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The pros and cons of a non-compete contract

On Behalf of | Jan 14, 2022 | Non-Compete Agreements

There are pros and cons to non-compete contracts. Employees often wonder if their old New Jersey employer will sue them for taking a higher-paying job. The answer depends on the details of the agreement.

Growing trend with businesses

More employers ask employees to sign non-compete agreements in today’s job market. The contracts can come with a raise, promotion or even a severance. Even non-corporate jobs are using non-compete contracts now, including camp counselors and yoga instructors. There are pros and cons to using non-compete contracts. Data has shown that the agreements limit job mobility, discourage venture capital investments and accelerate talent flight.

Takeaways of a non-compete contract

Employee non-compete contract stop an employer’s staff from working for a competitor. Depending on the details of the contract, there’s a specified geographical area or a certain amount of time after leaving the company. A non-solicitation agreement stops an employee from poaching other employees, customers or contracts after a firing. A confidentiality agreement stops employees from spreading private information about their previous company. Depending on the language of the contract, violators could face litigation.

What courts look for

Each state governs non-compete contracts their own way. The three aspects a court looks at are traditional non-competes, non-solicitation agreements and confidentiality agreements. A non-compete contract may go too far with restrictions. A court won’t approve anything they think is unreasonable, but every sector is different. A yoga instructor may wait three to six months before getting a new job, but a key executive may wait two to five years. Banning work for 10 miles around a hair salon may be equal to banning three states for a sales manager. A court will also check if the non-compete contract stifles competition or deprives the employee of making a living.

If there’s a non-compete contract paired with a job offer, ask for a copy instead of accepting it right away. There are pros and cons to non-compete contracts. The court takes the details of the contract into account when honoring provisions. An employee can negotiate a non-compete contract with an employer.