contractors - protect yourself from legal liabilities

Offered A Bonus Tied To A Non-Compete Clause? Consider Your Next Step Carefully

12 January 2016

Lawrence Ross

Non-compete clauses can be the bane of professionals everywhere–sign one and, if anything happens and you get fired, you're automatically precluded from working in your own field for a year or longer while your talents go rusty and you get less hireable by the day. Now, some employers are tying non-compete clauses to bonuses as a way to get people to give up their right to make a living after they leave. If you're presented with a "bonus opportunity" tied to a far-reaching non-compete clause, what should you do?

1.) Consider refusing the bonus.

That can be tough. A lot of employers make the offer fully expecting you to agree and won't react kindly if you decline. Your employer may start to wonder if you've already got one foot out the door and into a competitor's (or are planning on starting your own business). You may worry that you'll be fired in retaliation for a flat refusal to sign. (If you are, that may not be legal. In New Jersey, for example, the courts have held that overly broad non-compete agreements violate public policy and firing someone for refusing to sign is an act of wrongful termination.)

Still, it is an option. You can't be forced to agree to it. It might be better to have to look for employment elsewhere and fight the firing in court than to sign and find yourself terminated in a few months for some other reason and unable to pursue other work.

2.) Examine the bonus and determine if it is enough.

It can be difficult to turn down a significant bonus opportunity by refusing to sign a non-compete agreement. However, you may not really be getting what it seems like you're getting. You need to examine the language regarding the bonus carefully.

If the non-compete clause has vague language that includes phrases like "target bonus," watch out. Your company doesn't have to give you the "target bonus" in order to give proper consideration for your agreement to the non-compete clause. All your employer has to show is that he or she acted in good faith when the contract was presented. If the bonus was tied into the expected profits at the time and those profits never materialized, you are out the majority of the expected bonus and stuck in the non-compete agreement anyhow.

A better tactic, if you are willing to sign, is to negotiate a set bonus that will be paid within a set period of time, regardless of whether you are fired the next week or not. Even if you have to negotiate something lower than the "target bonus," that gives you something to live on while you're waiting out the non-compete period. Make sure that it's enough to warrant that time off work.

3.) Negotiate a more reasonable non-compete agreement.

You can also negotiate a more reasonable non-compete period. If the agreement handed to you is for a year or two years, you might be able to negotiate it down to about half that time period. That allows time for your employer to move on without fear that you'll walk off with the clients from your accounts or get their current ideas to market without worrying that you'll try to push them out yourself through a competitor. It also allows you to get back to work in your chosen profession sooner.

You can also negotiate a more reasonable non-compete area. For example, if the agreement you're given specifies that you won't go into competition anywhere or with any competitor in the business, try to negotiate an agreement that allows you to work in a different state or market area.

Before you sign up for any bonus, no matter how exciting, carefully check any agreements you're asked to sign. Consider hiring an attorney like one from GSJones Law Group, P.S. to go over it with you, line by line, so that you understand exactly what you're giving up and what you're getting in return–before it becomes a problem.

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