Non-Compete Clauses: What Employees Need to Know

Many employment contracts include a non-compete clause—where you agree not to work for a competitor or in a similar role for a period after you leave. These clauses can limit where you work next, and they're not always enforceable. Knowing what they usually say, when they're limited by law, and what to look for before you sign can help you make informed decisions. Here's what employees need to know about non-compete clauses.

What non-compete clauses usually say

A non-compete clause typically restricts you from: (1) working for a competitor, (2) in a similar role or in the same industry, (3) for a certain period (e.g. 6 months, 1 year, 2 years), and (4) sometimes in a certain geography (e.g. same city, same country, worldwide). The contract may define "competitor" broadly (e.g. any company that competes with us in any product or market) or narrowly (e.g. companies that directly compete in the same product line). The broader the definition, the more restrictive the clause—and the harder it may be to find your next job without moving or changing career direction.

Why it matters

If the non-compete is too broad—any "competitive" role, any geography, or a very long period—it can block you from your next job. You might want to join a startup in the same space, or move to a larger company that has a competing product; the clause may say you can't. In some places non-competes are limited or unenforceable: for example, in California (with limited exceptions) they're generally not enforceable for employees; in the EU and some other jurisdictions they're subject to strict conditions (e.g. duration, scope, compensation). The contract may still contain the clause—and the company may still ask you to sign it—but it might not hold up in court. Even if it's unenforceable, it can create uncertainty or discourage you from leaving. So understanding what you're signing and what the law says in your jurisdiction is important.

What to look for before you sign

• Duration. How long does the restriction last? One year is common; two years or more is long. Shorter is better for you.
• Geographic scope. Is it worldwide, nationwide, or limited to a region? Narrower is better.
• Definition of "competitor." Is it limited to companies that directly compete in the same product or market? Or is it "any company that could compete"? The narrower, the better.
• What you can't do. Are you barred from any role at a competitor, or only from certain roles (e.g. sales, product, R&D)? Broader restrictions are harder to live with.
• Consideration. In some jurisdictions a non-compete must be supported by consideration (e.g. job offer, promotion, or separate payment). If you're asked to sign a non-compete after you've already started, check whether you're getting something in return.

What to ask for

If you're concerned, you can ask for: (1) a shorter duration (e.g. 6 months instead of 2 years), (2) a narrower geographic scope (e.g. same city instead of nationwide), (3) a clearer, narrower definition of "competitor," or (4) a carve-out for certain roles or industries. Some companies will negotiate; others won't. If they won't and you're still uncomfortable, get advice from a lawyer or labour specialist in your jurisdiction. BeforeYouSign can highlight non-compete language in your offer so you know what you're agreeing to and what to ask about before you sign.