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What Employees Need to Know About Non-Competition Clauses

Non-compete clauses have grown increasingly popular in recent years, as companies seek to keep employees from leaving to work for competitors. Years ago, only senior executives were asked to sign non-competes, but now many companies ask all their workers to sign one.

A non-compete may be a section in a larger contract, or may be a separate contract of its own. Usually, the non-compete will specify a length of time during which you cannot work for competitors.

In many states, companies may legally require workers to sign a non-compete when they're hired. But know that your non-compete clause must be legally enforceable for the company to hold you to its terms -- and not all non-compete clauses will hold up if challenged in court.

In general, for a non-compete clause to be legal, companies that ask for a non-compete clause must give you something in return for surrendering your right to work for competing companies in the same field. Often, companies grant a signing bonus or stock options upon hiring when they require a non-compete clause, as compensation in exchange for the non-compete clause. If nothing is offered by way of compensation, a court could decide the non-compete clause was unreasonable and rule it invalid.

If you will be privy to inside information about the company -- their strategy, how their proprietary software works, what new products or services they are developing, their customer lists -- you may well be asked to sign a non-compete agreement.

You may also have signed a non-compete years ago, and now be wondering if you can accept a new job at a competing company. Often, working for a competitor will be a worker's easiest job transition, as they have directly relevant skills and experience. So it's no small matter to sign away that right in a non-compete clause.

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