Does Your Work Contract Contain a Noncompete Clause?

Unbeknownst to many workers, when they enter into an agreement with their new employer and sign the paperwork, they may have agreed to a noncompete clause. What this tells the employee is that, if the employee decides to leave, they cannot immediately work for a competitor. These non-competes may also contain restrictions as to where you may work and how long before you can work for a competing company.

The Center for American Progress (CAP) cited a survey released by the University of Michigan Law School last year which showed that 18% of all U.S. workers are currently under a noncompete clause and 38% of all workers have signed a noncompete clause at least once in their lifetime. In 2017, Alan Krueger of the University of Princeton and Eric Posner of the University of Chicago Law School conducted a similar survey; according to the results, 25% had previously signed a noncompete clause and 15.5% are currently bound by one.

According to CAP, many of these non-competes target lower-wage workers who the employers know will be stuck in a position with no chance for advancement. While these employees know they are stuck in a dead-end job, they know they cannot leave. The think tank went on to state that, once they sign that piece of paper, the employee loses any leverage in negotiating for a promotion or a raise.

The CAP cited various studies showing workers employed in states that enforce noncompete contracts may be penalized, while those who work in states with looser enforcement may not be penalized. A 25-year-old worker may be penalized 5% of their wages as a result of a state’s strict noncompete requirements. For a 50-year-old worker, the penalty is twice the amount, at 10% of their wages.

In New York State, non-competes are allowed only on the following conditions: “it (1) is necessary to protect the employer’s legitimate interests, (2) does not impose an undue hardship on the employee, (3) does not harm the public, and (4) is reasonable in time period and geographic scope.” However, if an employee leaves their job to work for a competing company, the state can allow the employer to file a lawsuit asking the court to enforce the clause and require the worker to agree to the terms of the noncompete clause. In some cases, the employer might send a letter to the employee or the new employer threatening to sue as a means to discourage the worker from accepting the new job.

It is important that you know your rights as an employee. Before you sign a noncompete clause as part of your employment contract, contact an experienced New York employment law attorney who can ensure that your rights are protected. Call Steven Mitchell Sack, The Employees Lawyer™ at (917) 371-8000 or email him atsms@StevenSack.com.

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