“Covenants to not compete” with former employers (“noncompetes”) are increasingly required from a wide range of employees, including camp counselors, hairstylists and sandwich-makers. At least half of high-technology employees are required to sign them.
Noncompetes have long been a part of the contract law of most states. Only a few states, like California, do not enforce them.
Noncompetes are increasingly criticized, however, as suppressing industry growth and employee mobility and prosperity. Congress has demanded that the Federal Trade Commission evaluate the fairness of noncompetes. Massachusetts, Virginia and Minnesota have considered bans on noncompetes, with the support of entrepreneurs and venture capitalists, as well as former employees bound by these agreements.
Pro-competition public policies limit the enforcement of noncompetes. Employees thinking of starting a new job or business should consider these limitations as they prepare for their new (self) employment. They should ask themselves these questions:
What should I do about my existing employer's noncompete agreement, if I am considering leaving to join another employer or to start a new company?
What should I ask a prospective employer about noncompetes before I agree to a new job, or begin work?
What are the public policy limitations on noncompete agreements if they cannot be avoided in current or prospective employment?
What are the terms of a noncompete agreement that might be open to negotiation, and what should I ask for?
If I am prevented from doing the kind of work I want to do because of a noncompete agreement with a former employer, do I have any options?