3 ms·

What are your thoughts about a non-compete which is tied to a bonus, restricted stock, or some other reward? I worked for my employer for several years without

What are your thoughts about a non-compete which is tied to a bonus, restricted stock, or some other reward? I worked for my employer for several years without a non-compete before I received my first chunk of restricted stock. In accepting the stock grant, I had to accept a non-compete for a period of 1 year, which included both competitors and customers of my employer. It was a significant sum, but not a year's salary. I feared that if I turned it down, I would be seen as disloyal, and it could cause my employer to pass me up for promotions or include me in the next reduction-in-force. Since then, I've received almost yearly bonuses and stock grants which carry the same non-compete, so I am probably closer to having received a year's salary worth of additional consideration by now, but I still feel wary about the non-compete. (edit) Note: I'm not in California

beagle3 9y ago
It depends on your jurisdiction, mostly. In some jurisdictions, enforceable non compete requires extra-ordinary compensation, which has to be comparable to a base salary. If the industry (and especially the company) gives almost everyone a bonus, then it is ordinary and thus not enough to make the non-compete agreement valid. It was customary for employers to negotiate a reasonable salary, say $96K, and write it down in the employment contract that "you get a base salary of $48K/year, and an additional $48K/year is compensation for your 2-year non compete". Courts struck this down many times, since this wouldn't be extraordinary in the first place; and also, because if employee quit after 1 month, they would get $4K in compensation for a 2-year non compete, which is not remotely of the same order of magnitude as the income lost due to that non-compete.