The Fine Print: Employment Agreements

Taking a job can mean a lot more than just agreeing to show up every morning. Your employer may require you to sign a contract or other agreement that very specifically governs what you can say and do while you’re at the company—or after you leave.

Although there’s not a lot you can do to avoid signing if it’s a job you want, it’s important to recognize the potential consequences if you agree to certain terms and conditions. That way you can be prepared for some of the situations you might encounter.

NDA: Keeping secrets

The first agreement you’re likely to come across is a non-disclosure agreement (NDA), sometimes called a confidentiality agreement. By signing an NDA when you’re hired, you agree not to share any of a company’s proprietary information with people outside the company, both during and after the time you’re employed.

Of course, what is and isn’t proprietary information depends on whose information it is. At some companies, you’re simply prohibited from talking about new products or ventures that haven’t been made public yet. But other, more competitive employers insist on much more control over what you learn and create while you’re on the job. In some extreme cases, you might have to sign an NDA at a job interview, before you even find out what a company really does.

Non-compete agreements

Some companies might also include a non-compete agreement in your contract or job offer letter. These clauses mean that if you accept their offer, you’re restricted from working for competitors for a certain period of time after you leave. Other employers ask you to sign non-compete agreements when you’re laid off if you want to be entitled to severance pay.

Many people feel that non-compete clauses are inherently unfair. After all, unless you’re deliberately planning to change career paths, not being allowed to work for other companies in the same industry can severely limit your future job prospects. Fortunately, most courts feel the same way, and non-compete agreements rarely hold up in court, especially those that extend their control for long periods of time or over large geographic areas.

Nevertheless, many companies use them as scare tactics, hoping that you’ll comply with their conditions just because you’ve signed their agreements. In 2024, the Federal Trade Commission (FTC) effectively banned most new non-competes and required that employers not enforce most existing ones, calling them unfair methods of competition. However, lawsuits have been filed to overturn the ruling, leaving its fate uncertain.

Insider trading

If you’re working for or with a public company whose shares are traded on the stock markets, make sure you know the story on insider trading. That’s when corporate officers, or other people who might have access to confidential information, buy or sell the company’s stock. If this trading decision is based on information that’s not available to the public, it’s illegal. So is passing on that information to anyone who buys or sells based on it.

Just because you’re not a corporate officer or a major stockholder doesn’t mean you don’t run the risk of getting caught up in illegal insider trading. Anyone with access to corporate information could potentially get in trouble. For example, if you’re a paralegal at a corporate law firm, the information you see and hear about clients could be used for insider trading.

Or if you work at a newspaper or other periodical, you could trade on information you learn before it goes out on the newsstands. And if you share this information with anyone, you could both end up in jail. So if you’re in a work situation where you’ve got access to private corporate information, watch what you do and say.