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Think Twice Before Signing An Employee Noncompete Covenant

The fact that more and more companies seem to require employees to sign noncompetition agreements was recently underscored when a Jimmy John’s employment agreement came to light. As reported in Entrepreneur magazine, the agreement required employees to refrain from working for a competing sandwich making business located within three miles of any Jimmy John’s restaurant for two years after leaving Jimmy John’s. It was noted in the Entrepreneur article that Jimmy John’s noncompetition covenant made little sense since it is difficult to understand how sandwich makers or deliverymen could gain information which would jeopardize their employer’s “corporate structure.”

An article published on The Ladders website notes that a noncompete agreement may appear “harmless enough” but, if you are not careful, such an agreement could prove costly to you in the long run. This is because noncompetition agreements threaten to undermine your future financial earnings by limiting your ability to go to work for a competitor at a higher salary or to open your own competing business. While noncompete agreements provide a measure of protection to an employer, they “don’t add value to you.”

Although top level executives can sometimes negotiate a high salary and a generous severance package to offset the possible negative consequences of a noncompete should they be terminated, this would not be true for lower-wage employees. According to an article recently published on MSN, noncompetes can result in trapping low-wage workers in their current jobs due to fear that they might be sued if they seek a higher paying job with a competitor.

As in most other states, restrictive employment covenants are enforceable in Connecticut assuming they are reasonable. The Connecticut courts, in evaluating reasonableness, look to: (1) the length of time the restriction continues; (2) the geographical scope; (3) fairness of the protection accorded to the employer; (4) the extent of the restraint on an employee’s opportunity to pursue his or her occupation; and (5) the extent of interference with the public’s interests.

Careful consideration

The website Monster.com advises that one must give careful consideration as to whether to sign a noncompete agreement. In a sense, whether you should sign a noncompete depends on how badly you want-or need-a particular job. If the noncompete is reasonable, you will be bound by its terms if you leave the company. One should never assume that an employer will release you from the noncompete covenant should you find a higher paying job with a business competitor.

When presented with a noncompete, you should assume that it was written by a competent attorney and is reasonable under Connecticut law. Accordingly, Monster advises that you should let your own attorney review the noncompete agreement and evaluate it before you sign it.

It is always possible that negotiating with an employer over the wording of a noncompete might be successful in making its terms less onerous. Conceivably, you might be able to limit the covenant as to its duration and geographical scope. At the very least, you should try to negotiate additional compensation and, if possible, a very generous severance agreement in exchange for signing the covenant.

Seeking legal advice

If you are asked to sign a noncompete agreement, you should consult with a Connecticut attorney who handles employment law matters. The attorney can advise you on the legal ramifications of what you will be signing and, if you desire, help you try to negotiate a revision of the agreement which better protects your interests.