For those of us that are full-time students, focused solely on our education and not pursuing a part time job, the concept of a non-compete agreement may be foreign to us. It certainly was to me when one of my friends brought it up recently. My friend was telling me how he was shocked that a buddy of his had to sign a non-compete agreement in order to work part time at a pizza place near his home. He went on and on about how that was basically modern-day slavery and how he wasn’t sure if it should even be legal. However, I didn’t know what a non-compete agreement was… so I decided to research the subject as soon as I got the opportunity to.
A non-compete agreement is basically a contract an employer provides to their employee for them to sign regarding how the employee is not allowed to go work for any competing companies. They can’t even make any competing companies of their own after the employee quits or gets fired from that current job. Non-compete agreements usually specify a time period and/or geographical area that they’re valid for. For example, they might say you can’t work within a certain amount of square feet from your last job for let’s say… 3 years after getting fired or quitting.
It is important to recognize that a non-compete agreement is not the same as a non-disclosure agreement. The main difference between the two is that a non-disclosure agreement lets the employee work with competitors as long as they don’t reveal information the employer considers of their property or confidential. Meanwhile, the non-compete agreement doesn’t let the employee work with competitors at all.
Now, I wouldn’t go as far as to say the non-compete agreement is “modern-day slavery,” the way my friend put it. However, it is very limiting for people who have spent their whole lives building a career in a certain industry because, once they get fired or quit, they would be forced to move or wait long periods of time unemployed-maybe even working odd jobs just so they won’t get into legal trouble. It limits people working in big corporate companies, but it also limits people in entry-level jobs that earn around minimum wage.
For example, Jimmy John’s had made their employees sign a non-compete agreement that stated they couldn’t work in an industry that dealt primarily with sandwiches for two years after quitting or getting fired from Jimmy John’s. Because of this, there is currently a legislation proposed that is trying to prohibit the use of non-compete agreements for employees earning around the minimum wage of their municipality.
I would understand why someone who was, for example, working very closely with an influential figure such as Bill Gates while Bill Gates was building Microsoft would have to sign a non-compete agreement. It is likely they met all their best customers or gained certain confidential knowledge that could make the employee capable of capitalizing on this information obtained by working for Bill Gates. So a non-compete agreement would be protection for the employer after having lent so much trust to that specific employee.
However, there’s no reason for our local pizza or sandwich maker to have a non-compete agreement because it is likely they’re either college students or people who chose not to go to college. Therefore, they’re probably struggling financially. This agreement just makes looking for future jobs almost impossible, especially when they probably don’t have the means to move from their geographical location and can’t realistically afford to go unemployed for a few years.
Now, you may be wondering the following:
What specific legal trouble can one get into when they violate the terms of their non-compete agreement?
Well, if one’s employer doesn’t choose to ignore the non-compete agreement and wants to make sure the terms of it are obeyed, they can take you to court to seek an “injunction,” which is a sort of restraining order that prevents you from violating the agreement any further. This injunction can keep you from working for a period of time established by the court (usually months or years). Your employer can also request you pay “liquidated damages,” which is a certain amount of money one would have to pay for violating the non-compete agreement. This will most likely not be affordable.
Luckily, non-compete agreements can’t be enforced in Oklahoma and North Dakota; and California doesn’t even recognize them at all. In fact, if an employer binds an employee to a non-compete agreement in California after they quit or are fired, the employer can actually be sued. Hawaii also banned the agreement for high-tech companies back in 2015, and Utah limited non-compete agreements to only 1 year in time length back in 2016. Therefore, some states are actually recognizing how limiting and problematic non-compete agreements can be and choosing to not even have them as an option or, at least, put some restrictions on them. However, non-compete agreements are still enforceable in Puerto Rico.
What should you do if you’re in a situation where you’re asked to sign a non-compete agreement because you want to have a part time somewhere—like a coffee shop—while you’re still a student?
If we’re keeping it real, an employer can avoid hiring you if you simply deny signing the non-compete agreement since this contract has to be signed before you’re officially hired. Therefore, you should always read everything before signing and try your best to negotiate the terms. Ask your employer what you get out of signing the non-compete agreement because in some situations you could get extra pay, a promotion, or special training to advance your career. You would have to then see for yourself if these additional perks are worth signing the non-compete agreement. You could also negotiate the duration and geographical location of your non-compete agreement, but be warned, not every employer will be willing to do this since some have a very “sign or you’re not hired” approach to business. Finally, if necessary and possible, you can even hire an employment lawyer to further guide you and inform you of other options you may have.
It’s important we understand early on that we should always know what we’re signing and the ups and downs of certain important legal documents because soon we’ll all be joining the working world (if we aren’t already working part-time positions somewhere) as legal adults. Once we sign something, we’re agreeing that we’ve read, understood, and are okay with what’s stated there. Therefore, let’s make sure we’re smart about what we decide to put our name on and know what compromises we’re making. So next time you don’t know what something is or means, ask! Don’t like the terms stated? Negotiate! Just make sure you always fully understand what you’re agreeing to when signing a contract.