What is one or two pages long and ties your hands for one or two years? A non-compete. Ever sign one? A client, Colleen, had that opportunity recently and wanted some advice.
Colleen is a sales representative currently between jobs. Her specialty is selling office equipment hardware and software through resellers to end users. Dozens of resellers offer customers the exact same equipment. Nothing proprietary there. She has worked for two resellers in her career already. The last one she worked for went out of business a few months ago despite Colleen’s excellent sales record.
Recently she came upon an opportunity with a reseller in Northeast Ohio offering customers the array of products and services she has sold in the past. She had several interviews and seemed to get along fine with the management team. This could be the job she is waiting for. They made an offer and sent along a hiring package. She came to The Interview Doctor to review her options. She was inclined to accept this offer although she had another iron in the fire.
As she reviewed the documents included in the offer package she came upon a non-compete. She was shocked! As we read through the non-compete I told her this one was pretty mild. This non-compete stated that accepting this position meant that for one year after leaving the position she agreed she would not work for any employer in a sales capacity if that employer sold or distributed any hardware or software that this employer sold within 20 miles of the current employer.
Non-compete agreements are a way for an employer to protect trade secrets and confidential information that the employer worked hard to create that the employer shares with the employee so that the employee can be successful.
Non-competes vary by state but generally include several elements:
- A time period that needs to be reasonable
- Specific products or knowledge that must be protected
- A reasonable physical distance from the place the employee worked
On the surface it seems reasonable. The company wants to protect legitimate business interests. But what happens when that non-compete prevents you from working in your field after you leave the employer? Who is the non-compete reasonable for?
Colleen decided that since she has worked for resellers before and can reasonably expect to work for resellers in the future, signing this non-compete was a bad idea for her. She would have to change careers or at least change the field in which she sold. This could severely limit her future opportunities.
I think Colleen is correct. It is easy to sign a non-compete in the height of excitement over a new opportunity. However we all know that there are no guarantees in life. We are all just one business meeting away from needing to find another job. If you signed a non-compete with optimism over the future when you first took the job but then want to work for a similar company in the future you could have a problem. The company can go to court to block you from taking a position in another company for a period of time. You could be looking at significant legal expenses.
Signing a non-compete could put handcuffs on your future job search. You must balance the possibilities of a new position over the potential costs or limitations in the future. What this is worth to you?
Non-competes are not just for senior managers or sales people any more. A Jimmy John’s franchise in Niles, Illinois requires all of its employees to sign a Confidential and Non-Competition Agreement as a condition of employment. According to Jon Hyman in The Practical Employer:
The agreement prohibits the employee, for two years following employment at Jimmy John’s, from working at any business within three miles of any Jimmy John’s that derives at least 10 percent of its revenue from sandwiches
Employee covenants and agrees that, during his or her employment with the Employer and for a period of two (2) years after … he or she will not have any direct or indirect interest in or perform services for … any business which derives more than ten percent (10 percent) of its revenue from selling submarine, hero-type, deli-style, pita and/or wrapped or rolled sandwiches and which is located with three (3) miles of either [the Jimmy John’s location in question] or any such other Jimmy John’s Sandwich Shop.