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.
Other Blogs of Interest
- How to Turn Down a Physician Job Offer | Declining Job Offer
- How Do You Avoid Signing a Non Compete?
- How Does a Company Know if You Violate 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 from having a legally binding agreement. Some states 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 negotiates their non-compete agreements. He would be happy to help you understand your rights and options under the law.
Can a Non-Compete be Enforced on a 1099 Employee (Independent Contractor)?
Can a non-compete be enforced against a 1099 independent contractor? If you are 1099, that means you are an independent contractor. Taxes will not be taken out of whatever your payment is. At the end of the year, you’ll get 1099. And you’re responsible for all the taxes associated with any of your compensation throughout the year. Let’s just start at that basic level. If you are an employee, you’ll get a W-2, and you are not an independent contractor. There will be a non-compete in any employment agreement. Even most independent contractor agreements for professionals who are in sales or maybe at the executive level. Certainly in healthcare, there will be non-competes in every employment agreement.
What Does Non-Compete Do in Work Agreements?
Now, what does a non-compete do? It essentially prohibits the professional from doing what they do for a certain amount of time. And within a specific geographic region. Are non-competes enforceable in every single state? No, there are a few states where they’re completely unenforceable. In most states, they are enforceable if they meet that state’s requirements. Most states do not have specific laws about non-competes. It’s kind of through case law from people suing and then the court’s making decisions. The courts will look at the following factors to determine if the non-compete is reasonable and enforceable.
Does the non-compete protect the employer’s legitimate business interests? Does it cause undue hardship for the employee/contractor? It doesn’t harm the public, and then it has a reasonable time or geographic scope associated with it.
Can You Enforce Non-competition Agreements?
Let’s talk about what to expect in the actual independent contractor agreement. First, can a non-compete be enforced in a 1099 independent contractor agreement? Yes, they can, unless it’s in a state where, as I said before, it’s completely unenforceable. In most non-compete, it’s going to state that the professional can’t do their specific profession. It will also state for how long. Usually somewhere between a one-to-two-year time. And then the geographic scope can be dramatically different based on the professional’s industry. For healthcare, somewhere between 5 to 15 miles is normal. For some sales positions, it can be the entire state or several Counties from where they are called upon with the sales targets. It is industry specific.
Top Tip: Make Independent Contractor Agreement Specific
Some things you must keep in mind. You want to narrow down the contract’s language to a specific profession. Let’s just say you’re a software salesperson. You don’t want it to say you can’t do sales for two years within this County. You wanted to say you can’t do the very specific software banking sales. That way, you’re not completely kept from doing sales. You just can’t do sales for a competitor. That’s kind of an important part of this.
If an employer is stating you can’t do sales at all and they’re a bank, it doesn’t make sense if you’re doing cleaning supply sales that they would prohibit you from doing that. That’s the first thing you need to think about, narrowly tailor the scope of what you can’t do. And then, as far as time goes, anywhere between one to two years would normally be enforceable. If you have a five-year, 10-year non-compete, that’s ridiculous!
Very unlikely that that would be enforced. And then, as far as geographic scope, as I said, you want that narrowly tailored as well. Some things to think about: you always want it to be from your primary location. If you’re in healthcare, certainly your primary practice location. If you’re in sales, you want to keep that as tight as possible. And maybe just one County, or if you’re throughout the state, it’s tougher, but still, you want to open as much area as possible. Multi-State non-competes generally are unenforceable. However, if you’re in sales and you’re in Cincinnati, and you’re on the border of Ohio, Kentucky, and Indiana, well, they may say somewhere around there. And so, like that, it is like enforceable.
Summary: Non-Compete Could Be Enforceable to Independent Contractors
So, are non-competes enforceable in 1099? Yes, if they are reasonable in scope. It’s tough. I mean, non-competes can be a huge part of any contract negotiation. Now, for some people, it doesn’t matter at all. For example, a physician I spoke to before. He is moving into a city just for the job. And that physician have no ties to the area at all. And that physician says that they will move out if the job doesn’t work out. Then the non-compete doesn’t matter to him at all.
Whereas if it was an established physician, who may have kids in school or families close by. Being able to stay in the area is important. It is important that he is able to continue and do his profession in the area. Otherwise he may have to move or his family might have to move. That is why the non-compete matters to him. So, if an employer/independent contractor customer is completely unwilling to make any changes to the non-compete, that can be a deal-breaker for some people. Unfortunately, the non-compete clause in an independent contractor is enforceable. Some negotiations to narrowly tailor the contract to your needs are needed.
I would have someone look it over. An attorney looks it over to give you their opinion on whether it’s enforceable and never go into a contract signing something, just saying, well, it’s too broad. It is unenforceable if need be. Yes, that might be true, but you might have to litigate it or go to arbitration. I would never suggest that someone sign a contract just thinking, ah, well, it is unenforceable. I don’t have to worry about it. That’s a bad idea, in my opinion.
Employment Contract Questions?
Contract Review, Termination Issues and more!