Employee Non-Compete Agreement

An Employee Non-Compete Agreement ensures that an employee won’t compete against the employer.

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Nowadays, there is competition in many fields of business. The nature of business is employees coming and going and companies doing everything in their power to protect their interests.

That is why the Employee Non-Compete Agreement is not an uncommon procedure when hiring new employees. Not every state has the same policy concerning the implementation and enforceability of Employee Non-Compete Agreements.

But in many instances, the companies choose to include them to prevent large workforce turnovers.

What Is an Employee Non-Compete Agreement?

An Employee Non-Compete Agreement is a legally binding document between an employer and its employees. It states that the employee agrees to not compete against the employer, such as starting a business that competes in the same field.

The scope of this agreement can vary in duration and geographical area. For example, the contract may only cover the non-compete aspect when the employee is still working at the company, which prevents them from seeking additional work in the same field.

Also, it could prevent them from seeking employment at a competitor after they leave the company. That's where the time and geography clauses come in.

The Employee Non-Compete Agreement can be difficult to enforce if it is too restrictive, so it should consider the employee. Also, an employer can introduce an Employee Non-Compete Agreement at any time, not just at the start of employment.

Other Names for Employee Non-Compete Agreement

Depending on your state, an Employee Non-Compete Agreement may also be known as:

  • Noncompete
  • Non-Compete Covenant
  • Non-Compete Contract
  • Agreement Not to Compete
  • Non-Compete Form

Who Needs an Employee Non-Compete Agreement?

In most cases, companies owning proprietary technologies and information require employees to sign an Employee Non-Compete Agreement. Others may have to spend valuable resources on training workers and would rather not have that come back to bite them later.

Why Use 360 Legal Forms for Your Employee Non-Compete Agreement

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Create your own documents by answering our easy-to-understand questionnaires to get exactly what you need out of your Employee Non-Compete Agreement.

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How to Create an Employee Non-Compete Agreement with 360 Legal Forms

An Employee Non-Compete Agreement doesn't have to contain too much information, just the right information. That means if you miss something, the document could end up unenforceable. That's why a practical template goes a long way.

Let 360 Legal Forms help with our extensive library of attorney-vetted legal forms. The process is fast and easy. All you have to do is fill out our easy-to-understand questionnaire. Once complete, simply download your form as a PDF or Word document from your secure online account.

What Information Will I Need to Create My Employee Non-Compete Agreement?

To create your document, please provide:

  • Company Details: The legal name of the company, address, and governing state.
  • Employee Details: The details of the signing representative of the company or the employer.
  • Effective Date: The date when the agreement becomes valid.
  • Scope: Details regarding the deal details and what the employee is allowed and not allowed during and after employment.
  • Geographic Scope: Describe the area where the employee is supposed to agree not to compete.
  • Additional Clauses: Non-solicitation, non-disclosure, and confidentiality.
  • Signatures: Both parties need to sign the document to make it legally enforceable.

Employee Non-Compete Agreement Terms

  • Non-Disclosure: A clause calling for the employee to not share sensitive information with those outside the company
  • Non-Solicitation: A clause preventing the employee from contacting former clients, coworkers, and other assets
  • Employee Handbook: A manual explaining all the duties and responsibilities of the employees concerning the company
  • Trade Secret: Intellectual property of the employer
  • Covenant: Another word for agreement
  • Turnover: The frequency of employees coming and leaving in a company
  • Assignment: A provision allowing an employer to transfer the contract to another party

Employee Non-Compete Agreement Signing Requirements

When all clauses and provisions are outlined in the document, both the employer and employee sign the form. Only then will it be legally binding. The employee may refuse to sign it, but, depending on the state, the employer has the right to rescind the job offer.

Also, the document doesn't require notarization or a witness by law. However, you may choose to include one or both if you want another layer of authentication.

What to Do with Your Employee Non-Compete Agreement

Once an Employee Non-Compete Agreement is signed, both parties should keep their copies. Also, a copy of the agreement should be attached to the Employment Contract and sent to the company's HR department.

Frequently Asked Questions

There is often a lot of confusion about Non-Compete Agreements and Non-Disclosure Agreements. While there is some overlap, essentially the Non-Disclosure Agreement doesn't prevent the employee from working in the same field after leaving the company. So, technically, they can compete with the previous employer. They can't disclose any trade secrets that could be considered sensitive, confidential, or proprietary. In most cases, the Employment Contract may contain both clauses.

When an employee is presented with an Employee Non-Compete Agreement, they should always ask if it will be enforced if they leave voluntarily. As such, if they get fired or laid off from work, they can still pursue a career in the same field. In most cases, companies are accommodating in this respect.

Almost all advantages of an Employee Non-Compete Agreement are intended for the employer, not the employee. When an employee signs the agreement, the employer has more guarantee that there wouldn't be a high turnover. It will also encourage the employer to provide expensive training for their employees without worrying that it might not pay off. As for the employee, the apparent advantage is employment because not signing the agreement could lead to the company withdrawing the job offer.

It is legal for an employer to ask current employees to sign a Non-Compete. This happens if certain circumstances occur that would lead the employer to want to protect the business. However, if an employee chooses not to sign it, it may be illegal for the employer to dismiss the employee. You may have to consult your state law for the specificities.

Many contract law attorneys would argue that the first mistake is not having one in the first place. But there are other common many mistakes employers make when creating an Employee Non-Compete Agreement. One is that the restrictions last too long. And even if you take the matter to court, it may not be enforceable. Another mistake that companies should avoid is not specifying geographical restrictions in the agreement. And finally, not updating the agreement regularly could lead to an inaccurate scope of the non-compete.

In some cases, the employer may not do anything at all. However, you may get sued and the court may issue an injunction that forbids you from competing in the same industry. Those who violate injunctions can be held in contempt and sent to prison. Since time is essential in these matters, a court will usually react quickly if there are merits to the employer's claim. You may be assessed damages if you are to lose the case.

When it comes to disadvantages, they are more directed to the employee. Essentially, when an employee signs a non-compete, this automatically reduces the employee’s bargaining power. It's often a stumbling stone for many employee-employer relationships. Another disadvantage is that it can be challenging to enforce. The degree of difficulty will vary from state to state and in part how restrictive the agreement is.

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Applicable to all 50 states
Applicable to all 50 states

Our documents are vetted by lawyers and are applicable to all 50 states.