A non-compete agreement is a formal agreement between an employer and an employee that the employee will not engage in any employment activities that are in conflict or competition with their primary job. Companies use non-compete agreements to ensure that their workers will not engage in businesses activities that may diminish the company's share in the market.
Below you will find more information about non-compete contracts and a free non-compete agreement template that you can download.
Non-Compete Agreement Template:
This Non-Compete Agreement is entered into between _________________(Employee) and ________________(Company Name) on the ____ day of _____________ in the year 20___. [Company Name] is located at [Address] and is represented by [name of representative] in this agreement.
WHEREAS, the Company is in the business of [describe type of business].
WHEREAS, the Employee and the Employer have entered into a formal Employment agreement where the Employee will perform duties related to their position as a [Job Title]; and
WHEREAS, the Employee agrees to the restrictions described herein as binding.
THEREFORE, the Employer and the Employee agree to the following terms:
NON-COMPETITION. For the entire duration of this agreement, and for [length of time] after the Employer’s relationship with the Employee has been terminated for any reason, the Employee will not work as an employee, officer, director, partner, consultant, agent, owner or engage in any other capacity with a competing company. This means that Employee must not perform any work for [describe type of company] in [geographic area].
EMPLOYEE ACKNOWLEDGEMENTS. The Employee acknowledges that they have been provided with the opportunity to negotiate this agreement, have had the opportunity to seek legal counsel before signing this agreement, and that the restrictions imposed are fair and necessary for the Company’s business interests. Finally, the Employee agrees that these restrictions are reasonable and do not constitute a threat to their livelihood.
APPLICABLE LAW. This agreement and its interpretation shall be governed by the laws of [state, province or territory].
IN WITNESS WHEREOF, both parties agree to these terms and give their consent and authority to this agreement below.
Employer Representative Signature
How to Create a Non-Compete Agreement:
1. Study your competition.
Find out what types of businesses represent direct competition to your business. Competitors are businesses that offer the same goods or services as you, sometimes in the same geographic location. You need to know what possible conflicts of interest could arise among your employees.
2. Write up the agreement.
You can create an agreement from scratch, or you can use a non-compete agreement sample like ours. Either way, your agreement should be customized to reflect the specifics of your business.
3. Have your agreement reviewed by a legal professional.
It is important to have the advice of a lawyer or legal representative when drafting legal documents. Get a lawyer to read through your contract and look for any possible omissions or flaws. You want your non-compete form to be airtight, so don't assume that it is just because you used a free non-compete agreement template.
4. Present the non-compete contract to your employee.
At this point, the employee should be given ample opportunity to ask questions. The best thing to do is read through the document with them.
5. If everyone is satisfied, sign and date the agreement.
Provided that everyone feels that the terms of the non-compete agreement are fair, both parties can sign it. You should keep a copy for your records and give a copy to your employee for his or her records.
How do I write a non-compete agreement?
Download a non-compete agreement template and customize it for your specific requirements.
What should be included in a standard non-compete agreement?
- Name of employer.
- Name of the employee.
- Type of work that is restricted.
- Terms of restriction.
- Duration of the agreement.
What is a sales non-compete agreement template?
A sales non-compete agreement is created specifically for employees in sales roles. These agreements typically include details about the salesperson's sales restrictions and their limitations when selling for other parties.
Are non-compete agreements enforceable?
Non-compete agreements are often restricted or not enforceable, because they are so restrictive. They are illegal in California, unless you are selling a business. Other states enforce some provisions, like the trade secret protection, but not the work restrictions.
Does a non compete agreement need to be notarized?
No. There is no statutory or common law requirement that a non-compete agreement be notarized. It has to be signed by the party against whom enforcement is sought to be enforceable, though.
Why should I have a non compete agreement?
A non-compete agreement prevents employees from entering into competition with you during or after employment. It prevents employees from entering into markets or professions with you.
Do non-compete agreements hold up in court?
Non-compete agreements are difficult to enforce because they interfere with a person's ability to make a living. Your non-compete clause needs to meet specific standards to hold up in a court of law.
Do both parties have to sign a non compete agreement?
Yes, but it doesn't need to be witnessed to be legally binding.
In what states are non-compete agreements legal?
California, Montana, North Dakota, and Oklahoma ban non-compete agreements for employees completely.
How long can a non-compete agreement last?
This varies from state to state. The agreement must be reasonable in duration to be enforceable in most states, Generally speaking, non-compete agreements that last longer than two or three years may not be enforced by a court.
Are an NDA and a non-compete agreement template the same thing?
Not exactly. A NDA (non-disclosure agreement) is a confidentiality agreement. A NDA might be put in place if an employee is going to be granted access to privileged information.