When you accept a new job, it’s typical to have to fill out a bunch of paperwork. That might include tax forms and a host of different contracts designed to protect your employer.
One such contract is a noncompete. Whether you sign one as its own agreement or as a clause within a larger employment contract, a noncompete effectively prohibits you from working for your employer’s competitors for a period of time after separating from that company. You might, for example, be asked to sign a noncompete that bars you from working for a competitor for six or nine months after you leave your job — whether voluntarily or due to a layoff.
But noncompetes can be very limiting. Let’s say you have specialized skills and work in a fairly niche industry. In that case, there’s a good chance that any other company that seeks to hire you will be considered a competitor of your employer. That could leave you in the very tough situation of not being able to work for several months — and having to utterly deplete your savings as a result.
But a new proposal could make noncompete clauses and agreements a thing of the past. And if it goes through, it could be a very positive development for workers.
When you’re held back by a contract
Right now, noncompetes aren’t illegal, though in some cases, they can be tough to enforce. But the Federal Trade Commission recently proposed a new rule calling for noncompetes to be banned. If it goes through, it could open the door to more employment opportunities for many workers who end up separating from their employers.
Not only does this new proposal seek to ban noncompetes, but it also seeks to cancel existing noncompetes that have already been signed. All told, almost every industry could be impacted by this change.
What makes noncompetes so frustrating for workers is that their language is often blurry and open to interpretation. Some noncompetes, for example, don’t clearly define what a competitor is. This makes it difficult to know what job opportunities workers are legally allowed to pursue once they separate from their employers.
Worse yet, workers aren’t released from their noncompete obligations in situations where they’re laid off through no fault of their own. Now, imagine you’re a dedicated worker who just lost their job due to your company’s need to downsize. You didn’t do anything wrong, and it wasn’t your choice to leave your job. Yet now you’re stuck with limited choices on finding a new role thanks to your noncompete. If this proposal goes through, all of that could change.
An important development
The National Employment Law Project estimates that more than 30 million workers — at least 18% of the total U.S. labor force — are forced to sign a noncompete as a condition of employment. Barring noncompetes could help ensure that millions of workers aren’t subjected to undue hardships in finding jobs due to these one-sided clauses and agreements.
