This week's question: Can your employer make you sign -- and can it enforce -- a noncompete agreement?
If you've decided it's time to move on, you look for another job, find one you like, accept it, give notice at your current job and make the move, right? Not so fast. If you've signed a noncompete agreement with your current employer, the process may be more complicated.
Noncompete agreements state that an employee will not work for a competitor of his or her current company for a specific amount of time. They usually specify a geographic area, as well, so you're not prevented from finding a job with a similar company if you move across the country.
A reader wrote to me recently wondering if noncompete agreements can be enforced.
"Can a company really limit your livelihood if you voluntarily choose to move on?" the reader asked.
I talked to a few lawyers and found that, like most legal questions, this one has a simple answer: It depends.
First and foremost, it depends on which state you live in. In some states, including California, noncompete agreements generally can't be enforced against employees, says Stephen Fishman, an attorney at Nolo.com, in Berkeley, California, and author of Software Development: A Legal Guide.
In other states noncompete agreements can be enforced, as long as they are reasonable. If you don't think this seems like a terribly helpful answer, you're right.
"The problem is that because [noncompete agreements] come in so many shapes and sizes, and because you've got very conflicting societal interests, the courts tend to analyze these things on a case-by-case basis, which means predictability is very low," says Steven Kayman, a litigation partner in the New York office of law firm Proskauer Rose. In other words, even within a given state, it can be difficult to predict whether or not a particular agreement will be enforceable.
Kayman says that courts generally look at four areas when they seek to determine if an agreement is reasonable or not.
-- Is there adequate consideration? In other words, did the employee receive something in return for signing the agreement? Contracts generally must offer something of benefit to both parties. But this is a particularly tricky question in the case of at-will employees, who can quit or be let go without warning. In some states, at-will employee can be asked to sign a noncompete agreement or leave; courts have said that continued employment is sufficient compensation for the employee's signature. In other states, however, courts have ruled that at-will employees can't be asked to sign a new agreement without being given additional compensation.
-- What legitimate interest is the employer seeking to protect? Employers' interests can include protecting confidential information or their investment in the development of a client base, for example.
-- What is the scope of the agreement? Does it cover a limited area and time, or is it unduly restrictive?
-- What impact will this have on the employee and any third parties? What sort of hardship will it impose on the employee?
"Often, you'll get a split decision," Kayman says. For example, a court might cut the amount of time in which an agreement is valid.
Even if a noncompete agreement is deemed unenforceable, you might still have to go to court to get out of it.
Nolo.com's Fishman says that even in California, where these agreements are generally not enforceable, some employers ask employees to sign noncompetes.
Sometimes the employer simply doesn't know the law. In other cases, he or she sees an "intimidation factor" at work.
So what should you do if you're asked to sign a noncompete agreement?
Because these agreements protect employers, not employees, there's not much reason for you to sign one if you have a choice. But if signing the noncompete is a condition of getting or keeping a job, you may not have a choice.
If you have concerns about the agreement's legality, consult an attorney familiar with the employment laws of your state. Even if you find that the agreement is probably legal, you might be able to persuade the employer to make it less restrictive. And if noncompetes aren't common in your industry or area, you may be able to find a job with another company that doesn't require one.
But the bottom line is that, in some cases, you may have little choice but to sign.
Have you signed a noncompete?
(Send e-mail on this subject to firstname.lastname@example.org. Margaret Steen has edited InfoWorld's Enterprise Careers section since its inception and has worked as a high-tech journalist since 1994.)