Non-Compete Agreement (Should You SIGN One?)
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, it’s very likely if you are a healthcare professional, you’re in sales, that it’s going to include a non-compete. And a non-compete prohibits the professional from providing a specific service within a particular 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.
What If Non-Compete is Required by an Employer?
Now, just through decades of experience here, it is improbable that you can completely avoid signing a non-compete if required by an employer. The employer does this for some apparent 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 they decide to leave at some point. They take all the patients or 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.
Non-Compete in Different States
A reasonable non-compete depends upon where you’re located 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 entirely 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 thinks you cannot work in sales in any industry. You want it to be specifically for what you’re doing for that employer, which will open other opportunities for the non-compete time limit.
Scenarios in Software Sales
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, negotiation must be done 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? If 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 be best 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 agreement unless it’s 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. If you bring a ton of experience to an office or a business, you’re likely much more valuable and have more leverage in negotiating that.
Other Blogs of Interest
- Can a Company Make You Sign a Non-Compete After Employment? | Employees Noncompete
- How Much Does it Cost to Fight a Non-Compete? | Non-Competition
- Should You Tell a Future Employer About a Non-Compete?
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 of a Terrible Non-Compete From a Former Employer?
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 a healthcare professional is about to take on a new job, you may wonder 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 must 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 negotiates their non-compete agreements. He would be happy to help you understand your rights and options under the law.
Does a Non-Compete Hold Up if You Are Laid Off?
Does a non-compete still apply if you’re laid off? First, suppose you have a non-compete that applies to you. In that case, you’ve likely signed an employment agreement where the non-compete was part of the restrictive covenants in the employment agreement. Restrictive covenants are things the professional can’t do either during or after the contract is terminated. I’m only going to talk specifically about professionals that have signed employment agreements, including a non-compete.
How to terminate an Employment Contract?
Within the contract, it will state, one, the term, meaning the length of the agreement, and then two, termination, how to terminate it. Usually, there are four ways to terminate a contract.
Initial Term and Mutual Agreement
One, the initial term can end. So, if you have a three-year contract, the end of the three years is over, and there’s no renewal language in the agreement, that’s it. The non-compete would then apply as soon as the employer terminates the contract. Two, the contract can be terminated by mutual agreement. So, if either party said, you know what, this isn’t working, let’s move on. Once again, whenever that date is, that non-compete would then kick in once that was terminated.
The next one is with-cause, meaning if one party is in breach of contract and fails to secure the breach. Then the other party will have the option to terminate the agreement immediately. Now, there are times when the employer is in breach of contract. They’ll be language in there that states the non-compete won’t apply if the employer is in breach and the agreement is terminated with-cause. If the language isn’t there, I suggest you put it in or ensure it’s in there. That states, once again, if the employer is breaching the contract, fails to, we call that cure the breach, or fix the breach, the non-compete won’t apply.
The last option we’ll talk about the most today is without-cause termination. This means either party can terminate the agreement for any reason, at any time, with a certain amount of notice to the other party. Most people think that being laid off is when the employer terminates the contract without-cause. Both parties can do this with a certain amount of notice. You must make sure that you’re providing the proper notice. If the employer utilizes the without-cause termination agreement, the non-compete will still apply. So, to be clear, even if you’re laid off, which means the employer terminated the contract without-cause, the non-compete will still apply. So, yes, if you are laid off, it’s highly likely that the non-compete will apply.
Three Components of Signed Non-compete
Now, there are a handful of states where non-competes are entirely unenforceable. So, I would check in whatever state you’re in to ensure that a non-competition clause is even enforceable by the courts in that state. And then two, any state will only enforce reasonable non-competes. Meaning it’s specific to what is prohibited, it’s typical to how long it lasts, and then it’s specific to the geographic restriction. And those are the three components of any non-compete, what you specifically can’t do, for how long, within a specific geographic radius. For a physician, let’s say they’re a general surgeon. It’ll state you can’t work as a general surgeon for one year after the contract terminates within 10 miles of your primary practice location.
And then, you can extrapolate that to all the different professions. So, in short, yes, it’s very likely the non-compete will still apply even if you are laid off if you had signed an employment agreement. The employer utilized the without-cause termination option.
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