That 'noncompete' can really tie you down

Eve Tahmincioglu • Profile • E-mail

Even though you may be desperate to keep your job or find a new one, think long and hard before signing a noncompete agreement.

Among the flood of forms you get when you’re first hired, or paperwork a boss asks you to fill out as part of a new company policy, a noncompete clause or agreement may be lurking. If you sign it, you could be shooting yourself in the career foot.

Such legal documents can preclude you from going to work for a competitor or even keep you from starting a business in a similar industry.

Gretchen, who worked in telecommunications in Florida, says she was forced to sign such a noncompete form in order to keep her job and was subsequently laid off.  (She asked to be identified by her first name only to improve her chances with potential employers.)

“I am a single mother, and finding a good-paying job in South Florida is not always the easiest,” she says. “So I was told I had to sign the agreement or I would lose my job. So I signed.”

Suddenly she found herself without a job and unable to work in her chosen field because the noncompete agreement prohibited her from working for a competitor.

“I have not worked in the industry since and have had to start all over again in another industry,” she says. “I now sell exterior building materials in an economy that is getting progressively worse for this type of business.” 

“What is an employee’s recourse?” she asks.

Unfortunately, depending on the state you live in, there may be little recourse if you knowingly signed such an agreement.

Think before you sign
Barbara Poole, CEO of Employaid, an online resource for employees and HR executives, likens noncompete agreements to prenuptial contracts. Too often, employees get caught up in the elation of getting a job offer and “don’t think about what they’re signing.”

However, legal experts say, you sign at your own peril. Given the tough economy and intense competition among most industries today, employers increasingly are taking workers to court over violations of these agreements.

“We see far more attempts to enforce these,” says Poole.

In addition, noncompete agreements have become more common as the economy has shifted more toward service sector jobs and away from manufacturing.

“More jobs are in the service world, where information is the premium,” says Steve Fox, employment attorney at Fish & Richardson in Dallas “The value of what employees have in their heads is greater. There’s more of a need for noncompetes because it’s so much easier to leave and take what you’ve learned from the old employer and apply it with the new employer.”

That’s exactly what worried Susan Polselli, owner of a fruit bouquet franchise called Incredibly Edible Delights in Palm Beach, Fla.

Polselli has made her employees sign noncompete agreements for the past decade but recently sued to enforce the accords for the first time, targeting two workers who left to work for a direct competitor in town.

“As an employer and owner of a small business, you don’t have a lot of resources. All you have is your product or business,” she says. “If they went to work at a clothing store I wouldn’t go after them.”

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