In integrative negotiation, each side seeks to create and claim value with an eye towards the future of the negotiating relationship. One way of securing this relationship is a noncompete agreement: Employers sometimes ask potential employees to agree not to work for their competitors in the future but don’t assume such requests are nonnegotiable.
Back in the fall of 2010, journalist Christopher Flores was looking for a job in Chicago. As he recounts in an article in the Chicago Reader, he came across listings for staff writer positions for local online coupon company Groupon. Intrigued by the witty style in which Groupon’s daily deals are described, Flores sent in a writing sample and was invited to attend a seminar called “Groupon Academy,” where he and about 30 other prospective employees would be educated about the company and given a chance to write a freelance Groupon ad.
To attend the seminar, however, Flores was told he would need to sign a freelancer contract that included a clause barring him from working for any of Groupon’s competitors “in any capacity” for the next two years. Flores was unwilling to swear off future job prospects for what might amount to only one day of work. Without a signed contract, a Groupon recruiter told him that he could not attend the seminar. As of January 2011, Groupon had stopped asking job applicants to sign a noncompete agreement, though a company spokesperson told Flores that the decision could be reversed.
Proprietary Information and Exclusive Relationships in Negotiated Agreements
To protect their proprietary information, companies often ask prospective employees to sign noncompete agreements that bar them from working for competitors for a certain amount of time and sometimes in a specific geographical region. Typically, however, such requests are made only after a job offer has been extended.
Flores’s experience with Groupon underscores the fact that noncompete agreements of all types abound in the job marketplace—and, in many cases, you should negotiate before signing on the dotted line.
Negotiation in Business: The Basics of Noncompete Agreements
Employers draft noncompete agreements to limit turnover and protect client lists and other proprietary information. Groupon may have been interested in guarding the distinctive, quirky voice of its ads; arguably, the company could spend time and money training writers who then take their new skills to competitors. And a Groupon recruiting manager told Flores that its writers have access to “sensitive financial and sales records” that need to be guarded.
In most cases, companies require new hires to sign noncompete agreements as part of an employment contract. Sometimes, however, employers include noncompete clauses in separation agreements with employees. Two examples from the world of television made headlines. As part of his $32.5 million severance package with NBC, talk show host Conan O’Brien agreed in early 2010 not to launch a new television show for nine months. A year later, upon his departure from NBC Universal, MSNBC personality Keith Olbermann negotiated a $7 million separation agreement that prohibited him from working on other major TV networks for several months. Soon after, Olbermann signed on to anchor a show on Current TV, a low-profile network not listed in his noncompete agreement.
In both deals, the TV stars agreed not to bad-mouth their former employers and were prohibited from giving interviews for a set period of time. Olbermann also agreed not to discuss his deal publicly, adding intrigue to his on-air announcement of his departure until the details were leaked to the media.
Salary Negotiations: Is a Noncompete Agreement Really Necessary?
Employers have legitimate reasons for asking employees to sign noncompete agreements. But as a prospective employee, you also have compelling motives to negotiate an employment contract that won’t put you in a straitjacket if you are laid off or find the job is not a good fit.
If an employer asks you to sign a noncompete agreement, consult with an employment attorney in your area. The amount you’ll spend on legal fees pales in comparison to what you’d later spend to contest a noncompete agreement in court or defend yourself against a lawsuit alleging a breach of a noncompete, writes Tara Weiss in an article for Forbes.com.
Your attorney can help to determine whether your employer’s noncompete agreement is lawful and fair. An employer that asks you to sign an agreement before even offering you a full-time job, as Groupon did, may not be in compliance with the law, for instance. Moreover, noncompete agreements are restricted or prohibited entirely in a few U.S. states, including California. If there is a problem with the agreement, bring it to your potential employer’s attention.
How can you avoid signing a noncompete agreement altogether? Explain your concerns, such as the fear of being unemployable in your field in the event of unforeseen layoffs, to the hiring manager. Ask for an explanation of the company’s interests in having you sign a noncompete agreement. If the company is concerned about protecting trade secrets, it might agree to replace a noncompete clause with a beefed-up nondisclosure clause that would prevent you from taking research with you. If the noncompete is meant to keep you from poaching clients, a non-solicitation agreement that prevents you from pursuing key clients might do the trick, employment attorney Mark J. Girouard told Forbes.com.
What if the company won’t explain its interests or refuses to budge on the issue? This may be a sign that you should look for a more flexible employer.
Non-Compete Agreements: What’s Negotiable?
Other key terms of a nondisclosure agreement may be open to negotiation, especially if the employer uses the same boilerplate language in every contract. Groupon’s noncompete agreement prohibited job applicants from working for its “competitors,” a term the company didn’t define, Flores writes in the Chicago Reader.
It was unclear whether Groupon narrowly viewed its competitors to be other online coupon companies or if it also included news markets that run coupon promotions on its list of forbidden employers.
If a company uses vague contract language, insist on greater clarity. Then, if necessary, negotiate to expand your future employment options.
When a company is concerned about losing you to local competition, the agreement ideally should stipulate the geographic region in which you are barred from working for competitors.
As an example, hair salons sometimes ask stylists to sign noncompete negotiated agreements that would prevent them from working for other salons in the same town for a certain period of time.
When geography is an issue, try to negotiate as small a region as possible.
The length of time stipulated by a noncompete agreement is another critical variable. Would you be barred from working for a competitor for six months after separating from an employer? For one year? Two years? You should be able to negotiate a limit on the amount of time you’d have to wait to work for desirable employers, especially if the company has set a timeline arbitrarily.
Finally, you might follow Olbermann and O’Brien’s lead by using a noncompete agreement as leverage on another issue (such as a higher salary or, in the case of a separation agreement, a bigger severance payment). If you would be walking away with a comfortable financial cushion, the prospect of being off the market for a set amount of time might become a blessing rather than a curse.
Non-Compete Agreements: Balancing Both Sides Interests in the Negotiated Agreement
Employers often have sound reasons for requiring new employees to commit to noncompete agreements. Before you sign on the dotted line, make sure you understand this rationale and have negotiated a contract that balances both sides’ interests.
Have you ever had to negotiate a non-compete agreement? Share your story in the comments.
Originally published in 2014.