Employers have an edge today when they’re hiring. More people are out of work. So employers up the ante and bargain harder. More companies are insisting that people sign non-compete agreements (NCAs) before they’ll hire them. An NCA protects a company from you after you leave because it restricts where you can work, what kind of work you can do, and who you can work for. It protects the company from competition.
Desperate for a job — or just because they’re in a hurry to close a deal –, people sign NCAs without realizing the consequences. An NCA could shatter your career plans by literally restricting you from the jobs you want.
Computerworld‘s article last week, Don’t sign away your future, is one of the best career pieces the mag has done. (The date on the article on the website is April 23, 2009, but it appears in the May 25 edition of the magazine.) It discusses six tips to protect your career. Don’t miss it.
What the article doesn’t discuss is how goofy employers are — and what they get away with. For example, usually only top-level executives get employment contracts that define terms and obligations between the employee and the employer. These agreements protect both parties. Companies won’t give these agreements to lower level workers.
But employers routinely demand that employees at almost any level sign one-sided, restrictive covenants that benefit only the employer. NCA’s are an example. And herein lies the negotiating tactic you should use when an employer asks you to sign a restrictive NCA before giving you a job offer. Your objective is to get compensated for signing an NCA, just like a top-level executive — or to avoid the NCA altogether. Try this:
- Ask whether the company will negotiate a comprehensive, written employment contract with you. Unless you’re an exec, they will say no.
- Respond that you don’t understand why, if they won’t sign a mutual pact, they are asking you to sign an agreement that protects only the company.
- After they offer a mindless “this is our policy” explanation, tell them you’d be glad to consider an NCA if they will reciprocate by agreeing to terms that will compensate you for what you’d be giving up if you sign the NCA.
“If I can’t work in this industry or in this region or on certain products, that will cost me money. I’d be glad to consider giving you such a covenant, but I need to know what you will give me in return. I’m sure we could negotiate reasonable terms.”
The only legitimate answer to a request to sign an NCA is an employment contract that pays you severance (or something similar) during the period you agree not to compete with the company. In other words, the company should agree to keep you on the payroll while it benefits from avoiding competition with you. This is common with top execs. Such a deal is often termed “severance” or a “consulting contract,” during which time the exec basically just collects a check until he’s free to get his next job.
If the company won’t agree to a mutually-beneficial covenant, then smile and tell them you just don’t see why you should risk your future income (and career) by signing a one-sided contract. Do this only if you have the brass. It could cost you the job. On the other hand, signing the NCA could cost you your next job.
My buddy and attorney Bernie Dietz suggests that regarding Employment Contracts: Everyone needs promise protection, not just top execs. I agree.
If you’re a manager and you’re hiring people, and you need them to sign an NCA, consider that you’re asking for something that has significant financial value. Don’t expect something for nothing. Pay for what you’re getting.
If you’re a job applicant, and you’re going to give up future income because an employer wants to be protected from you, then negotiate compensation for the restrictions you’ll accept. Otherwise, it’s probably not a good deal — no matter how desperate you are. If the company agrees to do an employment contract, invest a few bucks in a good lawyer to make sure the thing is really mutually beneficial.