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?