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Is It Mandatory for an Employee to Sign a Non-Compete Agreement Before Receiving Their Last Paycheck?

Published April 14, 2023 by Employment and Commerce Law Group
Is It Mandatory for an Employee to Sign a Non-Compete Agreement Before Receiving Their Last Paycheck?

Some employment contracts contain non-compete clauses, which prohibit workers from joining a competitor organization for a period of time after leaving their current positions. The question of what it means to sign a non-compete is confusing for many employees who wish to switch jobs within their industry, and there are misconceptions about what employers can legally do regarding non-compete agreements. One of the most common questions is whether the employer can withhold their final paycheck until they sign a non-compete.  

You don’t have to sign a non-compete agreement to receive your final paycheck. Your employer might threaten to withhold your last paycheck until you sign, but that’s against federal and state law. A non-compete agreement might also violate your rights and prevent you from seeking employment in your preferred industry.

What is a Non-compete Agreement?

A non-compete agreement is a contract or clause in a contract prohibiting an employee from competing with their employer when their employment ends. That means the employee can’t work for a competitor for a specified period. The contract might also prohibit employees from sharing trade secrets or proprietary information with other parties during and after employment.

Can an Employer Withhold My Final Paycheck Until I Sign a Non-compete?

non compete agreementThe Fair Labor Standards Act (FLSA) doesn’t require employers to provide final paychecks to employees immediately. However, they must give the last paycheck to former employees by the next regularly scheduled payday.

Withholding a paycheck for any reason is prohibited in Tennessee. According to the Tennessee Department of Labor & Workforce Development, employers must issue final paychecks to employees 21 days after separation from employment or no later than the next regularly scheduled payday. The law applies whether an employer fires an employee or an employee voluntarily quits their job.

Tennessee Law on Non-compete Agreements

Although the courts often do not favor non-compete agreements, they will enforce one if it is reasonable. They will consider these elements:

  • Reasonable consideration
  • A threatened danger to the employer
  • The employee’s economic hardship due to the agreement
  • Whether the agreement is against the public interest

If your employer requires you to sign an agreement, there might be non-compete loopholes that could be used to get you out of it. The court will review the contract to determine whether it is enforceable under state law.

Types of Non-compete Agreements

The four types of non-compete agreements are:

  • Non-competition agreement Another word for a noncompete, a non-competition agreement prohibits an employee from working for the company’s competitor.
  • Non-disclosure agreement A non-disclosure agreement prevents a former employee from providing their former employer’s competitors with trade secrets and other confidential information. The employee also can’t share information with third parties.
  • Non-solicitation agreement A non-solicitation agreement prohibits a former employee from contracting or soliciting business from an employer’s customers or clients.
  • Confidentiality agreement A confidentiality agreement requires an employee to keep information related to the company private during and after employment.

Get Help from a Tennessee Employment Law Attorney

You might sign a non-compete agreement when you accept a job offer thinking it won’t harm you. However, it typically benefits an employer instead of an employee. If you have questions about the fairness of a non-compete agreement you signed, seek help from an experienced Tennessee employment attorney.

The Employment and Commerce Law Group knows state and federal laws governing non-compete agreements and clauses. We protect our client’s rights and fight against unfair employment practices. Call or contact us online today for a free consultation.

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