Hey All,
I received an awesome (but unpaid) internship offer for the spring semester. I read through my internship agreement, and there is a non-compete clause which says I cannot work for a competitor for 10 years after completing the internship! It is seems like a great company, but I am not willing to make such a commitment so early on in my career. Did I misunderstand something? Are agreements like this normal? What should I do?
I doubt that any court would uphold a 10 year non compete agreement, particularly for a one semester unpaid internship. Non-compete agreements are usually used if someone has worked at a company for several years or has the type of job where they would learn trade secrets or have access to customer lists. Courts have upheld, for instance, a one year non compete on a doctor going to another practice within a certain geographic area. Frankly, I wouldn’t want to work a company that is so heavy handed, but if you choose to, I wouldn’t worry about the contract. Tell them that you would rather not sign it and see what they say.
Couple problems here.
First, as techmom said, the term is excessive - I have had non-competes at all of my jobs, and the most restrictive has a two-year term.
Second, a non-compete for an internship? The whole point of internships is to give a no-strings-attached taste of what it’s like to work in an industry or for a company. By issuing a non-compete, they are basically saying that you aren’t allowed to apply what you learned later on.
Third, a non-compete for an unpaid position (internship or not) is almost certainly unenforceable. A non-compete is a contract, and the most fundamental criterion for creating an enforceable contract is the presence of, among other things, acceptance and consideration. The person issuing the contract is requesting the signer to accept the terms, but that party must have skin in the game as well - this is consideration.
For example, let’s say I am buying a car from you. We draw up a contract that says you will sell me your car on August 15, at 10:00AM at the police station. You draft it and I sign it. At this point, you have accepted my offer, but aside from a piece of paper, there is nothing that has bound us. You have all of your car, and I have all of my money; if you decide not to meet at the agreed-upon date/time/location, nobody has lost anything materially. I can’t sue you for reneging on your agreement because I haven’t given you anything. If, however, I give you a $500 deposit when I sign the contract, then the contract becomes binding - you have received something in exchange for something else but have not yet delivered the item. If you, then, renege, I can sue you to recover my $500.
In most instances, a non-compete is issued as an offer with payment for services rendered as the consideration. It meets the basic definition for enforcement. In your case, it does not. Your “employer” is not providing you with any materially significant payment (‘experience’ isn’t material), so there is nothing that employer can do to prevent you from competing. I’m not a lawyer, so take my advice with a grain of salt (basing this on a single contracts class I took in college)
Fourth, it may be worthwhile to figure out what ‘competitor’ means. The broader the definition, the less enforceable it is. My first company out of college considered any company offering services similar to its own as a competitor. Typically that means that you can work at the competitor but may not have contact with anyone in the division that competes - if you work in algorithm development at Bing, you can go work in UX design at Google but not algorithm development - but my company expanded it. That made the contract essentially unenforceable. My last company had a much narrower definition - I was not allowed to work in certain departments (generalized for definition purposes) at a finite, explicit set of companies.
At the end of the day, unfortunately, even if a contract is unenforceable, they can still have you sign it and can still come after you, even if it is frivolous. In my case, a company I wanted to work for said that I was a great candidate but wouldn’t touch me because of my non-compete. They knew that they would win the lawsuit, but they would have to pay hundreds of thousands of dollars in legal fees on my behalf and were unwilling to bother.
For you, I would choose not to sign this non-compete at all if you aren’t getting paid. If they offer you payment (even in the form of a bonus for signing), don’t accept a 10-year term… 10 years is literally half your life right now, and that is far too long to commit not to work for competitors. If you agree not to disclose information, not to steal clients, and not to work for a competitor for six months or a year, AND if you get paid for it, then consider signing.
To say this is overkill is a vast understatement. Tell them that you will sign a Nondisclosure Agreement (can’t share trade secrets, confidential information, customer lists, etc.) but at this stage in your career/life, you can’t sign the non-compete.
@techmom99, @chrisw, and @suzy100
I see thank you for the replies. This is not a separate non-compete contract, but simply something that was put into the “Internship Agreement”. Is there any way to sign everything EXCEPT the noncompete?
No, you cannot line item veto a clause in an agreement.
