A Non-Compete Agreement, often incorrectly referred to as a "Noncompete Agreement," is a legal contract signed between two parties, employers and employees, where they have agreed on the fact that the individual will not enter into competition with the company where they work, during or after their employment. It means that an employee who has signed this type of agreement cannot work for a competitor of their former employer or disclose any proprietary information. The information that is not supposed to be disclosed is defined in the agreement.
Most states recognize Non-Compete Agreements, however before signing one an individual should check the state law of where they reside in order to understand if there are any legal restrictions dedicated to the agreement's duration, the territory of coverage, consideration payment, etc.
A standard Non-Compete Agreement consists of several parts, the most important ones include the following:
In addition to the mentioned sections, a Non-Compete Agreement can also include parts dedicated to severability, legal fees, applicable law and jurisdiction, representatives, etc.
Usually, employees are asked to sign an employee Non-Compete Agreement after they have applied for a position and successfully passed the interview. Getting the position means that they will get access to certain types of confidential information, which an employer is trying to protect.
If an employee is asked to sign this kind of agreement, they should spend a significant amount of time reviewing it. It's important to pay attention to the territory and the time period upon which they are not allowed to enter into competition with their employer. During the negotiation process, they should try to narrow it down as much as possible to protect their rights.
Another important part of the agreement is the section where an employer describes the actions and the nature of the business that are restricted for the employee. Companies tend to broaden it and restrict bigger areas than are actually necessary to protect.
The only way to get out of a Non-Compete Agreement is to go to court. However, the results of the litigation will depend on the state where the agreement was signed. Some states tend to question the necessity of Non-Compete Agreements and narrow them down, while others take them more seriously and protect the employer's rights. The general tendency is that Non-Compete Agreements are in disfavor right now, so, depending on the circumstances, an employee might get away with violating the agreement. Keep in mind that situations will vary depending on the case.
If an individual has violated a Non-Compete Agreement, they must be ready to meet some consequences. However, the consequences will depend on the actions the other party is willing to make. A possible repercussion can include litigation as an employer is likely to sue an employee for a violation of this agreement. The further consequences, in this case, will be ruled on by a judge, who base their opinion on state law and state tendencies towards Non-Compete Agreements. Nevertheless, an employee might meet no repercussions at all, if the employer won't file a lawsuit against them.
Related Agreements and Forms: