What you should know before signing confidentiality and non-compete agreements

Getting a new job is two things: a thrill and a lot of paperwork. The legalese can feel overwhelming, whether you’re looking through your initial at-will employment agreement or trying to decipher your first non-compete agreement.

According to an often-cited Treasury Department study, at least 18% of workers are under a non-compete agreement. The study, while noteworthy, is also dated. It was published in 2016, which can lead us to assume that as the tech industry, in particular, has expanded its job market share, so has the likelihood of even more people working under non-competes or confidentiality agreements. To better understand the difference between the agreements and employees’ rights under both, we spoke to Taylor Tieman, attorney and founder of The Legalmiga Library®.

What are confidentiality and non-compete agreements?

According to Tieman, “Confidentiality agreements aim to prevent the disclosure of confidential or proprietary information to third parties and are used to protect sensitive information such as trade secrets, business ideas, and client communications.” On the other hand, “Non-compete agreements aim to prevent employees from working for a competing company, starting a competing business, or taking clients from their previous employer.”

While you may feel pressured to sign these agreements immediately, Tieman recommends that you pause and consult a lawyer before signing on the dotted lines. “Always, always read and review before you sign—even have an attorney review prior to you signing,” she encourages. “Also, you always have the ability to negotiate, so don’t forget about that. It is up to your employer to decide if they want to negotiate, but they cannot—and should never—force you to sign anything.”

Key employee rights under non-compete and confidentiality agreements

No matter the company or the role, you have rights as a future employee. According to Tieman, under confidentiality agreements, “employees have the right to know what information is confidential and how it can be used, as well as the right to refuse to disclose it if it violates the agreement. If the agreement is overly broad or unreasonable, employees have the right to challenge its validity.”

If you’re interested in negotiating a confidentiality agreement before starting a new job, you can ask things like:

• What needs to be kept confidential?
• How long will the agreement last?
• Can I have my lawyer look at this first?

The same goes for non-compete agreements. Tieman adds, “Non-compete agreements—if validly written—lay out if employees cannot work for competitors, start similar businesses, or take clients from their previous employer. Employees have the right to know what is prohibited and for how long and can refuse to agree if overly restrictive. If the agreement is not supported by valid consideration or imposes an undue burden on the employee’s ability to earn a living, they can challenge its validity.”

Like an at-will agreement, employees can also be protected at a state level from having to abide by a too-restrictive agreement. “If you’ve already signed a confidentiality or non-compete agreement but want to change the terms, you should first review the agreement and see if changes are allowed or if early termination is an option,” explains Tieman. “If not, you can try negotiating with your employer. But always seek legal advice first. Changing an agreement after signing can be hard, so it’s best to review and negotiate before signing.”

How to negotiate confidentiality and non-compete agreements effectively

When presented with confidentiality and non-compete agreements, it’s important to remember that you can negotiate these contracts. Start by reading the terms carefully, making note of any conditions that seem overly restrictive or unclear. If you are uncertain about any clauses, it is always a good idea to seek legal counsel.

When preparing to negotiate, consider the following points:

• Geographical restrictions: Non-compete agreements often include geographical limitations to prevent you from working with competitors in a certain area. If these limitations are overly broad or limit your ability to find work, you may want to negotiate a smaller radius.
• Duration: The time frame during which the non-compete agreement is enforceable should be reasonable. If the agreement restricts you from working in your industry for an extended period, argue for a shorter duration.
• Definition of a competitor: Ensure that the agreement has a clear, specific definition of what constitutes a ‘competitor’. A broad definition could unreasonably limit your career options.

Approach your employer or potential employer professionally and constructively, highlighting your enthusiasm for the job but expressing your concerns about the agreement. Be prepared for back-and-forth discussions. Remember, an agreement is only beneficial if it protects both parties’ interests.

Industry-specific considerations for confidentiality and non-compete agreements

Confidentiality and non-compete agreements aren’t one-size-fits-all; they can vary significantly across industries. In tech, for example, non-compete clauses are common due to the fast-paced nature of the sector and the highly confidential information involved. However, some regions, like California, generally do not enforce non-compete agreements, making them less common in Silicon Valley compared to other tech hubs.

In contrast, industries like real estate or sales might focus more on non-solicitation agreements to prevent employees from taking clients to a new company. Medical and legal professions often have stringent non-compete clauses to prevent practices from being set up within close proximity.

Furthermore, changes in legislation can impact these agreements. For example, a few states have passed laws limiting the use of non-compete clauses for low-wage workers, and there is an increasing call for similar legislation at the federal level.

Key takeaways

Navigating the world of job contracts can often feel like trying to decipher a foreign language. Yet, understanding the terms of your confidentiality and non-compete agreements is a crucial step before stepping into any new role. Here’s what we’ve learned from this exploration:

• Increasing prevalence: With the expansion of the tech sector and other sectors, more people are likely to encounter non-compete and confidentiality agreements. A 2016 study indicated that 18% of workers were under a non-compete agreement—a number that’s likely grown since.
• Understanding the agreements: Confidentiality agreements protect sensitive information, such as trade secrets, business ideas, and client communications. In contrast, non-compete agreements prevent employees from working for a competitor, starting a similar business, or taking clients from a previous employer.
• Right to review and negotiate: You have the right to thoroughly review any agreement before signing, and you should consider seeking legal advice. Remember, you’re also entitled to negotiate the terms of these agreements. Employers should never force you to sign anything.
• Knowing your rights: Under confidentiality agreements, you have the right to understand what information is deemed confidential, how it’s to be used, and you can refuse if the agreement violates these provisions. Non-compete agreements should clearly state the restrictions, duration, and employees can challenge their validity if overly restrictive.
• State-level protection: Employees can often find protection from overly restrictive agreements at the state level. If you’re seeking to change terms after signing, legal advice should be your first step. Changes are often possible, but it’s more challenging after the fact.

Equipping yourself with more information about the agreements or contracts you’re signing is never bad. You want to feel protected and sure when kickstarting the next chapter in your career journey. Learning more about nondisclosure agreements and confidentiality agreements will help you safeguard your professional future while fostering a healthy relationship with your employer.

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