Non-Compete Agreement

A non-compete agreement (also called non-solicitation agreement or non-disclosure agreement) is a contract between an employer and an employee, that prohibits an employee from working for a competitor, stealing the company’s trade secrets, sharing the company’s marketing information, revealing upcoming products, or stealing the company’s customer list, in the event of termination or resignation at that company. A non-compete is typically used as a condition of employment and should be signed prior to the employee starting work at the company.

Each non-compete should be specific to each company’s unique needs, however each state has its own laws, so the employment law attorneys at JUX ensure they draft non-compete agreements that are compliant with the law. A non-compete should not be too broad, otherwise the courts might deem it unreasonable or unenforceable.

A non-compete agreement can be its own separate document, or part of other employment contracts such as confidentiality agreement, employment agreement, or an independent contractor agreement. In order for a non-compete to be enforceable it must include consideration. Consideration occurs when the employee has received something valuable (typically employment and/or extra compensation) in exchange of signing the non-compete agreement.

The main components of a non-compete are:

  • Time period in which the non-compete is enforceable (typically 1-3 years)
  • Scope of activities that are prohibited (ie: slander of the company, employment at a competitor, soliciting customers, etc.)
  • The geographical area that is restricted

By hiring a business attorney, they will ensure that they draft a non-compete agreement that is enforceable, but will also follow the litigation process if necessary, to get a favorable outcome for the business owner when a non-compete agreement has been violated by an employee, or when it is deemed unenforceable or unreasonable. Some of the most common reasons for non-competes to be deemed unenforceable are listed below.

  • The duration is unreasonable
  • The employee accepted the position prior to knowing about the non-compete
  • The non-compete is too broad
  • The employee never signed the non-compete agreement
  • The employer has wrongfully terminated the employee or was terminated for poor performance
  • The employee has not received valuable consideration that was agreed upon
  • The employer has breached the contract

A non-compete agreement is one of the most important ways an employer can protect their business interests, client list, and confidential information.