An employee signs a non-compete agreement promising not to work for another employer once their employment has ended.
A non-compete agreement is a legally binding agreement between an employer and their employee. In this type of legal agreement, the employee agrees and sing that they will not enter in a competition with the employer during their time of working with the employer.
A non-compete agreement can also be a clause in an employment contract. The most important part of this agreement is that it makes sure that the employee does not reveal any proprietary information or any trade secrets to any other parties during their time of employment and even after that.
A non-compete agreement also prohibits employee from entering the markets or profession that they employer considers are in direct competition with their business.
These contracts also indicate how long the employee will abstain from working with a competitor in a specific market or location. Non-compete agreement can also prevent employers from getting work in their field if they leave a position.
Employers make the non-compete agreement for employees to stop them from revealing information about clients, customers, ongoing projects, future projects, ideas, methods, pricing, operations, salaries, strategy and much more.
Employers usually only ask their employees to sign a non-compete agreement, but independent contractors and consultants may also be a subject to non-compete agreement during the time period of their employment as their employment contract seeks to avoid competition.
Before getting into a non-compete agreement, you must know what kind of business it is that is involving you in this contract, whether it is a legitimate business or not. If it is not a legitimate business, then there is really no need to agree to these terms and the employee can do as they seem fit.
If you are asked to sign a non-compete agreement by your employer, then you should contact your lawyer for advice right away. With the help of a legal team, it will be easy for you to know whether the agreement and business is legitimate or not and that you are not jeopardizing your future by signing an agreement like that. A lawyer will make sure to read through the contract and see that the agreement isn’t overly harmful or restrictive to the employee.
A non-compete agreement will be enforced when the relation between employer and their employee has ended if the employer wishes to stop the employee from competing against them in their new position.
In a non-compete contract following things can be considered as a competition:
Following things can be included in a non-compete agreement by an employer:
Follow the laws:
An important point to note here is that the agreement should not be breaking any laws of the state or country and it is made while keeping all the laws in mind and the employee will not be getting in any trouble by signing it.
Let employee know about the company policies:
Before making employees sign the agreement the employer must tell them about the policies of the company and the competitors. The employee should be made aware of what they are getting into.
Agreement should not be too restrictive:
If the agreement is too restrictive then the employee will be skeptical about signing the agreement as it can be risky for their future in the field. This will be bad for the company as the employees will not be easily convinced or will be comfortable with signing the agreement.
Remind employees of the agreement:
When an employee is leaving your company then it is your job to remind them of the agreement and inform them that as soon as they leave the agreement will be effective from that day and that the employee should review the agreement in order to avoid any problems in the future.
There are various advantages of a non-compete agreement:
Providing incentive to employers:
A company would not like to spend their money on training if the employees will take all that they have learned to the competitors. By making employees sign the non-compete agreement, it provides employer with an incentive that everything that the employees will learn in their company will only stay within the company and the skills they learned will not be used in any other competitor firm.
Protecting Trade Secrets:
Non-compete agreement ensures that the employee will not leak any trade secrets to any outside party and the trade secrets they know of the company they are working at will not be known by any other company.
If an employee of the company by any chance has a low desire to keep changing jobs, they will be a good fit for the company that uses a non-compete agreement. An employee like that provide reassurance to the company that their secrets are safe with the employee and in exchange the employee is given a job security and a chance to have a successful future at the company.
Unlike NDA, a non-compete agreement will stop the employee from getting a job in the competitor firm. This way even if the employee has a better job option available, they will not be able to leave the company they are currently at, as long as the contract is valid.
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This Non-Compete Agreement (the “Agreement”) is entered into ________________________ (the “Effective Date”), by and between ___________________________, with an address of ________________________________ (the “Company”) and ____________________, with an address of ____________________________________, (the “Individual”), also individually referred to as “Party”, and collectively “the Parties.”
This Agreement shall be in force beginning on the date of execution (hereinafter referred to as the "Effective Date"), during the Employee's Employment Period, and for a period of ___________________ after the termination of the Employment Agreement.
The Individual hereby agrees that he or she will refrain from participating in any business or firm that competes with the company’s business activity and line of business for the length of his or her employment.
The Individual shall not conduct any business or work that is in competition with the business of the Company.
The Individual promises that any company that competes with the Company will not be managed, operated, advised, owned, controlled, consult with, or use in his or her name.
The Person understands that the Company's main line of business is _____________________. The Individual is not permitted to engage in direct business competition with the Company.
Following the end of its engagement with the Company, the Individual will be prohibited from competing against the Company for ____________ years.
Within a __________ mile radius of the Company's major business location at ___________________________________, the Individual shall be prohibited from competing with the Company.
Without the prior written consent of the Company, the Individual shall not, during the Restricted Period and within the Restricted Territory, directly or indirectly own, manage, operate, join, control, finance, or participate in the ownership, management, operation, control, or financing of, or be connected as an officer, director, employee, partner, principal, agent, representative, or consultant of any entity engaged in the Restricted Business.
To enter into this non-compete agreement, the Company and the Individual both agree to pay and accept ___________________.
The person likewise promises to refrain from directly or indirectly attempting to persuade any employee of the company to quit, as well as refraining from directly or indirectly attempting to win over any of the company's clients or customers.
The Parties agree that this Agreement shall be governed by the ______________________________ in which the Company is located.
The term "Confidential Information" refers to all technical and non-technical information provided by the Company, including but not limited to any data, files, reports, accounts, or proprietary information in any way related to products, services, processes, databases, plans, methods, research, development, programs, software, authorship, customer lists, vendor lists, suppliers, marketing and/or advertising plans, methods, reports, analyses, financial or statistical data, or any other information.
At no time will the Individual divulge any of this private information. Additionally, the individual agrees to never utilize any of this private information for personal gain. Even after the Agreement is terminated by its natural expiration or by an early termination by either party, this clause is still in full force and effect.
Representations and Warranties:
Both Parties vouch for their full legal capacity to enter into this Agreement. There will be no violations or infringements of any third party's rights, of any other agreements between the Parties, individually, and any other person, organization, or business, or of any law or governmental regulation in the performance or obligation of either Party.
All other sections should remain in full force and effect as valid and enforceable. If any provision of this Agreement is found to be invalid or unenforceable, in whole or in part, that provision shall be severed from the remainder of the Agreement.
The Parties recognize and concur that this Agreement encapsulates their whole understanding. Any changes, additions, or other modifications to the terms must be made in writing and signed by both Parties if the Parties wish to proceed.
The Parties agree to the terms and conditions set forth above as demonstrated by their signatures as follows: