You're being asked to sign a non-disclosure or a non-compete agreement. Should you sign -- or not? That's a very good question.
agreements are fairly common in the video game industry, especially if
you're a job seeker since they are more likely to be asked to sign one
than those who are currently employed. Your decision should really be
based on how badly you want -- or need -- the job. For once it's
signed, you're bound by its terms if you leave the company for any
story often begins on the date of hire when an employer requires an
employee to sign on the dotted line as a condition of employment.
Employers and employees have a natural conflict of interest on the
subject of agreements. The employer thinks it's unfair competition when
a former employee -- using the skills, training, and information they
acquired from the employer -- takes a job with a competitor. The
employee, on the other hand, usually wants to negotiate more favorable
terms but seldom has the clout to do so. Remember that the best time to
negotiate these issues is when you're first being hired, not after
you've accepted the job.
you don't have the clout -- and most people don't -- don't just close
your eyes and sign. Read the agreement carefully to determine how
reasonable it is; remember that it will be legally binding. Depending
on the situation and the financial consequences, you might want to
consult an attorney first.
might also think about how long you intend to stay with your new
employer; if you plan to leave in a year or two, having signed a
non-disclosure or non-compete agreement can have certain consequences
on your next move. An employee who thinks that a court may keep him
from successfully landing with a new employer may not want to sign.
Also, the presence of such an agreement may dissuade competitors or
their headhunters from offering you better employment. These days, one
of the first questions a savvy recruiter will ask is whether a prospect
has signed a non-compete agreement. Few businesses want to become
embroiled in expensive and time-consuming litigation as part of the
hiring process, particularly if the agreement looks like it will stand
up in court.
might also try to determine what your new employer's response was when
other employees left the company as this could give you a good idea of
what you might face. Some employers wish departing employees well and
welcome the competition; others take it personally and track them down
with barking lawyers.
you do decide to sign the agreement, be sure to keep a copy. It would
be awkward to ask for one when you're planning your exit strategy. And
once you've signed, don't forget about it. Your employer won't. He'll
keep it in a secure place until it's needed, and you should, too.
What's The Difference Between A Non-Disclosure & A Non-Compete?
agreements -- sometimes called “confidentiality agreements” -- are
designed to protect sensitive technical or commercial information
(intellectual property or “IP”) or trade secrets from being shared with
others. Simply stated, when you sign a non-disclosure agreement, you
swear that you won't reveal anything that the company considers to be
proprietary or confidential, such as details of new products,
technology, business plans, financial information, models, sketches,
and so on. It doesn't mean you can't work for a competitor; it simply
means you can't use what you learned or obtained from your former
employer with your new employer.
non-compete agreements are designed, too, to protect employers but they
are a different breed. If a former employee moves to a competitor,
there is often a transfer of knowledge. To prevent this, many companies
routinely ask new employees to sign statements restricting them from
working for a direct competitor for a reasonable length of time and
within reasonable geographic limits after leaving. In other words,
you'd violate a non-compete agreement if you took a job at the only
game developer in your state, learned all you could while you were
there, and then quit and tried to start your own development studio
right across the street.
Are The Agreements Enforceable?
people sign these agreements under the assumption that they aren't
enforceable. But they'd be wrong. Generally speaking, courts will
enforce non-disclosure and non-compete agreements and so it's worth
taking the time to read and understand what you're being asked to sign.
Ask yourself these questions:
- What legitimate interest is my new employer seeking to protect?
- What is the scope of the agreement? Is it unduly restrictive?
- What impact will this have on me and any third parties (like my future employers)?
critical question is, does the agreement look like it will pass
judicial scrutiny? If an employee is contemplating a move, the
employer's first call will usually be to an attorney for an opinion as
to the probability of the agreement being enforced by a judge.
Likewise, a competing employer, if serious about a potential employee,
will consult with an attorney.
evaluating a non-competition agreement, an attorney will be looking for
reasonableness and fairness (since that is what a judge will require).
The interests of the employee, as well as the employer, must be
protected and a restriction will be declared invalid if an employee is
unreasonably prevented from pursuing his occupation and supporting his
the years, the courts have developed a five-pronged test for assessing
whether an agreement not to compete is reasonably limited and fair to
both the employee and the employer. In determining the validity of an
agreement, a court will consider:
- Whether the length of time that the restriction will remain in effect is reasonable.
- Whether the geographic area covered by the restriction is reasonable.
- The overall fairness of the protection accorded to the employer.
- The extent of the employee's opportunity to pursue his or her occupation if the restriction is enforced.
- And the extent of interference with the public interest.
that there are different circumstances depending on where you work. For
example, non-compete agreements aren't enforceable against employees in
California . However, California employers can use non-disclosure
agreements to protect their trade secrets and client lists when an
in mind that the intent of non-compete and non-disclosure agreements is
considered to be fair; it restricts the employee's freedom to compete
just enough to enable the employer to protect its business interests.
In other words, since it would not be fair for you to take advantage of
an employer's training or investment, a court will allow the employer
to protect that training or investment.
What Are The Penalties?
you try and compete after signing a valid agreement, your employer can
file suit against you for an injunction and money damages. If the
employer can point to a valid agreement with reasonable restrictions,
most courts will grant an injunction while the lawsuit is pending. You
will have to hire an attorney to defend the suit and, when it's over,
you not only may owe the money damages sought by the employer, but may
be prevented from competing for a period of time following the lawsuit.
many cases, you may have little choice but to sign an agreement.
Because agreements protect employers (not employees), you may be forced
to choose between signing the agreement and not accepting the position.
However, you should know your rights and understand the ramifications
of what you are signing.
you're leaving for a better job opportunity with a competitor, it's not
likely that an employer will release you from a non-disclosure or
non-compete agreement. However, if you're being downsized or laid off,
talk this over with your boss. Since you're not choosing to leave on
your own, an employer might be more willing to give you the freedom to
leave without restricting your ability to find another job. But the
employer could still hold to the agreement's terms.
bottom line? Be cautious when asked to sign an agreement. Assuming it
was written by a competent attorney and is reasonable, you'll be bound
by its provisions. Start by taking the long-term view when you're
offered a job. No matter how great the job is and how well it suits
you, the days when employees stayed at one company for life are long
gone. Sooner or later, you're going to want to move on. If you sign a
broad non-disclosure or non-compete, it will be hard to convince the
employer to change the terms when you want to leave. The best time to
get changes made is now, when you have the most leverage -- between the
time they make you the offer and when you accept it. So read through
the document carefully and, by all means, consult a lawyer.
This article is not intended to provide legal advice and should not be
relied on as legal advice. If you have legal questions consult an