When will we be free from the cursed NCA (Non-Compete Agreement)? I got sucked into one years ago. When I left the company, I was barred for a year from taking a job with any of the company’s competitors or working in a similar business. It cost me a lot because I was unable to parlay what were then very hot skills into a great salary. I’ve missed out on other good jobs because I said never again will I sign an NCA. I’m reading that the laws are changing but it’s a little here, a little there. Do you think NCAs will ever be banned?

Nick’s Reply

non-compete agreementThere has certainly been a lot in the news recently about “cursed NCAs.” And that’s good, because very, very few jobs can justify an NCA. The freedom to have a job of your choosing and to earn a living is fundamental. But employers from fast-food joints to software companies and doctors’ offices routinely require employees to sign these nefarious agreements. That’s changing.

Thumb down on the non-compete agreement

California, which often leads the nation in new trends of all kinds, recently made NCAs illegal. That’s one sign of what’s coming. Earlier this year the Federal Trade Commission proposed a rule that would effectively kill NCAs nationally. Shortly after, the National Labor Relations Board issued a legal opinion that NCAs violate the National Labor Relations Act in most circumstances. Now the FTC has joined with the Department of Labor to further protect workers from employers trying to curtail the freedom to work.

My favorite story about the death knell of NCAs is about two podcasters who were sued by their old employer for competing with the company. The Washington Post reports that this case could end NCAs as we know them.

So to answer your question, I think soon you’ll stop getting job offers that include NCAs designed to interfere with your freedom to work anywhere you want.

Protect yourself

But we’re not out of the woods yet. Because we don’t know when or if this will actually come to pass, I’ll refer you to some advice about how to avoid the pain of an NCA:

What does your non-compete agreement say?

In the meantime, I’d like to ask everyone:

  • Were you forced to sign an NCA in order to get hired?
  • Have you had to pass up a good job because you didn’t want to sign an NCA?
  • If you have an active NCA, what are the main restrictions and what is the timeline?
  • If you’ve ever gotten out of having to sign an NCA, how did you do it?

Let’s compare notes and try to protect your right to work while the FTC, NLRB and Department of Labor finally bury the NCA.

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  1. I was forced to sign an NCA two months after starting a new job. I told the secretary, “They want me to sign my life away.” She told the HR guy who came down and complained. I told him the same and also that NCAs were not legally enforceable. He got really mad, so I told him get some manners, and to please leave, I was busy.
    End of tale

  2. The law in MA has changed and as Nick predicted I sense NCAs are much less popular. To add to this topic, I also would not sign anything that contains an arbitration agreement/requirement. After working for my last company I will probably have my attorney review any and all things I am requested to sign.

    Welcome back Nick! You were missed.

    • @LST: I think we’re going to be seeing more job offers in attorney review. (And thanks!)

  3. The only truly fair NCAs would be ones that pay you to not compete with them. I wouldn’t complain about an NCA that would pay at least 75% of the salary for not competing. I would even maybe go as low as 50%, but in that case I’d want a lump sum all up front.

    But of course we know employees don’t do fair like this.

    • @J: That’s my favorite solution! There’s a price for everything. It’s no coincidence that executive employment contracts that include NCAs almost always have complementary severance terms (and payouts). I’ve discussed trading value for value elsewhere. You want me out of your hair? Pay me.

  4. Actually, I think that this is a situation where we have a better solution here in Germany: companies can insist on an NCA. But if they want to have it, they have to pay 50% of your last salary for the duration of the NCA. This incentivizes companies to limit it to cases where an NCA is actually in their legitimate interest and not as a catch-all.

  5. I’m on the fence here, there are some very valid reasons for an NCA. Here are some:
    Military contractors/contracts especially those that look to R&D of new tech or weapons, there are other things you must sign also… the treason/ security clauses which are quite painful if you violate them.

    Tech companies that are prototyping new systems
    This includes biotech.

    Any company with a patented procedural system or patented design that is unique to that company.

    Medical billing

    Insurance sales

    There are more. The issue here is where to draw the line. Fast food does not need an NCA, but Boeing or Raytheon does.

    To many companies think this is a blanket to protect themselves from ???.

    The one that gets me is the legal form they try to force you when the want to fire you, have no real reason to, but it says if sign and leave they will pay you a severance. It is illegal, but, they expect you will just go and not fight.

    As far as NCA’s being legislated illegal………I think there should be hard rules made detailing when/where/how one of these can and should be allowed.

    Think about it this way, if you start a company, say bio mechanical dna locks and you are the patent holder to all tech and process for such and you are the only company doing it, then yes, an NCA should be allowed and fully enforceable. If there are 14 other companies doing the same thing, then no, an NCA shouldn’t even be considered.

