Why Sholuld You Have to Sign a Non-Compete Clause?

Chances are, at one time in your career, you will run across a non-compete clause that one of your employers requires you to sign as a condition of employment. These bits of legalese inform you that you can't work for or divulge proprietary information to a competitor for a certain period of time after you leave your current employer.

Background

A study from late 2016 shows that more and more companies require low-wage workers to sign a non-compete clause. Typically, only people in upper-level positions, managers or those who work in data-sensitive industries sign these types of statements. For example, if you work for a manufacturer that makes a special kind of circuitry, you may have to sign a document promising not to reveal any of the secret manufacturing processes that go into that circuitry. Similarly, if you work for a restaurant that uses secret ingredients for sauces, the business owner might not want you to tell other restaurants in town how you make the yummy mixture.

A non-compete clause protects an employer's interests. These statements are enforceable through litigation in the court system. Thanks to new technology, these legal statements have risen in popularity over the past 10 years.

Study

A 2016 study conducted by the University of Maryland showed that approximately 18 percent of U.S. workers are bound by a non-compete clause. The rate dropped to 15 percent among low-wage workers, or those without a college degree. These agreements can be served to new employees as part of an overall hiring packet, or as a separate, stand-alone document. The study noted that the language of these statements is fairly standard.

The study also examined the number of court cases litigated in a certain year. Around 1,500 court cases dealt with some type of non-compete clause. Some of the cases talked about manicurists, bartenders and even employees at sandwich shops. One high-profile case from the New York attorney general's office forced Jimmy Johns to rescind its legalese that said former employees couldn't work for another sandwich shop within a 3-mile radius.

How Workers Handle These Agreements

Some of non-compete clauses are very restrictive. Industry experts may build 20 years of experience in one firm only to find out they can't work in another company within the same industry and the same state for two years following someone leaving the company. Some workers have to leave their home state just to find another job. For higher-wage employees, that may not be as big of a problem.

Why These Are Valuable to Companies

Manicurists, hair stylists and bartenders may earn lower wages compared to a CEO, vice president or upper-level manager. However, many businesses litigate cases against these employees for one very important reason. Companies stand to lose customers, and therefore sales, revenue and profits, if a rogue employee suddenly quits a position and takes that customer base along with him. It's not exactly fair if a barber shop owner hires and trains one person only to see the employee quit, open his own barber shop next door and take 100 loyal customers.

Non-compete clauses are industry standards for many companies, even if they seem restrictive. If you feel that a a non-compete agreement goes too far, you can always have a lawyer examine the document before you sign it.

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