Despite the job market’s uncertainties and unpredictability, most experts say noncompetition and nondisclosure agreements are becoming increasingly common. Why? As the economy becomes more technology-oriented, employers are more concerned about preventing the technical and intellectual property they’ve developed from being copied by others.
Rick Levi, a partner in the Midwestern law firm of Earnest, Foster, Eder and Levi, says 75 percent of the businesses he represents in acquisitions, especially those that have local or regional market penetration, expect sellers and employees to sign noncompete agreements. “That’s increasingly an important part of the negotiation,” he says. “Nobody wants a former owner or employee opening the same type of business across the street.”
The Difference Between the Two Agreements
A noncompetition agreement means you agree not to directly compete with your former employer for a reasonable length of time and within reasonable geographic limits. In other words, you’d violate a noncompete agreement if you took a job at the only widget manufacturer in your state, learned all you could while there, quit and then tried to start your own widget company across the street.
A nondisclosure agreement means you agree not to disclose things the company may consider to be proprietary or confidential, such as information about new products, technology, business plans, financial information, models, sketches and so forth. It doesn’t mean you can’t work for a competitor; it simply means you can’t use proprietary or confidential information you learned or obtained from the former employer with a new employer.
To Sign or Not to Sign
Job seekers are more likely than those currently employed to be asked to sign noncompete or nondisclosure agreements. Whether you should sign the agreement depends on how badly you want or need the job. Once it’s signed, you’re bound by its terms if you leave the company for any reason.