being able to continue doing what you’re doing in the area?
Employer Can’t Force You to Sign a Non-Compete
For some people, non-compete can be the most important thing. If you have ties to an area, family, or kids in school, there’s no way you can move after the contract ends. In that case, the non-compete can be the deal breaker between whether a job is excellent or not. Some people have moved to that town for that job, and they could care less if there’s a non-compete after the contract ends. They’ll move on to new communities. So, if you’re in that scenario and they’re offering you some money or severance for signing the non-compete, and you’re going to move anyway, no brainer. I mean, assuming it’s not like an unconscionable non-compete that will follow you to whatever town you want to move into.
So, can the employer force you to sign? They can’t, but they can use leverage, meaning you’ll not get paid unless you sign this. It depends on the person and the professional and what’s most important to them.
Other Blogs of Interest
- What Makes a Non-Compete Unenforceable?
- How Much Does it Cost to Fight a Non-Compete?
- How Does a Company Know if You Violate a Non-Compete?
- Does a Non-Compete Hold Up if You Are Laid Off?
How Do You Avoid Signing a Non-Compete?
How can a professional avoid signing a non-compete? Suppose you’re looking into a new position, and the new employer has offered you either an independent contractor agreement or an employment agreement. In that case, if you’re a healthcare professional in sales, it’ll include a non-compete. And a non-compete prohibits the professional from providing a specific service within a specific amount of time within a geographic area. Now, any negotiation it’s based purely upon leverage. So, if you are moving to a new job and they require a non-compete before signing the document, you have two options. One, move on to a new job that doesn’t offer a non-compete or negotiate the terms of the existing non-compete.
Now, just through decades of experience here, it is very unlikely that you can completely avoid signing a non-compete if required by an employer. The employer does this for some obvious reasons. Any employer’s biggest fear is bringing in a new employee or independent contractor. That person establishes relationships with either business-to-business sales contacts or they’re in healthcare. They build up a patient base. And then, at some point, they decide to leave. They take all the patients or all of the business contacts with them and create a competitive business right next door. No employer wants that to happen. And that’s why a non-compete is in place. Now, from the employee or independent contractor side, you don’t want to sign a non-compete that could stop you from participating in your profession.
Reasonable Non-Compete Agreement Restriction
A reasonable non-compete depends upon your location in the United States. And then also, whether you’re in a rural or urban environment. There are a handful of states where non-competes are completely unenforceable. So, you must first check and see if you’re in one of those states. However, most of you are likely in a state where a non-compete is enforceable. So, what does a court look to when considering whether a non-compete is enforceable? Well, it must be reasonable. It needs to be narrow in scope, meaning if you’re, and this also goes for the points you can negotiate with the employer. Let’s say you’re in sales, and the non-compete says you cannot work in sales in any industry. You want it to be specifically for what you’re doing for that employer. That will open other opportunities for the non-compete time limit.
So, if you’re making software sales, you want the contract to state you cannot participate in software sales within, let’s say, 10 miles and for one year. Now, in sales, the geographic restriction is much broader than if you are a provider for a doctor. 10 to 15 miles from your primary practice location may be considered reasonable. However, if you’re in sales, it might be a whole swath of counties in a state because providers of services, software, or whatever are not limited to the nearby area.
Whereas if you’re a doctor, someone who lives five hours away is not going to come and see that doctor very often, most likely. So, negotiate in advance. All right, you need to look and see, is this job in a rural or urban environment? How long does it last? And then, is it specific to what I’m doing for them?
Negotiation Tips You Can Use for a Non-Compete
Suppose you cannot reduce those things to a reasonable degree. That’s better than signing something that could knock you out of your location. Some people who have ties to an area, who grew up in an area, have family, whose kids are in school, don’t want to move or at least travel for a year to work. So, this could be the most important thing. And so, you need to let the employer know that fact. It would help if you said to them, look, I have established ties to the community. There’s no chance I will move after this contract is terminated or ends or the relationship sours. And therefore, this clause is the most important thing to me. And I will not sign the contract unless it gets amended.
Then, the value you bring will determine the employer’s willingness to do that or not. I mean, if you’re just new to sales and out of training as a provider, you don’t have as much leverage. Suppose you bring a ton of experience to an office or a business. In that case, you’re likely much more valuable and have more leverage in negotiating that.
Can an Employee Refuse to Sign a 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, the employment agreement includes non-compete. 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.
Determining States With Unenforceable Non-Compete Agreements
There are a few states where non-competes are completely 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.
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 they’re in a city they grew up in. That they have family in, and 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 city, and they could care less if they have to move away after the contract ends.
Deciding Whether to Sign a Non-Compete
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, and it’s not even an issue. So, can the employer force the employee to sign a non-compete? Absolutely no. 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 do I get out of it? Well, it isn’t easy. Only if it’s in a state where they’re completely 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.
Considering the Scope
The scope of it is like, let’s say you’re in software sales, and then the non-compete says 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 could be a hospitalist, doing urgent care, ER, or primary care. 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 the scope you’re doing for that specific 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.
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