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A non-compete agreement is a contract in which one party agrees not to start a business in the same field as another party.

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Sample Non-Compete Agreement

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What is a Non-Compete Agreement?

A Non-Compete Agreement, also known as a Non-Compete Clause, is very common with employees of a large companies. The clause will prevent the employee from leaving the company to compete in the same industry as the former employer.

A Non-Compete Agreement may be included in another document or it can be its own separate form. The form will require information about both parties. It will also require the field that is being discussed. It may include information about the target consumer base for better clarification of the field that the party will be unable to compete in.

Most Non-Compete Agreements will be used in a certain state or for a certain geographical area, so the clause should include the area in which the party cannot create a competing business. This could be a small surrounding area, an entire state, or even multiple states, depending on the particular circumstances of the situation.

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What Is A Non-Compete Agreement?

what is a non-compete agreement

Hey. Are you a new entrepreneur? Are you currently hiring a bunch of Type-A, entrepreneurial employees? Ambitious people can work together well, but only for a certain amount of time. The economy is in trouble, and competition is at an all-time fierceness. Unless your business is already booming, you’ll want to have a solid non-compete agreement in place.

It’s easy to simply jump on the web and fill out a free non-compete agreement template on a website. But how exactly will your non-compete agreement work legally? There are a few major issues you have got to keep in mind when drafting your non-compete agreement.

Make it Document Number One

Before you expose an employee to the intricate workings of your business, it’s a good idea to have him or her sign the no-compete clause. Non-compete clauses do not apply to the past; they take effect at a present or future date and go from there. For maximum protection, you should make your non-compete agreement a priority.

Don’t be shy about using templates

There are plenty of reputable web sites that offer free non-compete agreement templates that one can download and fill out. This method erases several steps for you, as the organization and formalization of the document are already taken care of. All you need to do is prepare and enter the information, and you’re all set.

Include all details

Vague language is a terrible parent. It can’t protect anything. Unless you outline the details of what your associate needs to do or not do, your non-competition agreement is basically useless. Be sure to provide details of limitations, such as the duration of the agreement and the geographical area to which it applies (you can’t generally apply a non-compete agreement to the entire world, forever.


Also called a “consideration,” this is whatever you pay your associate to keep the non-compete agreement intact. In the case of a new employee, such a payment can be as menial as a job offer. On the higher levels, it can mean a lot of money. Be sure that you evaluate how much your captive market is worth to you and structure your agreement accordingly.

Legal Considerations of a Non-Compete Agreement

legal considerations of a non-compete agreement


Think you don’t have much in the way of business secrets? I’ve got news for you - if yours is a new business, those little strategies you’ve been implementing here and there? Someday, those may become big. I mean, you just don’t know. The market is a wild world, always changing. The risks you take and the moves you make can pay off in unexpected ways.

For this reason, it is crucial that you keep your data, model and strategies confidential. If you do not adequately protect your information, pretty much anyone can waltz in, snap it up and apply it in a competitive venture that effectively kills your business. Which brings me to the subject of the non-compete agreement, or non-compete clause. A no-compete clause is your single most effective legal defense against this sort of professional piracy . Here are a few legal details to keep in mind when drawing it up.

Check your state laws

First things first – be sure your non-compete agreement is legal in your state! Some states, such as California, only allow non-compete agreements in the case of the sale of a business. Some states impose specific time and geographical limits to restrictions.

Be specific.

Figure out exactly what you need to protect and state it concretely. Some no-compete agreements ask that employees not use X, Y or Z forms of information within G amount of time. Others are broader, prohibiting associates from opening a similar business or beginning any venture within that industry within a certain area and time period. For

Set a time limit

You can’t very well ask an ambitious associate to internalize your business secrets and then ignore them for the rest of his or her life. Not unless, of course, you are as rich as Donald Trump. For the most part, non-competition agreements have limited timespans as well as geographic areas. Your job is to choose your area and timespan. For example, if you run a stationery store in Seattle, you can get your employee, Richard Pritchard, to sign an agreement stating that he would not open a stationery or art supply store within 100 miles of Seattle city limits.

Make sure your associates sign it right away.

Your non-compete agreement is going to apply to a definite period in time. You cannot ask an employee to sign a promise that applies partially to the past.

Keep an eye on the situation.

Remember, if a former associate breaks the rules of the no-competition agreement, you are the one who will have to speak up about it. The non-competition agreement is a legally binding document. Don’t be sheepish about embracing its power and getting confrontational if necessary.

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