    • What you’re describing is an NDA, or Non-Disclosure Agreement. It’s *very* different than a Non-Compete Agreement. NDAs are virtually everywhere where you’ll be exposed to proprietary information. I’ve basically signed one at every employer as I do IT for a living. They’re perfectly reasonable in almost all cases and simply limit your ability to discuss specifics regarding technology, trade secrets, customer and client information, and more to other companies.

      • NCA is what ALL of the companies I mentioned use, some is an NDA with an NCA.

        Some use the National Security Act which is both an NDA and an NCA with very large nasty teeth.

        Farmers insurance for example uses a combination NDA,NCA due to the training and rating programs being used.

        Yes I know the difference and have had to sign many of these. It is just like unions, some are good, most are not.

        • National Security Act has nothing to do with either NDA or NCA. It has to do with state-controlled secrets. It would be set up through an NDA but you would face criminal actions for disseminating information as opposed to (almost always) civil.

          And NCA has nothing to do with data being shared, it’s strictly employment based.

  6. I’ve signed a few NCAs in my career.

    And I’ve promptly ignored them.

    Never faced any action for them, and likely never will.

    • Same here! Number one, how are they going to find out? Unless you put it on your linkedin profile, or blab to former co-workers that you are working for the competition. Do companies really take the the time and effort to go after a former employee (not talking C-suite executives)?

  7. The NCA’s that I have had the privilege of being stuck with explicitly stated that if you did not sign the agreement you would not be eligible for the companies severance package. Of course, I signed but ignored the NCA. If you have specific skills it will kill your chances of getting a new position in your industry as the OP pointed out.

  8. I don’t believe that we actually have to sign them. I signed one in 1968 and never again! You were looking for a job, what, “a week ago,” just keep looking. Tell the employer that you will put on the internet their nefarious behavior, including that that NDA / NCA were hidden from you until you wentt to work for them. They need to be called out.

  9. We don’t like NCA’s in Texas. Plently of lawfirms willing to sue for you. “While Texas courts generally disfavor non-compete agreements, they will enforce a non-compete covenant if it is executed for valid consideration, contains reasonable geographic, temporal, and activity restrictions, and protects the employer’s legitimate business interests.” Barry S. Hersh, Certified in Labor and Employment Law by the Texas Board of Legal Specialization.

  10. Years ago when I was doing contract work, the contract houses would often stipulate that 1. I could not take a job with the target company or any other company that they do business with unless they got the placement fee and 2. I would not work for any other contract house that would place me with any of those other companies. I get it that, if they put me somewhere as a contractor and they lose the contract income because the company wants to make me a full-time employee that they should at least get the placement fee. But the scope of the agreement would essentially put me out of work anywhere they operated. So I simple changed it to say that it would apply only if I was converted to full-time for the exact same job in the exact same department for the exact same manager. They never had a problem with my changes.

  11. My quibble is California did not “recently” ban noncompetes, they have been banned since 1872. California recently toughened and expanded the already-existing ban.

    Noncompetes were banned in California since 1872. Tested in courts since then. Exceptions are in the context of an owner selling goodwill, disposing of shares or selling a business, withdrawing from a partnership. From what I read, Newsom signed a bill to expand the noncompete ban to include agreements written outside California.

    The new law will have a retroactive effect as well.

    I hear so much talk about how businesses need noncompetes to protect trade secrets. California puts the lie to that claim. California has many tech companies, Cisco, Apple, etc., defense firms, etc., somehow they manage to survive in a state where noncompetes have been banned for 150 years. Of course, nondisclosure aggrements and nonsolicitation agreements are the key to that.

    The Federal Trade Commission was talking about banning noncompetes earlier this year.

    Breathless editorials in the Wall Street Journal followed, warning how this would ruin American business. I was rather disappointed in them for that.

    But then the issue vanished from media attention. Does anyone know if this is still an issue with the FTC?

  12. And of course, I should point out that there is no Bar Association in the nation that allows noncompetes in lawyer employment contracts.

    Lawyers consider noncompetes in lawyer employment contracts to be the unethical practice of law. Rationale is the usual issues you can imagine. Power imbalance between large law firm and new lawyer straight out of school, with educational debt. Freedom of lawyer to secure employment freely, and freedom of the public to access a lawyer of their choosing.

    The only exception, again as usual, would be an attorney shareholder selling the practice. The value of that law practice would be far less if the retiring or selling lawyer could simply go down the street and re-open a law practice.

    Physicians on the other hand, in most states allow noncompetes if they are “reasonable”. So now that new doctor with massive educational debt faces six-figure expenses to go to court to find out if his noncompete is “reasonable”. The doc just packs up family and moves. Public loses a doctor.

    I know multiple examples where noncompetes were invoked in rural areas where losing even one doctor really hurts the community.

    I have long dreamed of the day when physicians will raise their ethical standards up to the level of lawyers.