What is a Non-Compete Agreement?

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.

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Who can sign the non-compete agreement?

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.

What type of businesses use a non-compete agreement?

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.

When is a non-compete agreement enforced?

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.

What kind of things can be considered a competition?

In a non-compete contract following things can be considered as a competition:

• Working for competitor firm in the same market
• Starting a business in the same field
• Recruiting the workers of previous company and asking them to leave the previous company

Things to include in a non-compete agreement:

Following things can be included in a non-compete agreement by an employer:

• Names, contact information, addresses of all the individuals that are involved with the contract. Both the party that request the agreement and the party that is getting prohibited from competition should provide their personal and professional information.
• The reason to approve the agreement
• Type of employment
• Specified competitors
• The date from which the agreement will be effective
• The location or geographic area that is included in the non-compete agreement
• Duration of agreement
• Details of how the non-competing party will be compensated in exchange of not working with the competitors and following the terms and conditions of the agreement.

Things to consider when making a non-compete agreement:

• 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.

Advantages of a non-compete agreement:

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.

• Reducing turnover:

  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.

Disadvantages of a non-compete agreement:

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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