Non-Compete Agreement
Employers protecting business interests when hiring employees with access to trade secrets, client lists, or proprietary methods.
A non-compete agreement restricts an employee or contractor from working for competitors or starting a competing business after leaving a company. These agreements are common in industries where employees have access to trade secrets, proprietary processes, or key client relationships. Before using this template, check your state's laws — enforceability varies dramatically by jurisdiction.
Important Legal Warning: State Restrictions
Non-compete agreements are banned or severely restricted in several states. Before using this template, be aware:
- California — Non-competes are void and unenforceable. Period. (Cal. Bus. & Prof. Code 16600)
- Minnesota — Banned for all employees as of July 1, 2023.
- Oklahoma — Generally unenforceable except in the sale of a business.
- North Dakota — Non-competes are void under state law.
- Colorado — Banned for employees earning under $123,750/year (adjusted annually); highly restricted for all others.
- Many other states (Illinois, Oregon, Washington, Maine, etc.) impose income thresholds, duration limits, or require garden leave pay.
Additionally, the FTC has proposed a nationwide ban on non-compete agreements. While the rule's status remains in flux due to legal challenges, the trend is clearly moving toward restriction. Consult an employment attorney in your jurisdiction before relying on any non-compete.
Key Clauses Explained
Restricted Activities — This defines exactly what the employee cannot do. A good non-compete is narrow: it prevents working in the same specific role at a direct competitor, not "any job in any related industry." Courts regularly strike down overly broad restrictions.
Geographic Scope — The agreement must define where the restriction applies. A 10-mile radius for a local dental practice is reasonable. A nationwide ban for a mid-level employee is almost certainly unenforceable. The scope should match the employer's actual market footprint.
Duration (12 months) — This template uses a 12-month restriction, which most courts consider the upper bound of reasonableness for standard employees. Anything beyond 24 months is routinely struck down. Shorter is stronger — a 6-month non-compete is far more likely to hold up.
Consideration — The employee must receive something of value in exchange for signing. For new hires, the job itself is usually sufficient. For existing employees, courts in many states require additional consideration — a raise, bonus, promotion, or continued employment for a specified period.
Exceptions — Carve-outs for activities that do not compete. This protects the employee from absurd overreach and makes the agreement more enforceable by showing reasonableness.
Remedies — What happens if the employee violates the agreement. Typically includes injunctive relief (a court order to stop the activity) and potentially damages. Some agreements include liquidated damages or attorney's fees provisions.
Red Flags to Watch For
- No geographic limit — An unrestricted geographic scope is a sign of an overreaching agreement likely to be struck down.
- Duration over 24 months — Almost never enforceable for standard employees.
- No consideration for existing employees — If you already work there and they ask you to sign with nothing in return, you may have no obligation.
- Overly broad activity restrictions — "Any business that could be considered competitive" is vague and likely unenforceable. Look for specificity.
- No exceptions — A reasonable non-compete acknowledges that not all work in a sector is competitive.
- Liquidated damages without a cap — Some employers sneak in uncapped penalty clauses. Watch for this.
- Applies after termination without cause — If they fire you, they should not be able to restrict your livelihood. Many modern non-competes include a carve-out for involuntary termination.
Templates are starting points. Your actual contract will have different terms.
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Non-Compete Agreement
This Non-Compete Agreement ("Agreement") is entered into as of [DATE], by and between:
Employer: [EMPLOYER LEGAL NAME], a [STATE] [ENTITY TYPE], with its principal place of business at [EMPLOYER ADDRESS] ("Company")
Employee: [EMPLOYEE FULL NAME], residing at [EMPLOYEE ADDRESS] ("Employee")
RECITALS
WHEREAS, the Company is engaged in [DESCRIBE BUSINESS]; and
WHEREAS, the Employee will have access to the Company's confidential information, trade secrets, client relationships, and proprietary methods in the course of employment; and
WHEREAS, the Company and Employee wish to protect the Company's legitimate business interests;
NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the parties agree as follows:
1. Restricted Activities
During the Restricted Period (defined below), Employee shall not, directly or indirectly:
(a) Engage in, own, manage, operate, or provide services to any business that competes with the Company's [SPECIFIC BUSINESS AREA] within the Geographic Scope defined below;
(b) Solicit, contact, or attempt to divert any client or customer of the Company with whom Employee had material contact during the last [12/24] months of employment;
(c) Recruit, solicit, or hire any employee or contractor of the Company, or encourage any such person to leave the Company's service.
2. Geographic Scope
The restrictions in Section 1 apply within [DESCRIBE GEOGRAPHIC AREA — e.g., "a 25-mile radius of the Company's offices located at [ADDRESS]" OR "the following states: [LIST STATES]" OR "the metropolitan area of [CITY]"].
3. Duration
The restrictions in this Agreement shall apply during Employee's employment and for a period of twelve (12) months following the termination of Employee's employment for any reason (the "Restricted Period").
4. Consideration
In exchange for Employee's agreement to the restrictions in this Agreement, the Company shall provide:
[SELECT ONE OR MORE:]
- (a) Employment with the Company and access to its confidential information and trade secrets;
- (b) A one-time payment of $[AMOUNT], payable within [NUMBER] days of execution of this Agreement;
- (c) [OTHER CONSIDERATION — e.g., promotion, salary increase, stock options, signing bonus].
Employee acknowledges that the consideration provided is adequate and sufficient.
5. Exceptions
Notwithstanding the foregoing, this Agreement does not prohibit Employee from:
(a) Owning less than 5% of the outstanding shares of a publicly traded company that competes with the Company;
(b) Working in a role for a competing business that is unrelated to the Company's [SPECIFIC BUSINESS AREA] and does not involve the use of the Company's confidential information;
(c) [ADDITIONAL EXCEPTIONS AS APPLICABLE].
6. Remedies
(a) Employee acknowledges that a breach of this Agreement would cause irreparable harm to the Company for which monetary damages would be an inadequate remedy. Accordingly, the Company shall be entitled to seek injunctive relief, including temporary restraining orders, preliminary injunctions, and permanent injunctions, without the necessity of posting bond.
(b) In addition to injunctive relief, the Company shall be entitled to recover actual damages, including lost profits, resulting from any breach.
(c) The prevailing party in any action to enforce this Agreement shall be entitled to recover reasonable attorney's fees and costs.
(d) The Restricted Period shall be extended by the duration of any breach by Employee (i.e., the clock tolls during violation).
7. Severability
If any provision of this Agreement is held to be unreasonable or unenforceable, the parties agree that a court of competent jurisdiction may modify the provision to the minimum extent necessary to make it enforceable, rather than voiding it entirely.
8. Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the State of [STATE], without regard to conflicts of law principles.
9. Entire Agreement
This Agreement constitutes the entire understanding between the parties with respect to its subject matter and supersedes all prior negotiations, representations, and agreements.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
EMPLOYER:
Signature: ___________________________ Name: [AUTHORIZED SIGNATORY NAME] Title: [TITLE] Date: [DATE]
EMPLOYEE:
Signature: ___________________________ Name: [EMPLOYEE FULL NAME] Date: [DATE]
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