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What is valid consideration?

On Behalf of | Aug 23, 2022 | employment contracts |

If you are seeking employment, it is likely that your employer will have you sign a non-compete agreement. The terms of the agreement are likely to be different, depending on what your industry is.

However, it is important to realize what makes a non-compete agreement fair and valid. One such issue is “valid consideration.” According to FindLaw, “valid consideration” means that the employer must provide some form of compensation to the employee in exchange for signing the agreement.

What is a non-compete agreement?

Many businesses do have proprietary information. In many cases, the non-compete agreement ensures that the employees do not release confidential information to competitors. Generally, signing a non-compete agreement is a condition of employment.

Exchanging “employment” for the signature on the agreement is what makes most non-compete agreements have “valid consideration.” This is why most employers will have you sign the agreement before they officially hire you.

What if my employer asks me to sign after I have employment?

Your employer cannot stipulate that you sign a non-compete agreement after employment unless they give you something valuable in exchange. Since you are already employed, the employer cannot “re-offer” you employment. They also cannot threaten to fire you if you do not sign.

Thus, if your employer wishes for you to sign a non-compete agreement after employment, they must offer something extra. What this is depends on your desires. However, if your employer is not offering anything in exchange, the non-compete agreement does not have valid consideration.

Understanding your rights as an employee is paramount. Do not sign anything without knowing what is legal and what is not.