Tuesday, January 12, 2010

Should You Sign a Non Compete?

I acquired a new client this week and spent a good part of yesterday reading and filling out a variety of forms to scan and send back so that we could get started on the project. One of the forms I received was a non compete. If you don’t know, a non-compete can be a clause in an agreement or a full document (like what I received) designed to protect a business by stipulating certain limitations.

I once read a writer describe non competes as similar to a prenuptial agreement. That seems like a pretty fair comparison. These legal documents are meant to protect a client’s business interest (i.e. client relationships, trade secrets and other confidential information).

Restricted area

Non competes will typically involve one of three areas: defining the geographic scope of where you can and cannot conduct your freelance business while under an agreement with a client; the scope of the services you can provide others; or a duration clause (e.g. you must wait on year before doing business with a competitor, etc.).

Non competes can range from logical and uncomplicated to complex and full of ridiculous restrictions (believe me - I’ve passed on a few). I once had a small Internet marketing firm send me a non compete that would restrict me from working with any of their existing clients, or clients they were soliciting for business, for the next three years. That seems sort of extreme to me; especially considering I had no idea of knowing who they were marketing their services to. Usually clients requiring non competes are pretty hush-hush about that sort of thing.

Making the right choice

The non compete my new client asked me to sign was pretty harmless. I read it about four times just to be sure. Seriously, I cannot stress enough how important it is to read all documents before you sign on the line. I know that sounds like common sense, but it can be hard to think with a clear head when you’ve just skated through an extreme dry spell. Read the fine print. Think about how your business might be affected six months down the road based on the requested restrictions before signing a non compete. Sometimes the job’s just not worth it.

Have you ever been asked by a client to sign a non compete?


Lori said...

Kim, I just wrote about this last week - like minds! :) I signed a noncompete once. The only reason I signed it was because the entire document beyond the title said NOTHING about the non-compete expectations. It was a scare tactic and one the client avoided defining probably to avoid any inkling of employee status with the writers. Mentioning it in the title does not a noncompete document make. And frankly, I've no idea, based on that title alone, what companies or clients this client felt were competition, if the client meant I couldn't recruit her other writers, whether it meant this type of work specifically or if she meant I couldn't write about it or refer to it.... it was a BS document meant to scare and intimidate, not to define any particular relationship. And it wouldn't hold a prayer in a court.

In general, I wouldn't sign an agreement like that unless I was being compensated more for losing the potential clients.

Kimberly Ben said...

Lori said: "In general, I wouldn't sign an agreement like that unless I was being compensated more for losing the potential clients."

That's a good point, Lori. I've heard of other freelancers negotiating higher rates and other "perks" to compensate for the restrictions a non compete can impose.

Yo Prinzel said...

The most important thing any freelancer can do when signing a non-compete is to modify the agreement to state that you will not KNOWINGLY compete or KNOWINGLY contract with competitors/customers of the client. After all, unless they are giving yo a list of all the people you can't do business with or all the business things you cannot do as a result of the non-compete, you could very well UNKNOWINGLY do so.

Kimberly Ben said...

Oooh, good advice, Yolander! We can always ask about negotiating a client's terms. The worse thing that can happen is that they'll say "no." Then you just move on.

Lori said...

Yo, terrific advice. And yet, they won't know who you're targeting either, so it could all go unnoticed.

What I don't like is that they put the onus on the writer to know who the competition is. That's not fair. Tell me specifically. I can't sign a blanket agreement unless I know what I'm up against.

Kimberly Ben said...

Right, Lori. That's the point I was trying to make in the post. Since I don't know who your target market is, how can I be absolutely sure that I wouldn't contact them?

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