Getting a job offer is always exciting, and even more so if it’s a job you really, really wanted. In fact, your exuberance from getting the job might even cloud your judgment when it comes to signing all the paperwork. Did you honestly read through every single line of the documents you’re signing? And in particular, did you see something called a “noncompete clause” or a “nondisclosure agreement?”
Finish reading this before you sign. Let’s just say this one is worth understanding.
Before you get too giddy and start signing at every “x,” consider the following four questions. While this is obviously not a substitute for real legal advice, it should help you figure out what’s normal for a noncompete, what you can do about it, and whether you should, in fact, be seeking real legal advice.
1. What Are You Actually Signing?
A nondisclosure agreement (NDA) is a contract that prevents you from sharing intellectual property, client information, or really anything related to the work you do for a particular company. This is the document that makes it so imperative for you to leave the company empty handed when you resign—no client lists, no thumb drive with proprietary information, nothing.
A noncompete clause (NCC), on the other hand, is a contract that legally prevents you from competing with your employer should you ever decide to leave the company. Essentially, for a set period of time or in a particularly geographic area, you are agreeing not to work at a competing company or, arguably, in the industry at all. Companies, as a way to protect their competitive edge, always try to make their NCC as broad as possible, but if they want any hope of being able to enforce it, they usually keep it to one year and within the geographic limitations of their client base.
2. Can an NCC or NDA Be Enforced?
For either document, in most cases, the answer is yes. Some states, like California or Montana, have decided that NCCs are unenforceable, but most do not have such a stance. So, the question of whether or not the NCC or NDA can be enforced really depends on what choice of law applies. For example, if you have an offer from Google (headquartered in California), but spend most or all of your working hours in the NYC office, it’s likely that a court would decide to go by New York law.
Aside from choice of law, the circumstances of the offer can also be an indicator of whether or not it can be enforced. Anything that a judge would deem unreasonable makes the NCC or NDA more likely to be unenforceable. For example, if a company doesn’t take any basic steps to mark information as confidential, this weakens its case if it tries to take you to court over an NDA. Or, if you are promoted multiple times and eventually end up in a role that isn’t very similar to your first role, your NCC will be trickier to enforce due to a material change in your employment relationship—the company technically needs to have you sign a new NCC each time you’re promoted.
3. Is It Possible to Negotiate the Terms of an NCC or NDA?
It may take some effort, time, and coordination, but it’s definitely worth trying to negotiate an NCC or NDA. Many companies will give all new employees a default NCC or NDA, which actually makes it easier for you to negotiate. For example, if you’re an engineer, it may not make the most sense for your NDA to include a stipulation about client lists. Overall, though, it will be tricky.
Some things you may want to try negotiating in general include limiting the geographic scope, shortening the time span, or getting compensated during the time you’re not permitted to work. As I mentioned before, an NCC is usually good for one year, especially when you consider how quickly technology evolves now. For more specific advice, you can always seek the counsel of a lawyer. It’ll likely cost you $250 to $1,000 an hour and take one or two hours, but considering the costs of being taken to court for breaking an NCC or NDA, it’s well worth it.
4. What Happens if You Break an NCC or NDA?
Breaking an NCC or NDA is a serious matter. Companies won’t just go after you, they’ll go after your new company—and it won’t be cheap. The whole process will happen quickly (companies want to protect their intellectual property), last about a month, and cost all parties (yes, including you) upward of $100K each.
Many companies hiring lateral talent will now ask if potential future employees have NCCs and request to see them. Likewise, some people are now negotiating for their new employers to cover their legal fees if their previous employer decides to take them to court or to compensate them while they wait out the clock on their NCC.
NCCs and NDAs are not to be taken lightly. Employers don’t have to disclose NDAs or NCCs with job offers, so you could potentially show up on day one and have one presented to you. To make sure you don’t get surprised, make sure to ask when you’re still reviewing the job offer. While NCCs and NDAs are becoming increasingly common, that doesn’t mean you can just sign them hastily.