Non-Compete Agreements: What You Need to Know Before Signing

A non-compete agreement review should be at the top of your list before accepting any job offer that includes one. Non-compete agreements can restrict where you work, what industries you can enter, and how long you have to wait before taking a similar role. Understanding these clauses before you sign could save your career years of unnecessary limitations.

What Is a Non-Compete Agreement?

A non-compete agreement (also called a non-compete clause or restrictive covenant) is a contract provision where you agree not to work for a competitor or start a competing business for a certain period after leaving your employer. These are commonly found in employment contracts, partnership agreements, and sometimes even freelance contracts.

Employers use non-competes to protect trade secrets, client relationships, and proprietary information. While that goal can be legitimate, many non-competes go far beyond what is necessary and unfairly restrict workers.

Key Elements to Review

Every non-compete has three critical dimensions you should evaluate carefully:

Duration: How long does the restriction last? Six months is generally considered reasonable for most roles. One to two years is common but can be burdensome. Anything beyond two years is usually excessive and may not hold up in court.

Geographic scope: Does the non-compete apply to your city, state, country, or the entire world? A global non-compete for a local sales role makes little sense and is often unenforceable. The geographic restriction should match the actual reach of the business.

Scope of activity: What exactly are you restricted from doing? A clause that prevents you from working in "any business that competes directly or indirectly" with your employer could effectively bar you from your entire industry. Look for specific, narrowly defined restrictions.

Red Flags in Non-Compete Agreements

Not all non-competes are created equal. Here are warning signs that yours may be overly aggressive:

No consideration: In many states, a non-compete must be supported by "consideration," meaning you receive something in return. If you are an existing employee being asked to sign a non-compete with no raise, bonus, or promotion attached, it may not be enforceable.

Vague definitions: If the agreement does not clearly define "competitor" or "competing business," the employer could argue that almost any job in your field violates it. Demand specificity.

No carve-outs: A reasonable non-compete should have exceptions for situations like layoffs or termination without cause. If you get fired and then cannot work in your field for a year, that is a significant hardship.

Applies to all roles: Some companies require non-competes from every employee, including entry-level workers who have no access to trade secrets. If your role does not involve confidential information or key client relationships, a non-compete may be unnecessary and overreaching.

Are Non-Competes Enforceable?

Enforceability varies dramatically by state. California, Oklahoma, and North Dakota generally refuse to enforce non-competes. Other states like Florida and Texas tend to enforce them more readily but still require reasonableness.

The Federal Trade Commission (FTC) has also taken steps to limit non-competes nationwide, though the legal landscape continues to evolve. Even in states where non-competes are enforceable, courts often narrow overly broad provisions rather than enforce them as written.

However, do not assume a non-compete is unenforceable just because it seems unfair. Defending yourself against a non-compete lawsuit is expensive and stressful, even if you ultimately win. It is far better to negotiate the terms before signing.

How to Negotiate a Non-Compete

Many employers expect some negotiation. Here are strategies that work:

Ask to shorten the duration. Reducing a two-year restriction to six months can make a huge difference in your career flexibility. Request a narrower geographic scope tied to the markets where you actually work. Push for a specific list of competitors rather than a broad industry definition.

You can also ask for a "garden leave" clause, where the employer continues to pay your salary during the restricted period. If they want to restrict your ability to earn a living, they should be willing to compensate you for it.

Finally, request that the non-compete be voided if you are laid off or terminated without cause. This is a reasonable ask that protects you from the worst-case scenario.

Review Before You Sign

The best time to address a problematic non-compete is before you sign it. Once you have agreed, your options become more limited and more expensive. Take the time to read every word, understand the implications, and negotiate where possible.

If legal language feels overwhelming, Fine Print Fighters can help you understand what you are agreeing to. Upload your non-compete and get a plain-English breakdown of its restrictions and risks. Check our pricing page for detailed analysis options.

Disclaimer: This article is for educational purposes only and does not constitute legal advice. For questions about your specific situation, consult a qualified attorney in your jurisdiction.