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From The Archive

66. Signing non-compete agreements for fun and profit.
Companies love to have new hires sign non-compete agreements (NCA's), whereby the employee agrees that if and when he leaves the company, he will not join a competitor or compete with the company for a prescribed period of time. The prospect of signing an NCA worries most people, and it should. An NCA can prevent you from working in your field and it can cost you a lot of money in lost income.

There are many tactics you can use to limit the effects of an NCA, including restricting the time period and the geographic area to which it applies. But, I've got a better approach that startles most companies. Try it when you negotiate your next NCA.

Recognize that signing an NCA costs you money and confers a benefit on the company. For the deal to be fair, the NCA should cost the company money, too, and it should confer a benefit on you.

If a company wants to restrict your ability to earn a living, it should give you something in return: a guaranteed severance package for the term of the NCA, to tide you over while you're out of work and not competing. The severance should be yoked to the terms of the NCA. That is, if the NCA applies whether you quit or are fired, then the severance should be paid in either case. This is a deal that shows good faith when the company hires you.

It's no fun to be left holding the bag when you leave your job. If a company wants to lock you out of the market, it must compensate you for it. What I'm suggesting is a win-win approach to NCA's that forces the employer to put some skin in the game. When it has to pay for the benefit of an NCA, an employer will think carefully before asking you to sign one.

Let's make sure there's fun and profit for everyone in NCA's.

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