Three Reasons You Should Never Sign a Non-Compete Agreement

I have never signed a non-compete agreement.  I hesitate to say that I never will because you never know what life will bring.  Let’s just say it will take an extraordinary situation for me to sign a non-compete agreement.  When I refer to a non-compete, I am referring to something that essentially says when you leave this job, you cannot work for a competitor for one year (or whatever time frame) or you can’t open your own business that competes with us.  I am not referring to something that says you cannot work for a competitor at the same time as you are working for us.  I think it’s fair, for example, for Coke to say you can’t work for us and Pepsi at the same time.  I’m also not referring a confidentiality agreement.  I think it’s fair for Coke to say that if, in the course of your job, you learn the recipe for Coke, you can’t tell it to Pepsi if you go work for them.  What I’m referring to is something where Coke says if you leave us you have to wait at least one year before you work for Pepsi or any other beverage company.

Why am I against non-compete agreements? There are three simple reasons.

1. It starts off the relationship on unequal footing.

If I make you sign a non-compete agreement when you work for me, it means I’m approaching the relationship thinking that I bring more to the table than you do.  Is that a good way to start any relationship?  What if the employee* asked the employer to sign something that said if you fire the employee, you cannot fill that position for one year? Would the employer think that is fair? Of course not. Then why does the employer think the reverse is fair — because the employer that asks you to sign a non-compete believe that they bring more to the table than you do.

In real estate, most brokers are seeking sales agents with an entrepreneurial attitude.  If I, as the broker, make it clear that I bring more to the table than you do, is that going to attract entrepreneur types?  Or is that going to attract people who are accustomed to an hourly job where the employee doesn’t need to make any decisions?

2. It holds people back from growth.

I am, first and foremost, a real estate instructor.  When the school I was teaching for closed its doors, I talked to another local school and they said they make their instructors sign non-competes.  That was all I needed to know to decide this would not work for me.  This person went on to explain that it is because they don’t want their teachers to become their competitors.  I don’t understand this mentality – particularly from a teacher! 

As a teacher, nothing would make me prouder than to have one of my students go on to open her own business – even if it is competition for me.  Isn’t that the ultimate goal of an instructor or trainer – to have your students succeed?  Presumably, this school owner wants to promote growth … but not too much.  If it’s too much, then the students are no longer students, but now they become threats.  Is that where you want to work?  Is that even where you want to go to school? For me, the answer to that is a resounding no.

3. It allows companies to get lazy in terms of workplace culture.

I used to work for a real estate company that was adamantly opposed to non-compete agreements.  Sometimes people in leadership positions would suggest it for various reasons and say, “We don’t have to enforce it.  We can just use it to scare people.”  The top executives never caved.  Their philosophy was that we need to make this place such a good place to work that people won’t want to go work for our competitor.  It worked.  It was a good place to work.  The company I currently work for does not require its agents to sign non-competes.  It, too, is a great work culture.

So if someone asks you to sign a non-compete, consider that they may feel like they have to use legal threats to keep you there because you wouldn’t want to stay there if you had a choice.

By the way, the person that said I would have to sign a non-compete to work for him suggested that if I didn’t like his rules, I could always open my own school.  His options were to hire me or compete with me.  He chose compete with me.  By insisting on having his teachers sign non-compete agreements, he created another competitor.

*In this article, I am using the phrase “employee” and “employer” to mean the person who works and the person who hires them, respectively.  I’m not using those terms in the IRS sense of the word.  In other words, my discussion applies to independent contractors, salaried employees who get benefits, basically anyone who get paid by another person of the same company.