November 10, 2014

Consultants, contractors and other employees can be asked by their employers to sign non-compete agreements, which are essentially contracts preventing people from sharing the trade secrets or intellectual property of a business with another company.

Have you been presented with a non-compete agreement? If so, here are some questions to ask yourself as you decide whether you should sign this contract.

Have you been presented with a non-compete agreement? If so, here are some questions to ask yourself as you decide whether you should sign this contract.

While non-compete agreements are popular and widely used in the tech industry:

  • They can come into play in any industry or line of business.
  • They may be part of an employment contract, or they can be stand-alone contracts that people are asked to sign at any point prior to or during their employment with a company.

Because signing a non-compete agreement comes with various obligations, it’s important that people thoroughly understand the terms of these agreements so they can make an informed decision about whether or not they would like to sign them.

In this three-part blog series, we will highlight some important questions to ask yourself if you are trying to figure out whether you should sign a non-compete agreement. If you would like some professional legal advice regarding a specific non-compete agreement, don’t hesitate to contact Downey & Associates, PC. Our seasoned business lawyers are ready to provide you with the answers you need so you can make the right moves for you, your business and your future.

Here’s What You Should Consider with a Non-Compete Agreement…

Question 1 – How broad is the non-compete agreement?

The scope of a non-compete agreement is one of the first and most important things that needs to be understood, as the terms of these agreements can vary widely. For instance, while some of these contracts may stipulate that people cannot work for competitors in the same local region for a certain period of time, others may be far broader and more extensive, possibly including terms to try to preclude people from working for any of a company’s competitors, regardless of where the competitors are based.

So, make sure you understand these terms of a non-compete agreement and how they could impact you if you decide not to work with that firm at some point in the future.

Here, it’s also important to note that:

  • A non-compete agreement cannot prevent people from using their skills for another employer in the future.
  • These skills can be used separate from the trade secrets and/or intellectual property of a business.

Question 2 – How does the non-compete agreement define “confidential”?

Understanding the terms and limitations of a non-compete agreement can help you decide whether you should sign it or not. Call us if you have any questions about these contracts.

Understanding the terms and limitations of a non-compete agreement can help you decide whether you should sign it or not. Call us if you have any questions about these contracts.

In many cases, the focus of non-compete agreements is the trade secrets and intellectual property of a business. In other words, these contracts define such trade secrets and intellectual property as being “confidential.”

Make sure that, as you review the terms of a non-compete agreement, you clearly understand what the definition of “confidential” is for the purposes of that contract. If this term is not clearly defined in the non-compete agreement, it can be a good idea to:

  • Request that an employer more clearly define this term in the contract documents
  • Consult with an experienced business attorney to find out whether such ambiguities may work in or against a person’s favor.

While such ambiguities can open up some wiggle room for employees, they can also usher in a world of legal trouble and headaches if or when a business may decide to come after a person for allegedly violating a non-compete agreement. So, do yourself a favor and avoid such issues and headaches up front by making sure these terms are clear and that you fully understand them.

Question 3 – Does the non-compete agreement prevent you from working in other states?

This question is also aimed at shedding light on how limiting a non-compete agreement may be and how it can impact people’s future professional opportunities. When reading through these agreements, consider the geographical limitations imposed by these agreements:

  • Does the non-compete agreement prevent you from working for competitors in the same region or state?
  • Does this agreement extend to competitors based anywhere in the U.S.?
  • Does the agreement extend to international competitors?
  • Or are there no geographical limitations imposed by the non-compete agreement?

If there are not any geographical limitations imposed by a non-compete agreement, this may not bode well for the workers who are asked to sign them, as such broad terms can end up being used against workers to try to prevent them from working for any competitor anywhere.

Question 4 – Are there time limits imposed by the non-compete agreement?

While these questions can help you figure out whether you should sign a non-compete agreement, don’t hesitate to contact us for professional advice and help.

While these questions can help you figure out whether you should sign a non-compete agreement, don’t hesitate to contact us for professional advice and help.

This is another critical aspect of non-compete agreements that people need to be aware of, as the time limits or time frames that are imposed by these contracts can be extremely detrimental to employees in the future if or when they are looking for new employment.

For instance, some non-compete agreements may lay out strict terms regarding how long people have to wait before they sign on to work with a firm’s competitor. In other cases, broader non-compete agreements may not specify any time frames whatsoever, and this can create ambiguities that firms may use to argue that workers can never work for certain competitors.

As with the term “confidential,” the ambiguities with time limits can end up creating a world of legal problems for workers if they end up working for competitors in the future, as the firms that made them sign non-compete agreements can argue that these workers are in violation (or breach) of the agreement.

So again, make sure that:

  • The time frames dictated by a non-compete agreement are clearly defined.
  • These time frames are not detrimental to your career or professional plans for the future.
  • You thoroughly understand the terms regarding a non-compete agreement’s time frames so you can be in compliance and avoid any legal disputes in the future.

Question 5 – Is there room to negotiate some of the terms of the non-compete agreement? 

Regardless of the specific terms of a non-compete agreement that you may be given and asked to sign, if the terms of this agreement are ambiguous, unfavorable or outright unacceptable, being able to negotiate these terms can be critical. Is the employer that has provided you with this agreement willing to make some concessions like narrowing the terms of the time limits, geographical limitations or other limitations that may be imposed by the non-compete agreement?

If not, you may want to seriously consider whether it’s worth it to sign a non-compete agreement, as it may have significant impacts on your career and professional options in the not-so-far-off future.

Denver Business and Non-Compete Agreements Lawyer at Downey & Associates, PC

Do you need help reviewing a non-compete agreement to decide if you should sign it? Or do you need assistance developing effective, comprehensive non-compete agreements for you firm? If so, you can count on Denver Business Lawyer Thomas E. Downey. Since 1983, Thomas Downey and the other legal professionals at Downey & Associates, PC, have been providing individuals and businesses in the Denver Metro Area and throughout the U.S. with the highest level of legal service for their various business legal issues.

Contact Us Today

We encourage you to learn more about your rights and options, as well as our various services, by calling us at (303) 813-1111 or by emailing us using the contact form on this page.

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Categories: Blog, Contracts, Non-Compete Agreements