Thank you @TomSrOfBoston
I guess I should just email them regarding my reservations? They have a pretty large intern team (20+ interns), but it looks like no one read the fine print in signing their contracts. I just hope everything works out.
Well, strictly speaking you can strike out the non-compete and sign it, but if they see your strike-out, they probably won’t accept it.
As others have said, this is completely unenforceable. It is most likely inserted in there by a legal team that has created a boilerplate for employment contracts in the hope that it dissuades others from going to competing firms.
Do you really want to work for this company as an intern? If so, sign it, and if they come after you reply with something like “Are you really that incompetent?” which tells them you have a clue about how unenforceable this is. Otherwise, bring it up with them and say it is a sticking point. Do not accept a reply of “this is just standard language”–that tells you that lawyers are running the show which is never a good situation.
Disclosure: IANAL, but I have negotiated a number of personal and business contracts.
Good for you for READING the contract!!!
That’s what got us into the housing crisis, no one reads their contracts!
I agree with the other posters. How can they force you to not work for a competitor? You are there to get experience in your field. They are not paying you AND they don’t want you to work anywhere else? I know you need an internship, but DANG IT, they already are controlling your future???
I agree, tell them you’ve READ the contract and are concerned that the company is saying you wouldn’t be able to work anywhere else for 10 years. If they say its STANDARD and procedural, you can say, “but once I sign it, it isn’t standard anymore”. I agree with @suzy100, say that you are more than willing to sign a non-disclosure. If they really want you, they will accommodate you; and it sounds like they should want a person who is smart enough to read a contract!
That is one more nice thing about living and working in CA. No Non-Compete contracts allowed.
If it is a for-profit company, the internship being unpaid brings up questions to begin with.
Adding in an overly broad non-compete agreement brings up even more questions on whether the employer is really anyone you want to work for. Remember, even if such a thing will be thrown out in court, the employer likely has more lawyers than you can afford to defend yourself with if it sues to enforce it.
Absolutely nothing wrong with a reasonable non-compete clause. Depending upon the type of work and the industry, ti is patently unfair for a company to train you in proprietary methodologies and such and they have you take that to a competitor. The key is reasonable.
Unpaid internships are not something on which they will be able to enforce a non-compete…maybe it could keep you from taking another unpaid internship at a competitor…as UCB mentioned above, the cost is not likely worth it. The converse, however, is true as well. If you get a job with a competitor, they will most likely never know or care…unless you are in a high profile role.
Do you hope to work for this company after college? Is this company one of your top picks? Is this company at the top of their field? Like a Google or Facebook?
Is the intern program at this company known for grooming interns for hire at this company? Do 90 percent of interns get a job offer after working their unpaid internship? Will getting a job at this company set you up for an incredible job opportunity ?
I can’t imagine signing this contract as is, but only you can decide if this is the golden opportunity that will leave you with regret if you don’t take it.
What is your backup plan for spring semester? Have you had any other internship experience yet? Do you have any other internship options?
You actually can strike out a clause in an agreement. If you do it that way, just initial it.
Do you think it’s possible that they put that rediculous statement in there to see who reads the contract? They can’t be serious about that.
They are a start-up. I would not mind working for them after graduating if they pay well (some well-funded tech start-ups even pay more for new grads than companies like Google or Facebook). I do not expect they pay as well as that, but I would be willing to join the company fulltime if the work experience would be valuable/fulfilling. It is not, as of now, a dream company for me, however.
Remember that “competitor” can include a wide range of companies, since a large company can have products and services in many areas, many of which are not obvious at first glance.
A computing startup should be paying you for your work (or stock if pre funding, but that is risky and most likely to be worthless eventually).
@yikesyikesyikes Do you know what your internship will entail? Will it be primarily learning or primarily contributing to the company?
It appears mostly both - I will learn a good amount and hopefully contribute agood amount. It does not seem to be one of the internships in which I just do some low-level work no one else gets to do. They even said interns often lead projects of their own.
The fact that such an internship at a presumably for-profit company is unpaid despite you likely doing significant real work beyond training or experiential learning, and that it comes with an overly broad non-compete agreement, should really cause you to pause and consider what other (paid) job and internship opportunities you may be able to find instead.