Non compete agreement template

What is a non compete agreement?

A non-compete agreement template is a formal document that disallows an employee or an independent contractor from working with any competing companies or on any projects that conflict with the current job or becoming a direct competitor. The contract is binding only for a certain time, after your working relationship ends. 

To explain in detail, a non-compete agreement template is a document that outlines the terms and conditions of an agreement between an employer and an employee or a contractor, in which the employee or contractor agrees not to compete with the employer's business for a certain period of time after the termination of their employment or contract. This type of agreement is typically used to protect the employer's trade secrets, confidential information, and customer relationships. A non-compete agreement template typically includes the names of the parties involved, the scope of the non-competition, the duration of the non-competition, the geographical area where the non-competition applies, and any exceptions or exclusions. The non-compete agreement template also typically includes a section outlining the penalties for violating the non-compete clause.

The goal of this agreement is to find ways to ensure that your employee doesn't work on any projects that could reduce your company’s market share. 

A non-compete agreement is also known as non-compete, non-compete clause, non-compete covenant, and covenant not to compete.
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Here's a quick video on Non Compete Agreements.

Types of non compete agreement

• Non-competition agreement
• Non-solicitation agreement
• Non-disclosure agreement
• Confidentiality agreement

When to use a non-compete agreement

To create and approve a non-compete agreement, especially during the pandemic, here is what you need to do:

• Map out your competition
• Customize your non-compete agreement
• Send it to your employee for signature via an affordable eSignature solution like Signeasy
• Once it's signed by the employee, you need to also sign the online contract

Try to ensure that the non compete agreement template isn't overly restrictive or harmful to the employee. Not only would that be bad in terms of employee experience, but it may also not be applicable in court.

Why you should have a non-compete agreement

A non-compete  ensures that your business’ sensitive information and secrets are not leaked during or after employment. Inked between an employee and employer, it safeguards your company’s best practices, client details, pricing, strategy, salary and innovations. 

A non-compete  also delays ex-employees and consultants from using the know-how and contacts, secured while working with your company, to set-up a competing business. 

Note: Remember, it cannot stop your employees and contractors from joining or setting up competing firms forever. It is only applicable for a fixed period. And it's also not enforceable in a lot of states. 

What are the benefits of non-compete agreement 

For Employers

Many times, salespeople tend to be poached by direct competitors. Wouldn’t it be just awful if they could take their client list or trade secrets with them! And you stand to lose so much business. This is where a non-compete agreement template can come in real handy.

Another example is that of an app developer who has received all the requisite training and access to your future product pipeline. They will soon abandon ship and start their own software company - launching a similar product before you do. In such situations, a non-compete agreement can save the day. It dissuades employees from quitting and starting a competing business of their own. 

With a non compete agreement, in both cases, you not only discourage employees from quitting but also keep your business safe from competition. 

Just whip out the template (click here to download), upload it onto Signeasy, make edits and hit send. In this way, you can be legally protected while also saving on hours spent on drafting these contracts.

For employees

The biggest incentive for an individual to sign the non-compete agreement, is the promise of receiving employment with the company. Sometimes, employers also promise promotions, more expensive and intensive training sessions and other perks on signing this contract. But the biggest draw is obviously that of bagging the job.

Many times employers don't realize the importance of getting this contract signed until their employees start selling their products on the sly or joining rival companies. But, by then it's too late. Even if you belatedly ask for the non-compete agreement to be signed, the employees may refuse to do so. Since they have all the requisite know-how already, they can always set something up on their own or take the knowledge with them to a new company - lowering your bargaining power. 

So, always get the non compete agreement signed before onboarding the new recruit or contractor. And during COVID, to avoid delays, make sure you use Signeasy to keep the transaction hygienic and contact-free. 

Components of non-compete agreement template

As with most agreements, you start the non compete agreement template with a comprehensive introductory set of paragraphs. This includes the effective date on which the agreement will begin, the details of the parties involved in this contract and a brief description of what the employee’s role entails.

