Non-Compete Consideration refers to the legal requirement that a non-compete agreement be supported by adequate consideration—meaning the employee or party must receive something of value in exchange for accepting the restriction on their ability to work or compete. Consideration might include continued employment, a promotion, a salary increase, access to confidential information, or a signing bonus. This clause matters because in most jurisdictions, a non-compete agreement is unenforceable unless the restricted party received something of value beyond what they were already entitled to; simply continuing in an existing job without additional benefits is often deemed insufficient consideration. Without proper consideration, a court may refuse to enforce the non-compete even if all other terms are reasonable, leaving the employer without legal recourse if the employee violates the restriction.
If you are an employee being asked to sign a non-compete, ensure the agreement explicitly states what consideration you are receiving—whether that is continued employment (if you're new), a raise, a bonus, promotion, or other tangible benefit. If the employer offers only continued employment for an existing employee, request additional consideration such as a signing bonus or salary increase, as courts are skeptical of non-competes supported only by the threat of termination. If you are an employer, always document the consideration provided in the non-compete agreement itself (e.g., "Employee receives a $5,000 signing bonus and access to proprietary training"), and for existing employees, provide meaningful new consideration rather than relying solely on continued employment, which courts often find insufficient. This documentation strengthens enforceability if you later need to defend the agreement in court.
Frequently Asked Questions
What does this clause mean in simple terms?
Non-Compete Consideration refers to the legal requirement that a non-compete agreement be supported by adequate consideration—meaning the employee or party must receive something of value in exchange for accepting the restriction on their ability to work or compete.
Why should I care about this clause?
Consideration might include continued employment, a promotion, a salary increase, access to confidential information, or a signing bonus.
What are my options?
This clause matters because in most jurisdictions, a non-compete agreement is unenforceable unless the restricted party received something of value beyond what they were already entitled to; simply continuing in an existing job without additional benefits is often deemed insufficient consideration.
How does this affect small businesses?
Without proper consideration, a court may refuse to enforce the non-compete even if all other terms are reasonable, leaving the employer without legal recourse if the employee violates the restriction.