Don't sign away your future: Noncompetes done right

Should you sign a noncompete agreement? Experts weigh your choices.

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Susan Joffe, an associate professor at Hofstra University School of Law in Hempstead, N.Y., says some states, such as Oregon, require employers to give new hires the contracts before starting. Some, including Massachusetts and Oregon, forbid employers from requiring existing employees to sign them without additional "consideration," such as a raise or a promotion.

If there's a legal dispute, the courts in some states tend to be more pro-business and are thus more likely to enforce noncompetes as they're written, while courts in other states want to promote the mobility of the workforce and might rewrite the terms or decline to enforce them, Joffe says.

Look at your employer's choice of venue

Even if you know your own state's law, you might have more homework ahead, because your employer can pick, to some degree, which state's law will govern if there's a dispute. Be aware of this as you sign the contract. If the company opts for its choice of venue, it will be written into the actual agreement -- so read it before you sign. Schleier cites the case of an Arizona-based worker who signed a noncompete with a Delaware-based company that stipulated that Florida law would govern in case of a dispute.

"Arizona is one state where you'd probably be stuck with that [arrangement], but if you had that in say, California, you're more likely to get a court that will throw out the Florida law," Schleier says.

Georgia, South Carolina and Virginia are other states where the courts might uphold that type of contract language, according to Joffe. "These states believe in the sanctity of a contract, and if the parties agreed to the terms, they won't modify it," she says. So you really do need to read the fine print before you sign a noncompete, or you might wind up having a dispute settled by judge in a worker-unfriendly state.

Assert your rights

That doesn't mean, however, your employer can dictate whatever it wants in all situations, lawyers say.

Joseph A. Ciucci, a partner at Duane Morris LLP, recently advised an acquaintance in Michigan who designed software for the auto industry at an international company. The company was getting out of that software line and recently laid off its Michigan workforce.

Ciucci says the company told his client that to get his severance check, he had to sign a noncompete prohibiting him from working on that type of software development. The company wanted to apply North Carolina law if there were disputes.

"His question to me was, 'Is this enforceable?'" Ciucci says. "My answer: I don't think it is. They're having a layoff. They're getting out of that line of business, and they say North Carolina law controls. Good luck getting a Michigan court to apply North Carolina law if that company isn't even in the business anymore." As of this writing, his client was still out of work and there was no potential new job on the horizon.

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