Noncompetition agreements are increasingly common in the U.S.
On behalf of Michael Fox
Many people were no doubt surprised to learn in the Huffington Post that some “low-wage delivery drivers” employed by the fast-food company Jimmy John’s were asked to sign noncompete agreements pledging that they would not work at a competing sandwich shop for two years after leaving that job. Noncompetition agreements have long been used to restrict departing employees from going to work for rival companies, but they used to be confined mainly to top executives, engineers with access to trade secrets, and salespeople who might be tempted to take their clients with them to a competing company.
As the Jimmy John’s story suggests, however, noncompetition agreements are becoming increasingly common regardless of occupation. As reported in the New York Times, many employers are now keen to prohibit employees of all types, from camp counselors to event planners to yoga instructors, from jumping ship to work for the competition.
The Society for Human Resource Management observes that the Great Recession appears to have spurred the increased use of noncompetes. According to the SHRM, the economic downturn led companies to believe that they should be more aggressive in protecting their trade secrets from competitors. Unfortunately, many employers tend to overreach in their noncompete agreements and often ask new hires to sign agreements that are overly broad in scope, duration, and geographical coverage.
Courts have generally disfavored noncompete agreements because they interfere with a worker’s ability to freely engage in his or her chosen vocation. But most states, including Illinois, will allow noncompetes to be enforced. As noted in the Illinois Business Law Journal, enforceability depends on whether the noncompete protects a legitimate business interest of the employer and imposes reasonable scope, time, and geographical limitations, and whether the employee has received something in return for agreeing to the noncompete.
You should carefully review any noncompetition agreement before signing. According to the Ladders website, a noncompete agreement that looks harmless enough on its face could end up costing you a lot of money by limiting your options to pursue higher-paid employment opportunities or even open your own business.
If you are presented with a noncompete, the Ladders article advises taking it to an attorney for advice on negotiating a better agreement with the employer. That could help you limit the geographic scope of your agreement or, better yet, limit it to certain named companies and/or products. Negotiations might also let you reduce the time period the noncompete will remain in effect.
Never forgo the opportunity to request additional compensation for agreeing to a noncompete. For example, if you will not be allowed to work for a competitor or solicit customers for a certain time period after leaving your employment, you should ask for at least 12 months of severance pay once your employment ends.
Seek legal advice
If you are requested to sign a noncompete agreement, you should ask an Illinois attorney to review the agreement before you sign. An attorney who is experienced in dealing with noncompete agreements may be able to help you negotiate a much better agreement with your employer.