How to Waive a Non-Compete Agreement

In an age of quick turnover and job mobility, employers who don't want their trade secrets or confidential client lists made public will ask employees to sign a non-compete agreement. An employer may ask for a non-compete before, during or after employment. This type of contract states that the employee may not divulge certain information, or compete with the employer after leaving the job.

As an incentive to sign a non-compete agreement, the employer may offer a cash bonus, retirement benefits or stock options. In some circumstances, the employer may waive the non-compete contract; this can happen deliberately or through actions that, by the law, invalidate the agreement.

If an employer required a non-compete agreement at the start of employment, it may offer a waiver at the job's conclusion. In return for the waiver, the employee may give up rights to a severance package or other benefits. The original non-compete agreement may have a waiver clause that refers to an addendum to the original agreement or a separate waiver document that relieves the former employee from the non-compete requirements.

Whether the waiver is drafted as an addendum or a stand-alone document, it must include very specific language relating to conditions in the original non-compete agreement. If the non-compete mentioned a certain duration or geographic scope, then the waiver should also cite those conditions. Fuzzy language in any contract is an invitation for differing interpretations, disputes and litigation. The waiver needs witnessing and notarization, the initials of both parties on its pages and an individual in charge of the oversight and enforcement of employment agreements for the employer should sign it.

State law and legal precedents govern the enforcement of non-compete agreements. In some states, non-compete agreements are enforceable with conditions; for example, Texas requires that any non-compete be associated with some other enforceable agreement, such as a severance contract, and that it protect the legitimate interests of the employer. In circumstances where the courts won't enforce a non-compete, any waiver to the document would be moot.

Employees signing a non-compete agreement should be aware that actions by the employer may, by law, effectively waive the agreement. This may arise if a company continues to grant stock options by the terms of a non-compete agreement, even after claiming the employee violated the agreement. By offering the stock options, the employer is acknowledging that the employee is still in compliance with the agreement.

For this reason, the legal and benefits department of any company that signs a non-compete must cooperate in monitoring the former employee. By the same token, if a former employee is unsure if his actions would violate the agreement, he should consult directly with the company and, if necessary, secure a written agreement that his actions are compliant.