Non-Compete Agreement

In a Non-Compete Agreement, one party to the agreement agrees to not compete against the other in the same industry.

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Specific industries are more competitive than others. The companies in those industries may have to put in more effort to stay relevant and make money. Since the companies compete against each other on the market, they often would rather not have to worry about competing against their employees.

That is the basis of the Non-Compete Agreement. Before you spend many resources on training an employee to become a star performer, you can use this document to ensure the employee will not leave you in the lurch. After having benefited from all the training, they could pursue employment at a competitor or start a company competing against you or your company.

What Is a Non-Compete Agreement?

The Non-Compete Agreement is most commonly entered into between an employer and its employee. It can also be used when hiring an independent contractor. It's vital to note that even though most states recognize the Non-Compete Agreement, California, Oklahoma, and North Dakota do not.

One of the reasons an employer may choose to require Non-Compete Agreements, besides the provision mentioned above of expensive training for employees, is to reduce turnover. However, this agreement may reduce a company's bargaining power and negatively affect it in the long run.

Other Names for Non-Compete Agreement

Depending on your state, a Non-Compete Agreement may also be known as:

  • Non-Compete Covenant
  • Non-Compete Contract
  • Non-Compete Policy
  • Covenant Not to Compete
  • Agreement Not to Compete
  • Non-Compete Form

Who Needs a Non-Compete Agreement?

Specific industries depend on the Non-Compete Agreements more than others, for example, the tech industry. However, anyone can ask employees to sign a Non-Compete if they want to protect against the competition.

Usually, these types of agreements are presented to new employees in the hiring process. It is just as common to induce current employees to enter into such a contract.

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How to Create a Non-Compete Agreement with 360 Legal Forms

A Non-Compete does not have to be complicated, just as long as it is thorough. Lowering your competition is one less thing you have to worry about. All you need is a ready-to-go template and a few details.

Let 360 Legal Forms help with our extensive library of attorney-vetted legal forms. The process is fast and easy. All you have to do is fill out our easy-to-understand questionnaire. Once complete, simply download your form as a PDF or Word document from your secure online account.

What Information Will I Need to Create My Non-Compete Agreement?

To create your document, please provide:

  • Protected Party Information: The legal name and contact information of the protected party.
  • Non-Competitor Information: The legal name and contact information of the non-competitor.
  • The Effective Date: The date when the agreement goes into effect.
  • Governing Law: Specify the legal system used in the event of a dispute.
  • Scope: Describes the types of industries and businesses covered by the agreement, including the geographic range.
  • Agreement Duration: Specify the duration of the contract.
  • Additional Clauses: Non-solicitation, non-disclosure, non-disparagement, or any other clause.
  • Signatures: Both parties must sign the contract.

Non-Compete Agreement Terms

  • Non-Disclosure: A clause where one party agrees not to disclose the confidential information belonging to the other party
  • Non-Solicitation: A clause forbidding one party from soliciting or poaching employees and clients
  • Employee Handbook: A staff manual describing an employer's expectations and company values
  • Turnover: The frequency of a company having to replace its employees
  • Trade Secret: A type of intellectual property
  • Cease and Desist: A legal letter sent to a business or person demanding the ceasing of a specific activity or activities, which is required before filing a lawsuit
  • Injunction: A court order barring someone from engaging in a particular action at the threat of contempt of court
  • Severability: The quality of a document, such as an agreement or a lawmakers' bill, being valid even when some parts or provisions are struck out (valid without the offending parts or provisions)

Non-Compete Agreement Signing Requirements

An employee does not have to sign a Non-Compete Agreement, in which case it is within the employer's right to withdraw the job offer. For the agreement to be legally binding, both parties must sign it. Notarization is not required by law, but you could choose to have a witness at the signing.

What to Do with Your Non-Compete Agreement

After the signing, both parties should receive a copy of the Non-Compete Agreement. Companies usually keep their documents in the HR department, along with other employee files.

Frequently Asked Questions

Reasonableness is one of the most important aspects of any Non-Compete Agreement because the courts will be weighing in on it. Achieving a balance between protecting someone's business and not burdening the non-competitor is essential. And this is something often neglected by companies that use the agreement. An overbroad scope is usually considered unfair to the non-competitor, especially regarding the duration of the agreement. Similarly, the geographic range is often taken into a court’s consideration of reasonableness.

Sometimes an employer will add a “consideration” provision in the Non-Compete Agreement. This means that it will pay a monetary or non-monetary incentive to the non-competitor for agreeing to the terms. However, in most cases, employers will not think to provide such compensations, though most of the time only a good employer can pull off requiring such an agreement without employees leaving left and right.

It is legal for an employer to ask current employees to sign a Non-Compete. This happens if certain circumstances occur that would lead the employer to want to protect the business. However, if an employee chooses not to sign it, it may be illegal for the employer to dismiss the employee. You may have to consult your state law for the specificities.

Firstly, the difficulty of getting out of a Non-Compete Agreement will vary from state to state. Some are more known to enforce these agreements than others. If you feel that your non-compete is too restrictive, you may be able to take the matter to court. Another approach is to ask to be released from the Non-Compete Agreement. Employers often do not track employee activities after they leave the company, save for perhaps select outstanding individuals. An employer might be inclined to release you from the agreement and if so, you will want to get the release in writing before starting a new job or business.

In some cases, the employer may not do anything at all. However, you may get sued and the court may issue an injunction that forbids you from competing in the same industry. Those who violate injunctions can be held in contempt and sent to prison. Since time is essential in these matters, a court will usually react quickly if there are merits to the employer's claim. You may be assessed damages if you are to lose the case.

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