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What You Should Know About Signing a Non-Compete Agreement

The job market remains a realm of uncertainty for most employees. One moment you’re giving a company your best, the next you find yourself laid off due to automation or the financial state of the business. It happens to more Americans than you might think, and there’s more to getting laid off than just losing a job.

When an employee is terminated in this fashion, they are often asked to sign a non-compete agreement as part of a severance package. So, what exactly is a non-compete agreement and should you sign one? Here’s what you need to know:

Non-Compete vs. Non-Disclosure

A non-disclosure agreement is a legal promise not to reveal inside information from your current company. That includes technology, business plans, financial information and more. Think of it like working Chick-Fil-A, getting laid off, then telling KFC what they use in their chicken’s breading. Alternatively, exposing confidential materials from Microsoft to Sony would also be a breach of a non-disclosure agreement.

A non-compete agreement has everything to do with specific restrictions about working for a competing company These documents forbid employees from working for a direct competitor for a certain length of time after termination. It also stops you from starting your own company of the same type as your current employer.

What to Consider

If you’re asked to sign a non-compete agreement, take the time to review its terms first.  It isn’t uncommon for an employer to create unreasonable demands that might leave you in financial straits after being laid off or terminated.

At the same time, you want to look at the fine print. Does the employer only include similar businesses in surrounding states, or do they expect you to honor the non-compete agreement across the country?

Usually, courts honor non-compete agreements lasting from one to five years in any surrounding state. That can make it difficult to find a job if you should ever leave the company. What good would your experience be if you could no longer use it in your field without moving halfway across the country?

Keep in mind that this is a legal, binding contract. You could find yourself in a legal battle if you choose to break it. However, you don’t have to sign anything even if negotiations go south. It’s vital that you negotiate for fair terms.

When to Sign a Non-Compete or Non-Disclosure Agreement

According to California non-compete lawyers at Perkins Asbill, the only time it makes sense to sign one of these agreements is if it is mandatory to get hired. Even then, it helps to look over the document to ensure it is fair, reasonable, and something you can manage if you should ever lose the job.

Keep in mind what your reason might be for leaving, too. Some employers are more lenient when it comes to layoffs and downsizing, which is a topic worth discussing before you sign anything. Regardless, consulting an employment law attorney is still your best bet at avoiding a future financial bind resulting from the breach of a non-compete or non-disclosure agreement.

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