Should You Sign an Employee Non-Compete Agreement?
I believe businesses have the right to protect themselves. Some employees have behaved badly by stealing corporate secrets and selling them to the highest bidder. However, when asked should you sign an employee non-compete agreement, you should consider it carefully as doing some can limit your ability to work.
Stealing sensitive trade secrets is a problem. This should be covered by what is called a Non-Disclosure Agreement (NDA). This agreement was created specifically to deal with the issue of employees stealing secrets. Why is a non-compete clause even necessary?
What Is a Non-Compete Agreement (NCA) or Non-Compete Clauses (NCC)?
Employees in high positions, such as executives, are often asked to sign non-compete clauses. These clauses prevent the exec from working for other companies in a similar industry. The clauses have a period of time that they are good for. It could be three months, but often are at least one year.
Companies tried to make the agreements perpetual, but courts continually shoot this down. A perpetual agreement essentially means employees can never work in their own industry again.
Executives are not going to agree to signing any restrictive clause unless they get something in return, usually in the form of compensation.
What About the Rest of Us?
Lawyers, doing what they do, took the concept of over protection (which is what the NCC is) and applied it to the rest of us. However, being that most people are not key entities in a company or corporation, the lawyers have managed to make the incentive nothing more than you either sign the NCC or you don't get to work here. Some incentive, huh?
What this could mean for most people is not being allowed to work in your field for the duration of the agreement. Can you, like the executives, take a year off? I am going to guess the answer is no. I sure as hell cannot.
States Are Cracking Down
People must be reaching out to their representatives about the issue because states seem to be trying to do something about the practice. It varies widely by state with several states making it difficult for companies to implement these clauses.
It's good news that states are taking action but do not assume that means you can simply ignore NCCs. Do so at your peril.
Please note: no information or data from this page should be misconstrued as offering legal advice. I am not a lawyer. You should consult a legal professional for any advice in this regard.
Should You Sign the NCC?
Here are some ways to deal with an NCC.
Let's go into each of these in a bit more detail.
Don't Sign the Agreement
You have a choice of saying no. Of course, in most cases, that will mean you won't get to work for the company. Companies are holding employees hostage because they know that employees don't have many options.
It's a tough decision. If more employees refused to sign, companies would be left with shortages of staff. They would be forced to rethink this strategy.
There is a lack of knowledge surrounding this issue. This gives employers the upper hand. Essentially, they put people through the entire interview process (which is often extensive and grueling) and then spring the NCC on them after they are hired.
They know employees won't want to go through the interview process elsewhere and reluctantly sign the agreements.
Ask About an NCC Before or During the Interview Process
Turn the tables on the company advantage and ask if you will be required to sign an NCC. If you got the interview through a recruiter, tell the recruiter you want this information before you even agree to the interview. Ask for a copy of the agreement.
If you can't get this information before agreeing to an interview, ask about it when you are on the interview. You probably want to wait until the second or subsequent interviews before springing this question on them. But, if they think you are a strong candidate, it suddenly puts you in the driver's seat. It could even be an item you can use to negotiate for a higher salary or some other form of benefit.
Negotiate the Terms of the NCC
There is nothing wrong with stating that you aren't comfortable with the terms of the NCC. If the terms restrict you from working in your industry for a year, tell the company you want to change the agreement to three months. Let them come back and tell you they agree to six months, etc. Six months still stinks. But, it's a whole lot better than one year.
You should negotiate a provision that if the company lets you go, they give you a severance that is substantial enough to cover the duration of the agreement. If you leave on your own, it is probably going to be difficult to get this kind of provision. It all depends on how much value you bring to the table. If you have skills that are hard for them to find and they value that, you will have more negotiation power.
Ask them for more money. If they spring the NCC on you after accepting the job, tell them this is a significant change that has come to your attention and warrants renegotiation. This may be a good time to consult with your attorney.
Review the NCC with Your Attorney
Before signing, tell the company you wish to review the terms of all agreements with your attorney. If they give you a hard time about this, you can use this as an indication that this is a company you don't want to work for. If it is a decent company your prospective manager will respect your decision.
It's a huge decision, after all!
A good aspect of paying an attorney to do this is you can blame changes on him or her. It gives you some fire power when you go in and say, "my attorney wants me to make changes and here are the changes. Please speak to my attorney for negotiations." It takes the pressure off you to some degree. Of course, discuss this with your attorney first and ask for his or her opinion.
Reach Out to Your State Representative
You pay taxes, right? That entitles you to voice your concerns when something isn't right. Call your representatives of your state and let them know you want them to do something about this. The more people that do this, the more attention it will get.
Create a petition. When you get a certain number of signatures, it's required by the United States constitution to address the situation. I have a feeling you would get the proper amount of signatures.
You may believe reaching out to your representatives is a waste of time. It isn't. If you really want to pack a punch, do it during an election year of those representatives. It's amazing how much more responsive they are during this time!
The point is if no one reaches out, nothing gets done. It's the status quo with corporations overextending their reaches and us allowing it to happen. Use the democratic process of raising awareness!
