The marketplace thrives on competition. Businesses with good plans, smart distribution techniques, and attractive product designs are in better positions to gain market share than stagnant competitors who do not innovate.
As part of their effort to protect their competitive edges, many businesses require employees and contractors to sign legal documents called non-compete agreements (NCAs) or covenants not to compete (CNCs) which prohibit workers from starting their own businesses using proprietary practices.
Can Employers Always Enforce NCAs?
Just because an employee signed an NCA does not automatically mean the entire document is enforceable. Class action lawsuits from workers’ rights attorneys are common, such as the recent successful effort by low-level Jimmy Johns employees to nullify their NCAs.
What Do NCAs Commonly Say?
The most common NCAs restrict when and where workers gain employment once their work with the enforcing company ends. For example, an NCA signed by an employee of a tech firm performing social media analytics may deny the worker a right to take a job in the same field within the same state.
Unfortunately, because NCAs are usually part of a larger contract, many new employees simply overlook them as part of their paperwork for the firm and never read them. This can have damaging and limiting impacts on career progression, so an employee should always be aware of what he or she is signing as an employee.
Are NCAs a Good Deal?
Whether or not it makes sense for an employee to sign an NCA depends on the individual circumstances. For example, a new employee at a firm who plans to switch employers in the near future within the same profession should think twice about opportunities he or she might be giving up by signing an NCA.
Some states, like Florida, allow employers to demand that employees sign an NCA with the threat of firing for non-compliance. Other states, however, require that employers offer something of value to employees it requests to sign NCAs in an effort to make these types of agreements “fairer” to workers.
Ultimately, under the right conditions, it may make sense for some workers to comply with employers’ wishes and sign an NCA. Rights groups suggest, though, that employees carefully weigh the pros and cons before making a final decision.