Make a Delaware Non-Compete Agreement

Applicable State Laws - No state laws specifically address non-compete agreements

Once the employee or business partner signs the agreement, it now becomes a legally enforceable document that the employee must adhere to provided that the Delaware corporation properly drafts the non-competition agreement. There are no statutes that restrict what employers may impose in a non-compete agreement; however, they must follow case law and contract law to ensure enforceability by Delaware Chancery Court.

Before writing such agreements, business owners should seek legal advice from a law firm experienced in employment agreements, contract law, and non-solicitation. Legal counsel can help guide you on labor code, misappropriation, and the importance of forum selection, among other important concepts. Delaware doesn't have specific laws addressing non-compete agreements. It's important to not Google this information and to instead rely on a skilled attorney who understands how case law and contract law will affect you as the employer and the other party.

The Delaware Court of Chancery has generally held under Delaware law that non-competition agreements in employment contracts must be reasonable in time, scope, and geography. They must also serve a legitimate business interest, survive a balance of the equities, and be subject to a reasonable alterations approach. Of course, like all contracts, they cannot violate public policy.

Protect your Delaware business by also using a Delaware non-disclosure agreement form. Download a Delaware non-disclosure agreement form now!

How to Write a Delaware Non-Compete Agreement

A Delaware non-compete agreement generally includes the following clauses (provided that they are reasonable in scope):

• Purpose. This clause explains the purpose of the non-compete agreement: to protect confidential information from misappropriation. It also identifies the parties, includes an effective date, and refers to the confidential information as "proprietary information."
• Non-compete. This clause generally includes the time period restriction, geographical restriction, restrictions on business practices, restrictions on solicitations of clients or customers, restrictions on working for or with general competitors, restrictions on general or specific business activities, restrictions on general or specific activities, and restrictions on employee solicitation.
• Time period. This clause may reaffirm the time period as well as when the time period begins. The time period may begin either when the employee or independent contractor begins working for the business or when their relationship is terminated.
• Purchase option. This clause explains whether your business will allow the other party to buy out their responsibility to fulfill their duties in the agreement. If so, the amount they must pay will be listed.
• Jurisdiction. This clause states that Delaware law will govern the agreement.
• Confidential information. This clause states that the term "confidential information" as it is used throughout the non-compete agreement means any and all technical and non-technical information provided by your business that includes and is not limited to any data or other proprietary information related to products, inventions, plans, methods, processes, developmental or experimental products, intellectual property, software, databases, customer lists, vendor or supplier lists, marketing methods, reports, business plans, financial information, or other matter pertaining to your business or any of your clients, consultants, or licensees that is disclosed to the other party under the terms of this agreement.
• Permitted disclosure. This clause explains when confidential information is no longer considered confidential. Usually, this happens when information becomes public through no fault of the other party to this agreement, when the other party discovers the information on their own without a breach of another person, or it is released to the public after your business provides written consent.
• Confidentiality. This clause states that the other party acknowledges the information they receive is confidential and they agree they will not directly or indirectly disclose or communicate it to another party without the written consent of your business. They also agree they will not use the information for any purpose other than to further your business without first receiving written consent from your business.
• Consultants and employees bound. Both consultants and employees are bound to honor the agreement and are placed on a need-to-know basis. They are also required to keep confidential information in their strictest of confidence.
• Return of materials. This clause states that when the agreement is terminated or when requested by your business, the other party will promptly return all documents and any other tangible materials that represent the confidential information of the business as well as any copies that exist. The business will also notify the party upon discovering any loss of the unauthorized disclosure of the confidential information.
• Remedies. This clause explains the remedies your business is entitled to pursue under Delaware contract law if the other party breaches the non-compete agreement in some way. Examples include the recovery of court costs and reasonable attorney fees, the award by the court of a temporary restraining order or a preliminary injunction against the unauthorized use of your confidential information, etc., as well as all other remedies you may be entitled to pursue under Delaware law or equity.
• Choice of law. This clause states that the non-competition agreement is governed by the laws of the State of Delaware.
• Entire agreement. The final clause of the non-compete agreement states the agreement may only be amended in writing if the parties sign it. The parties must execute the non-compete agreement by signing and printing their name. Their signatures should also be dated.

Each party should receive a copy of the executed non-compete agreement for their records.