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Free Non-Compete Agreement Template

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Document and article by on October 31, 2023 Written by Easy Legal Docs Editorial Team

Understanding Non-Compete Agreements can be straightforward with the right guidance. Dive into our simple guide below, and don’t forget to grab our free downloadable template to get started.

What is a Non-Compete Agreement?

A Non-Compete Agreement is an agreement between two parties: usually an employer and an employee. In it, the employee promises not to compete with the employer for a certain time and in a certain area after leaving the job.

Why Do Businesses Use Them?

Every business wants to protect its unique strengths and advantages in the market. Non-Compete Agreements can serve this purpose.

Here are a few reasons why a business might use such an agreement:

  • Safeguard Secrets: They want to make sure former employees don’t share trade secrets with competitors.
  • Maintain Customer Relationships: They don’t want employees to leave and take customers with them.
  • Investment Protection: Training employees is costly. Businesses want to ensure they get a return on that investment.

Having these protections in place gives a company the confidence to operate, innovate, and grow without fearing that departing employees might compromise their success.

How Do They Benefit Employees?

It’s natural to think that Non-Compete Agreements mainly favor the employer. However, employees can find value in them too.

Let’s explore some of these benefits:

Skill Development

Often, employers invest in training. This can enhance an employee’s skills and value in the market.

Clarity

The agreement clearly defines what an employee can and can’t do after leaving. This can prevent future disputes.

Negotiation Power

Sometimes, employees can negotiate better terms or compensation in return for agreeing to these conditions.

3 Tips for Crafting a Fair Non-Compete Agreement:

Creating a Non-Compete Agreement requires a careful balance. It should be firm enough to protect business interests while also being fair to the employee. Here are a few things to keep in mind:

  • Be Reasonable: Overly restrictive terms might not be enforceable.
  • Be Clear: Ambiguities can lead to disputes.
  • Review Regularly: Business needs change. Review and update the agreement as needed.

By ensuring fairness and clarity, businesses can foster trust with their employees while also protecting their vital interests.

Key Elements of a Non-Compete Agreement:

Crafting a Non-Compete Agreement requires a clear understanding of its vital components. Here are the essential elements that every such agreement should possess:

  • Duration: Clearly state how long the non-compete lasts.
  • Geographical Scope: Define the area where the employee can’t compete.
  • Description of Prohibited Activities: Clearly describe what activities are restricted.
  • Consideration: Something of value must be given in return for the agreement (like training or a signing bonus).

Understanding and properly defining these elements can ensure that the agreement stands firm and is effective in protecting both the employer’s and the employee’s interests.

Using our Non-Compete Agreement: A Step-by-Step Guide

Step 1: Gather All Necessary Information

Before you begin filling out the Non-Compete Agreement, ensure you have all the necessary details on hand. This includes the company’s name, address, the employee’s name, address, job title, and the effective date.

Step 2: Fill in the Company and Employee Details

Start by entering the company’s name and address in the spaces provided. Following this, input the employee’s name and address. Make sure you accurately capture the details to avoid any discrepancies later.

Step 3: Indicate the Effective Date

Specify the date when this agreement comes into effect. This is typically the date when both parties sign the document.

Step 4: Describe the Employee’s Job Role

Clearly define the job title or the role of the employee in the space provided. This ensures clarity on the employee’s responsibilities and the scope of the agreement.

Step 5: Review Non-Competition and Non-Solicitation Clauses

Go through the non-competition and non-solicitation clauses to ensure you understand the terms. These sections are crucial as they describe the activities the employee is prohibited from engaging in during and after their contract term with the company.

Step 6: Acknowledge Employee’s Understanding

This part of the document allows the employee to acknowledge their understanding of the agreement. It confirms that the employee had a chance to seek legal counsel and understands the implications of the terms.

Step 7: Confirm Representations and Warranties

Both parties need to ensure that they are authorized to enter into this agreement and that they aren’t violating any other agreements or laws by doing so.

Step 8: Choose the Governing Law and Jurisdiction

Based on where the company operates and the preference of both parties, select the governing state or country. This determines which legal jurisdiction will handle any disputes arising from the agreement. Decide if any disputes will be handled through arbitration or in federal or state courts and specify the choice in the space provided.

Step 9: Sign the Agreement

After reading through the entire agreement and ensuring that all the information is accurate, both the company representative and the employee should sign in the designated areas. Along with the signatures, the respective dates of signing should be entered.

Step 10: Make Copies for Record Keeping

Once both parties have signed the agreement, make sure to make copies for both the company and the employee. This ensures that both parties have access to the agreement for future reference.

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Document Sample

Non-Compete Agreement Template

Below you can see a sample of the Non-Compete Agreement template:

Template Non-Compete Agreement

Non-Compete Agreement FAQ's

What is a non-compete agreement?

A non-compete agreement is a formal workplace undertaking between the employer company and its employee, consultant, or contractor. It is an initial contract usually signed by employees while working with specific companies or businesses. It is standard practice for such a contract is executed at the commencement of an employment or contractual term.

What should be included in a non-compete agreement?

The components of a non-compete agreement vary between companies and businesses, industries, and jurisdictions. However, a standard non-compete agreement document should include components such as non-competition terms (including duration, business territory, and market), non-solicitation terms, waiver, severability and governing law and jurisdiction.

Is a non-compete agreement enforceable in court?

A non-compete agreement is a legally binding contract between the relevant parties. However, the enforceability of such agreements varies between jurisdictions. So non-competes have different scopes and requirements for enforceability in different territories and jurisdictions. In the US, for instance, different states operate different degrees of enforceability. In some states like California, non-competes are illegal and have no legal effect. Although they can be used in places like Oklahoma and North Dakota, they cannot be enforced. Also, Hawaii hi-tech companies are banned from using non-competes while such agreements are only limited to 1 year in places like Utah.

How do I write a non-compete agreement?

A non-compete agreement is a legal document that requires legal expertise in its drafting and execution. So writing it all by yourself can be quite a daunting task. Remember that you also need to study your market, major competitors, and business directly or indirectly competing with your business. And you need to anticipate any possible future conflict of interest and forestall the resulting business threats in the short term. Instead of starting from scratch, our free non-compete template makes it easier to write your agreement. You can edit and customize our template to suit your specific business preferences and legal requirements.

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