Create an Alternative Source of Income
The best option to counter an NCC is actually the most fun. Create another source of income. If you decide that you have no option but to sign an NCC on the company's terms, then use your spare time wisely to create a side business that will earn you income.
If you end up leaving a company and your income source is already kicking in, the impact of the NCC won't be felt as hard. You can effectively wait out the duration of the agreement without a hit to your bank account.
Heck, you may even find that you start making enough to replace your income. That wouldn't suck, now, would it? Imagine telling companies to you-know-what with their NCC agreements. Make enough money, and that is exactly what you'll be in a position to do!
What kind of business can you start? It's limited only by your imagination. However, you will need to factor in the time it takes to run your side gig. If you work many hours and you are trying to balance work and home life, you'll need to take those into consideration.
Another problem is when people get comfortable in their jobs, they won't always take the time to work on something extra that can get them through the times when they have been laid off. The idea of creating an extra income for the purposes of making it through the NCC agreement time, becomes less important.
To get around these constraints, try to set aside a minimum number of hours per week. Set goals on what you want to get accomplished during those hours and shoot for completing them.
Of course, you need to know what kind of business to create so that you can create the proper goals. This is where I can help. I will give you a road map of a type of business that doesn't require much in the way of setting and yet, has the potential to earn a job-busting income.
How to Get Started Creating Your Alternative Income Stream
Since you have a busy life with your job and your family, my suggestion would be to rule out a brick-and-mortar type of business. There is nothing wrong with setting one up. But, it requires you to be physically at the location. You want a business that you can run from anywhere. That is why an online business is best suited for creating a secondary income.
Here are a few ideas that you can try:
What kind of online business should you form? You want a type of business that doesn't require much in the way setting up and maintaining. For instance, an eCommerce business requires the following:
If you plan on managing the all of these components yourself, you will need your own website. You will also need to know how to set up these components, which all have a rather steep learning curve.
I take nothing away from eCommerce solutions. People make serious money with them. It's just that for anyone limited on time and resources, it may not be the best means of creating your alternative income source.
When you are successful with an online business, you could certainly branch out into eCommerce. But, the idea is to get you earning as quickly as possible.
Outsource Order Fulfillment
Another option is to let a company take care of your order processing, payment, and fulfillment. Some companies will even handle the warehousing and shopping carts. This is one of the services Amazon offers and is called appropriately, Amazon FBA (Fulfillment by Amazon).
The way this works is you send your products to Amazon warehouses along with shipping materials. You set the prices and shipping costs, etc. Amazon takes care of all the other processing. Amazon will even sell the product on their website. When a customer buys, Amazon will accept the payment, ship the product from their warehouse. When inventory levels get below a certain point, Amazon sends a warning to you.
You will need to drive traffic to your offers and you will be competing with other sellers. If your products are in demand and have low competition, you could be sitting on a goldmine. Finding those products is not easy, however. There is a cost to use the Amazon FBA. These costs change, so take a look at the prices before signing up.
This is my favorite business model and is the one I recommend. It's the easiest to get started with and doesn't require much in the way of set up or maintenance.
The way an affiliate business works is you enter into an agreement with a vendor. Many vendors are doing this, so don't be surprised if companies like Target and Walmart will have affiliate programs (they do!)
If they agree (or the affiliate company they go through) to let you sell on their behalf, you will be given a link with a special code. This code identifies you as the affiliate. You put these links on your website in the form of text links or banners. Then, when a visitor to your website clicks on the link and makes a purchase, you get a percentage.
As you can see from this description, affiliate businesses don't require payment processors, shopping carts, shipping modules, or even any inventory. You simply send traffic to the vendor's page and let them handle all of those details. You get paid when customers purchase. It's that simple!
While the dynamics of the affiliate business model are simple, the implementation requires some finesse. You cannot just throw up a bunch of links on a website and hope that enough people will click and buy.
In the early stages of online affiliate marketing, it did work this way. Affiliates would load up advertising networds (like Google Adwords) with affiliate links, and collect whenever a sale was made. As long as the overall ad spend was less than the commission received, affiliates made money.
Google put a stop to this practice because its advertising channel became littered with affiliate links. It tried to discourage this by requiring affiliates to specify the symbol #aff in their ads. Finally, it just banned all affiliates who participated in this scheme, even though it wasn't against the rules at the time.
Affiliate marketing has matured to the point where you need to know what to do in order to make money. As I have stated, it's not simply a matter of blasting a bunch of affiliate links on web pages and getting sales from them.
There are certainly other business models that you could explore. There is a concept known as drop shipping where you can sell vendors' products and they agree to ship them individually.
You could sell Print on Demand (POS) where vendors have all the necessary materials and any time there is a sale, they create the product on the spot and ship them. TeeSpring does this with T-Shirts. There are plenty of others as well, including Amazon who now sells in this manner.
By the time this post gets published, there are likely to be several more ways to sell online. All of them have their advantages and disadvantages. However, I continue to recommend the affiliate model due to its simplicity.
If you want to get started with your affiliate business, and build it up in the event that you have to wait out your NCC duration period, learn how to set it properly by using this blueprint.