Free Non-Compete Agreement

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Non-Compete Agreement

Agreement Duration

How long will competition be restricted?What is some helpful information about enforcing this Agreement?It is helpful to know that:

As a matter of public policy, courts have said that a former employee cannot be prevented from working in their chosen trade except to the extent that is necessary to protect a previous employer.
However, a non-compete agreement may be upheld where a former employee could have found reasonable work that was not in direct competition with a former employer.
In general, it would be unfair to restrict the future earning potential of a typical tradesperson or office worker who does not have access to information that's confidential.

Two years

One year

Six months

Employment's duration

The Employee is prohibited from competing with the Employer
for two (2) years after employment ends.What is the scope of this Non-Compete Agreement?Note: Courts might not enforce a non-compete agreement if:

the effect could be harmful to the public (e.g. if it restricts commerce and depresses the local economy);

the scope is broader than necessary to protect the Employer;

the restriction would cause undue hardship on the Employee (too difficult for the Employee to find a new job), and/or;

the agreement has unreasonable time or geographic restrictions.

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NON-COMPETE AGREEMENT

THIS NON-COMPETE AGREEMENT (the "Agreement") dated this ________ day of ________________, ________

BETWEEN:

____________________ of ________________________________________________________________________________
(the "Employer")

OF THE FIRST PART

- AND -

____________________ of ________________________________________________________________________________
(the "Employee")

OF THE SECOND PART

BACKGROUND:

The Employee is currently or may be employed as an employee with the Employer for the position of: ____________________________________________________________. In addition to this responsibility or position, this Agreement also covers any position or responsibility now or later held with the Employer (the "Employment").
As a result of the Employment, the Employee will receive from, or develop on behalf of the Employer, certain proprietary or confidential information (the "Confidential Information") and the Employer has sought assurance this will not be exploited to gain a competitive advantage.

IN CONSIDERATION OF and as a condition of the Employment and the Employer providing the Confidential Information to the Employee in addition to other valuable consideration, the receipt and sufficiency of which consideration is hereby acknowledged, the parties to this Agreement (the "Parties") agree as follows:

Non-Competition
The Employee agrees that during the Employment and for a period of two (2) years after the end of that term, the Employee will not give advice or lend credit, money or the Employee's reputation to any natural person or business entity engaged in a competing business in any geographic area in which the Employer conducts its business, and the Employee will not, directly or indirectly, as employee, owner, sole proprietor, partner, director, member, consultant, agent, founder, co-venturer or otherwise, solely or jointly with others, engage in any business that is in competition with the business of the Employer within the following geographic area:
- __________
Confidential Information
The Employee acknowledges that, in any position the Employee may hold, in and as a result of the Employment, the Employee will, or may, be making use of, acquiring or adding to information which is confidential to the Employer (the "Confidential Information") and the Confidential Information is the exclusive property of the Employer.
The Confidential Information will include all data and information relating to the business and management of the Employer, including but not limited to, proprietary and trade secret technology and accounting records to which access is obtained by the Employee, including Work Product, Computer Software, Other Proprietary Data, Business Operations, Marketing and Development Operations, and Customer Information.
The Confidential Information will also include any information that has been disclosed by a third party to the Employer and is governed by a non-disclosure agreement entered into between that third party and the Employer.
The Confidential Information will not include information that:
1. Is generally known in the industry of the Employer;
2. Is now or subsequently becomes generally available to the public through no wrongful act of the Employee;
3. Was rightfully in the possession of the Employee prior to the disclosure to the Employee by the Employer;
4. Is independently created by the Employee without direct or indirect use of the Confidential Information; or
5. The Employee rightfully obtains from a third party who has the right to transfer or disclose it.
The Confidential Information will also not include anything developed or produced by the Employee during the Employment, including but not limited to, any intellectual property, process, design, development, creation, research, invention, know-how, trade name, trade-mark or copyright that:
1. Was developed without the use of equipment, supplies, facility or Confidential Information of the Employer;
2. Was developed entirely on the Employee's own time;
3. Does not result from any work performed by the Employee for the Employer; and
4. Does not relate to any actual or reasonably anticipated business opportunity of the Employer.
Duties and Obligations Concerning Confidential Information
The Employee agrees that a material term of this Agreement to keep all Confidential Information absolutely confidential and protect its release from the public. The Employee agrees not to divulge, reveal, report or use, for any purpose, any of the Confidential Information which the Employee has obtained or which was disclosed to the Employee by the Employer as a result of the Employment. The Employee agrees that if there is any question as to such disclosure then the Employee will seek out senior management of the Employer prior to making any disclosure of the Employer's information that may be covered by this Agreement.

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Non-Compete Agreement Document Preview

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Last Updated May 29, 2024

Written by

Ingvill Walmann Byrknes

Reviewed by

Fact checked by

What is a Non-Compete Agreement?

A Non-Compete Agreement (NCA) is a contract where one party agrees not to compete against the other.

When two parties exchange sensitive business information, one party could exploit that information to gain an unfair competitive advantage. A Non-Compete Agreement can help deter and limit this kind of competition.

Generally, Non-Compete Agreements must be limited by certain boundaries or parameters, such as time, geographical area, or industry.

Non-Compete Agreements are also known as:

Covenant not to compete
Restrictive covenant

Why should I use a Non-Compete Agreement?

The primary purpose of Non-Compete Agreements is to prohibit unfair competition. When you share sensitive information with another party, a Non-Compete Agreement deters them from using it to their or another competitor’s advantage.

