Should You Sign an Employee Noncompete?

Should you sign a noncompete proposed by your employer?

The short answer is no. There are some good reasons not to sign an employee noncompete. I’ll cover those in another post. For now, I’ll just say that we should normalize saying “no” to employee noncompetes.

There are exceptions, of course.

Exception no. 1: It was part of the deal

The first exception is when a noncompete was part of your deal. If the terms of the job offer included a noncompete, then it’s fair for the employer to include a noncompete in your employment agreement (sort of).

Even then, it may be a good idea to have a lawyer review the agreement before you sign. I cover this in Should You Pay a Lawyer for Noncompete Advice?

If a noncompete was not part of your deal, I suggest you politely decline. “I’m sorry, there must be some mistake,” you can tell your boss, or HR, or whoever. “The terms of my job offer did not include a noncompete.”

This probably won’t go over well. You’ll hear something like “uh, yes, we realize your original job offer did not specifically include a noncompete, but . . .”

“We had a bad experience with a former employee recently, so the owner now wants everybody to sign one.”

– or –

“It’s just standard language, and noncompetes don’t really get enforced anyway.”

– or –

“The private equity firm that just bought us says all key employees need to sign one.”

etc.

None of these are good reasons, but let’s assume you want to be a good team player.

“Ok,” you might say, “but a noncompete changes my deal significantly.” “What am I getting in return?”

That brings up the second exception.

Exception no. 2: The employer will pay you to sit out

In the words of Motown founder Berry Gordy (later covered by the Beatles), your loving gives me a thrill, but your loving don’t pay my bills.

Give me money. That’s what I want.

Think about it. If your employer expects you to sit out of the industry for a year, or two years, or longer, then it should pay you to do that.

As a rule of thumb, I like to tell employee clients that if the employer proposes a one-year noncompete, you should propose one year of severance pay. If they want a two-year noncompete, ask for two years. You get the idea.

It think it’s a fair trade. Most people can’t find a job paying nearly what they are currently making if they have to find a job in a different industry, or if they can’t bring their clients or customers with them to another employer.

Also keep in mind, your employer could fire you the day after you sign the noncompete (assuming at-will employment) and still insist on your compliance with it. The law only recognizes a duty of loyalty in one direction, and it ain’t in yours.

So when your employer proposes a noncompete, I suggest proposing commensurate severance pay to go with it.

This also doesn’t tend to go over well.

Which brings up the third and most important exception to my general advice not to sign an employee noncompete.

Exception no. 3: You have no choice

This is the most unfortunate, and most common, reason to sign a noncompete. In many cases, the employer will present the noncompete as take it or leave it, i.e. you are free not to sign it, but in that case here’s a free banker’s box for those family photos in your office.

Sure, you could say take this noncompete and shove it, but that’s not a realistic option for most people. You’ve got bills to pay, you’ve got mouths to feed, there ain’t nothing in this world for free.

If losing the job means you will struggle to pay your bills next month, or the month after that, it’s a no brainer. Sign the noncompete. Then save up some money for a lawyer.

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Zach Wolfe (zach@zachwolfelaw.com) is a Texas trial lawyer who defends noncompete and “trade secret” lawsuits at Zach Wolfe Law Firm (zachwolfelaw.com). Thomson Reuters has named him a Texas “Super Lawyer”® for Business Litigation every year since 2020.

These are just his personal opinions. Every case is different, so don’t rely on this post as legal advice for your case.