Saturday, January 29, 2011

Should You Negotiate Your Non-Compete? Yes, and Here's 5 Reasons Why.

It's no secret that most employees feel as if they have no choice but to sign a non-compete presented to them by their employer. For some, it is handed to them the first day on the job, while for others it is tendered in connection with a new compensation plan, a promotion or increased access to clients or confidential information of the company.

Trying to negotiate a non-compete with an employer is no easy task, and the vast majority of employees don't even try. However, employees should always make an effort to review it carefully, understand the terms and try to negotiate a more favorable agreement. Here are 5 reasons why this is so:

  1. By and large, an employer will respect you if you scrutinize what you're signing. Questioning the terms of an agreement, even its fundamental fairness, shows diligence and business acumen. This is not much different than negotiating a higher salary or a sign-on bonus. Most employers don't expect you to sign your life away or abandon your self-interest. An employer may even feel that an employee who blindly signs a personal contract won't be the most savvy person to deal with tough customers or vendors.
  2. Failed negotiations could help you in a subsequent dispute. For instance, if you end up in a non-compete dispute, and the employer previously failed to make changes to the terms of a non-compete that you requested, it could help demonstrate that the contract is adhesive and unreasonable. It will also help negate the impact of any representations you disagree with that are contained in the agreement.
  3. Negotiating the agreement will help you understand the employer better. There is a fairly good chance that if the employer is accommodating and willing to modify terms that may not apply to you, or willing to narrow up the covenant, that employer is someone you want to work with for the long term. Keep in mind that in small or closely-held organizations, your opportunities for negotiation are better. On a related point, you also may learn something about whether the employer has had issues in the past with other employees and what its intent is regarding enforcement.
  4. Negotiations should allow you to understand the non-compete better. Many sophisticated employees have never seen a non-compete before and are unclear as to what it actually restricts. By consulting with your counsel and your employer, you will have a much clearer understanding of what it actually prohibits, and this may clear up some misconceptions you might have. This understanding will help you evaluate a potentially competitive opportunity that may arise in the future.
  5. You might actually get something out of your negotiations. If you don't negotiate, you may be accepting a covenant your employer is perfectly willing to modify for you. There is no sense being bound to the most restrictive covenant if you don't need to be.

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