In addition to preventing unfair competition, a Non-Compete Agreement can also help you:

Protect confidential information. The agreement includes a confidentiality clause to protect everything from trade secrets to customer lists.
Get legal recourse. If the other party begins competing against you unfairly, you can rely on the contract to seek injunctive relief to stop the behavior.

When should I use a Non-Compete Agreement?

Most commonly, Non-Compete Agreements are used in employment situations. Staff with access to confidential information about the business agree not to compete with their former employer for a set period after leaving.

However, in April 2024, the Federal Trade Commission announced a rule banning Non-Compete Agreements for workers. The final rule will become effective 120 days after it is publicized in the Federal Register.

Non-Compete Agreements will remain valid in other situations where parties exchange confidential information. These transactions include negotiating the sale of a business or disclosing intellectual property ahead of a patent application.

1. Employment or service

Non-Compete Agreements can help you manage employees and service providers with access to sensitive information or trade secrets.

By signing, workers agree not to compete with you for a set amount of time or within a specific geographical area. While they’re working for you, and after they leave, the agreement deters them from taking a job or starting a business where they can gain a competitive advantage against your company.

After the Federal Trade Commission ban comes into effect, only existing Non-Compete Agreements with senior executives will be enforceable.

2. Purchase or sale

You can use a Non-Compete Agreement to protect your interests in commercial negotiations, like when buying or selling a business. In fact, the first document that a prospective buyer should sign in an acquisition process is a non-compete or Confidentiality Agreement.

When buying a business

After selling a business to you, the original owner could use their existing relationships with customers and vendors to open a new business of the same type in the area. This would take valuable market share away from you and defeat the purpose of buying the business.

Entering a Non-Compete Agreement as part of the business acquisition can protect you against unfair competition.

When selling a business

When negotiating the sale of a business, a buyer usually conducts due diligence and assesses the value of the business they intend to purchase. In these cases, the seller offers the prospective buyer access to sensitive business information, like financial records and customer lists.

A Non-Compete Agreement can help ensure the buyer doesn’t misuse this business information for competitive purposes.

3. Invention

Any time you share intellectual property with someone, you can use a Non-Compete Agreement to protect your interests. Suppose you have to share an invention with a potential investor or disclose details of your work to a collaborator. Access to sensitive information could allow them to compete unfairly with you.

By having a Non-Compete Agreement in place, you can keep the invention details confidential and prevent the other party from using their knowledge against you. If they share or use the information in any way, you can take legal action against them.

Are Non-Compete Agreements enforceable?

Yes, Non-Compete Agreements can be enforceable in the United States, depending on their exact terms and your jurisdiction.

As we’ve covered above, the Federal Trade Commission's ruling will hinder the enforceability of employee Non-Compete Agreements across the United States. Any employee non-competes implemented after the ruling’s effective date will not be enforceable. Existing non-compete clauses will only be enforceable against senior executives.

Outside of the employment context, to make your Non-Compete Agreement more likely to be legally valid, you should:

Make sure the restrictions are reasonable. The scope and duration of the restrictions should be fair and reasonable.
Consider the industry. Businesses in fields where tight competition and trade secrets are the norm are more likely to need Non-Compete Agreements.
Offer consideration. In exchange for signing the contract, the other party could receive an increased payment or some other perk.
Avoid ambiguity. Be specific about what activities are prohibited, as broad clauses are less likely to hold up in court.
Make sure the agreement is necessary. If there is no exchange of sensitive information, a Non-Compete Agreement might be unnecessary.

A court will likely throw out a Non-Compete Agreement that harms local commerce. Similarly, if the agreement isn’t limited to a reasonable scope of time or geographical area, it might be scaled down to what the court considers reasonable.

Are you looking to get legal advice on a Non-Compete Agreement?

Talk to a lawyer

How to create a Non-Compete Agreement

To create your Non-Compete Agreement, you can use LawDepot’s template. Simply fill out our quick and easy questionnaire, and your document will be ready within minutes.

Choose the circumstances of the agreement (employment/service, purchase/sale, or invention).
Select the state where you want the agreement to be in effect.
Add information about the parties involved.
Describe the terms of the Non-Compete Agreement, such as the length and area of the restriction.
If necessary, you can include a non-solicitation clause.
Add a confidentiality clause.
Create any additional clauses you want to add.
Have the agreement signed by both parties. Having a witness present isn’t necessary, but it can reduce the risk of a later dispute.

Ready to create your Non-Compete Agreement?

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Non-Disclosure Agreements versus Non-Compete Agreements

Both Non-Disclosure Agreements and Non-Compete Agreements seek to prohibit the misuse of confidential information.

If one party has shared confidential information for a specific purpose, the other party can’t use it for anything but that purpose. Attempting to misuse the information for other purposes will result in a breach of the agreement, which could lead to a court case.

One potential misuse of confidential information would be to compete against the business of the disclosing party.

For this reason, many Confidentiality Agreements include a non-compete clause expressly prohibiting this conduct. If a Non-Disclosure Agreement is created with the main purpose of prohibiting competition, it may be called a Non-Compete Agreement instead.

Free Non-Compete Agreement

Create Your Free Non-Compete Agreement

Non-Compete Agreement

Agreement Duration

Agreement Duration

Your Non-Compete Agreement

What is a Non-Compete Agreement?

Why should I use a Non-Compete Agreement?

When should I use a Non-Compete Agreement?

1. Employment or service

2. Purchase or sale

When buying a business

When selling a business

3. Invention

Are Non-Compete Agreements enforceable?

How to create a Non-Compete Agreement

Non-Disclosure Agreements versus Non-Compete Agreements

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