In our first post we talked about NDA’s, what are they and do you sign them? Today we’re going to look at non-compete agreements.
What is a non-compete?
Again let’s start by seeing exactly what Wikipedia says about them.
A non-compete clause (often NCC), or covenant not to compete (CNC), is a term used in contract law under which one party (usually an employee) agrees not to enter into or start a similar profession or trade in competition against another party (usually the employer).
A non-compete agreement is a contract that says you agree not to compete with the business. I’ve signed one before when I was on a long term contract. It basically prevented me from working with any of the clients I met while working on the contract for one year unless I had written permission from the company.
My wife recently signed a non-compete to work with a local personal training business. She agrees not to take on clients she meets while running programs for a year and that she won’t be starting local ‘bootcamp’ style classes while working for the other business.
Those non-competes are totally reasonable. I’ve been asked to sign one in the past that said I wasn’t allowed to work in eCommerce at all again. The client wasn’t willing to change the terms and I never signed it. They also didn’t like that my cost to sign it was $150k since I’d be saying no to a bunch of work and it would have a long term affect on my business.
If I work with a contractor I get them to sign a non-compete. It basically says that they can’t work my client for 1 year without my written permission. Pretty much the same deal as I’ve signed. I have no desire to stop you from making a living, I just don’t want you trying to steal clients.
Should you sign a non-compete?
I really don’t have a problem with non-competes, at least not usually. Like I said above if it’s about working with clients for a year I sign it. If they want to limit my business (like saying I can’t work in a field for a set amount of time) then I typically don’t sign.
Now if Coca-cola was to come to me and say that I couldn’t work with Pepsi I’d very much consider it. The cheque would be big enough to offset the potential lost work. They’d be paying for the right to limit my business.
One final note, if you can’t understand the non-compete make sure you have it read by a lawyer and explained to you. You should never sign something you don’t understand.
Next time we’ll take a look at contracts.
Please remember that I am not a lawyer, nor am I familiar with contract laws in all parts of the world, this is what I have learned through my experiences running my business. If you are seeking legal advice please do so through a lawyer in your area.