You will notice (in the snapshot below) that there is mention of “ agreeing to the restrictions as partial consideration for the Company’s promises inherent in the Employment Agreement.” This statement tries to showcase that the agreement is not forced on the employee, but rather is a barter deal.

Note: Be sure to attach a copy of the employment agreement with non-compete agreement as proof.

1. Non-competition 

This is perhaps the more critical piece of the contract. It outlines how long the non-compete restrictions on the employees or contractors apply. You can also make note of the types of businesses that you consider as competition and the geographical locations covered by the agreement. 

2. Employee acknowledgments

Courts tend to be very particular about not hoodwinking employees into signing non-compete contracts without understanding the full implications of its clauses. To counter this, you will see that this section mentions that the signers had the chance to seek legal guidance and negotiate the terms of this agreement. 

3. Applicable law

Since non-compete laws vary from state to state, this is an important section. It simply outlines which state’s laws are applicable to this contract.

4. Signature

Once the employee and employer sign on the dotted lines, the non-compete agreement is considered to be legally binding. This section should have the names of the company, its representative and the employee, along with the date. You could use an eSignature solution like Signeasy to have new joiners remotely sign documents. Signeasy can also automatically remind candidates to sign the document, which means you don't have to waste time manually following up.  

How can you make the non-compete agreement more enforceable?

Being too severe with your non-compete agreement clauses could make the employee feel like their hands are tied. And too much restriction can actually make the employee leave the field altogether, which means your pool of talent shrinks significantly.

Also, most states favor an employee's right to make a living over enforcing a non-compete contract. Therefore, the less restrictive the agreement is, the greater the chances that it will be imposed. 

All things considered, here are some suggestions on how to structure a water-tight non-compete agreement template:

1. Do not indefinitely ban an employee from working with a competing company. Typically the term of the agreement is 6 months to 2 years after the employee leaves the company. But, it varies from jurisdiction to jurisdiction, so be sure to check with a local legal representative.
2. Let the ambit of the contract’s clauses be limited to just the employee in question. Do not bar relatives of the employee from working with competing companies.
3. Make note of some of the key details of the employee’s role and responsibilities.
4. Show that you (the employer) offered something valuable to the employee in exchange for signing the non-compete document.
5. Add a clause that allows employees to work for competing firms or establish one, with business interests outside of your jurisdiction.

Employees who are presented with a non-compete agreement that feels too restrictive usually end up not signing it. Also, remember, unreasonable clauses usually will not even hold in the court of law owing to their far-reaching consequences.

Non-compete agreement:

FAQs on Non Compete Agreements

How do you get around a non-compete?

If as an employee, you have violated the terms of a non-compete agreement and the company sues you, then going to court is your best recourse. Of course, many a time employers don't really resort to legal cases when employees breach this contract.  

How effective is a non-compete agreement?

Generally speaking, once a non-compete agreement is signed, it legally prevents employees from joining competing firms or setting up competing businesses, for a set period after quitting your company. But, the judicial system in states such as California, North Carolina, and Oklahoma, completely disregard these agreements. 

What voids a non-compete agreement?

A non-compete agreement is considered null and void in case it can be proven that the employee never signed the contract at all or the contract is against the public interest.

How do I write a non-compete agreement?

To pen a non-compete agreement template, here are the steps to follow:

1. Identify your direct competition.
2. Pen the contract, or simply personalize the non-compete agreement template.
3. Ensure that the final draft is reviewed by a legal professional.
4. Send the non-compete agreement to your employee via an eSignature tool.
5. Once they sign it, have your representative also approve the document.
   

What is an example of a non-compete agreement?

A non-compete agreement template will help you understand all the provisions required to keep employees from joining competing brands. Here is an example of one such template. 

What is a typical non-compete clause?

A non-compete clause is one article in a contract that outlines the terms under which an employee is forbidden from working with direct competitors. It reads something like this: “For the complete duration of the Agreement, and [time period] after the termination of the Employee's relationship with the Company, the Employee will not a) engage as an employee, officer, director, partner, consultant, agent or owner b) be associated in any other capacity, with a competing company. This means that the Employee must not work for [business type] in [geographic area].