Non-Compete Agreements: How Do They Affect Careers?

A non-compete agreement might only take a paragraph or two in your employment contract, but it can become a roadblock to your future career.

Non-compete agreements can restrict your next move, limiting your ability to get a new job and even trigger legal disputes. Understanding how non-compete contracts work, where they’re enforceable, and how to negotiate fair terms is critical to maintaining your long-term career mobility. For legal help reviewing your contract, reach out to an employment lawyer.

What Is a Non-Compete Agreement?

A non-compete contract is a legally binding contract where an employee agrees not to engage in competitive activities against their employer during or after the employment relationship. These legal agreements are intended to protect the employer’s business interests.

Non-competes could be about the company’s trade secrets, confidential information, intellectual property, client list, or market positioning. Typically, these agreements restrict an employee from working for a competitor, starting a competing business, or soliciting the company’s clients, customers, or employees.

Established companies and startups use non-competes and other contractual agreements such as non-disclosure agreements (NDAs) to protect themselves.

Non-competes must have a limited timeframe and be defined by a geographic area, such as a city, state, region, or specific radius. Typically, it is the former employer’s competitive market. Finally, there should be a defined scope of activity, such as the industry, the former employee’s role, or specific services/products.

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How Do Non-Compete Agreements Impact Your Career?

Signing a non-compete agreement can potentially impact your career prospects by preventing you from working in your field or geographic area for a certain time after leaving a job.

For some professionals, non-competes can make it harder to negotiate better compensation or move to a higher-paying role. It could require taking a professional pause, changing industries, or relocating to a new geographic area.

A future employer may hesitate to hire an employee bound by a non-compete. It can also prevent you from pursuing your own entrepreneurship for a period of time. There is also the risk of a lawsuit and significant financial penalties if you choose to ignore or violate your non-compete agreement.

Legal Enforceability of Non-Compete Agreements

Most states allow non-compete agreements but enforce them only if they are reasonable in scope, duration, and geography. For the majority of states, the non-compete agreement must be imposed to protect a legitimate business interest. It must be narrowly tailored and not impose undue hardship on the employee. It also cannot harm the public interest.

California, North Dakota, and Oklahoma only allow non-competes in very limited situations. Illinois, Oregon, and Washington allow non-competes, but only for highly compensated employees. Pennsylvania allows non-compete contracts, but there are laws excluding specific industries, such as healthcare practitioners. New York currently has a proposed law under consideration, which would prohibit almost all non-compete agreements.

In 2024, the Federal Trade Commission (FTC) proposed a nationwide ban on most non-competes. If adopted, it would override state-level enforcement. However, a federal court in Texas issued a preliminary injunction against the FTC rule, blocking its enactment.

What To Consider Before Signing a Non-Compete

While non-solicitation agreements have a negative reputation, that doesn’t mean you shouldn’t sign them or pass on promising job opportunities just because they involve a non-compete.

Before signing a non-compete agreement, consider the terms that are in it. In some states, non-compete agreements are enforceable only if they meet specific legal requirements to ensure they are reasonable and not overly restrictive. Have the non-compete agreement and employment contract reviewed by an employment lawyer. Your attorney will help you understand the scope of the agreement.

You probably aren’t thinking about long-term job mobility, but you likely won’t stay at this new company forever. You need to know and understand the restrictive covenants that will limit your ability to find new employment. Negotiate and clarify any red flags that you or your attorney identify. Examples of this would be too broad, vague, hard to follow, or aggressively restrictive terms.

How To Negotiate a Non-Compete Agreement

You don’t have to accept a non-compete agreement as initially presented to you by an employer. Start by asking for clarity on the terms used in the agreement. Focus on getting clear definitions for key terms, such as “competitor” or “confidential information” to ensure you understand the limits of the agreement. You can then propose negotiated terms, such as reducing the geographic coverage area, shortening the length of the time period, or creating more limited definitions of the type of role or industry included.

One option is to request the exclusion of specific companies or clients. If the non-compete is enforced post-termination, ask for financial support during the restricted period. Consider requesting that the company also refrain from certain competitive behaviors.

Whatever changes you and the company agree to, it’s essential the non-compete clauses are memorialized in writing. Otherwise, you may be unable to enforce the changed or additional terms. Before you sign anything, have an employment attorney review the non-compete agreement. You will have greater bargaining power before you sign the agreement than when you leave the company.

Find Legal Help

Non-compete agreements are meant to protect businesses in a competitive market. Without proper oversight, they can become overly restrictive on American workers. Policymakers continue to balance business interests with protecting the public interest as they craft non-compete policies.

Because these agreements can carry real consequences for your career and livelihood, working with a skilled employment lawyer is a critical step. A lawyer knowledgeable in employment law can help you assess what’s fair, enforceable, and what should be revised.

Find an experienced employment lawyer to help you with your questions about your non-compete agreement.