A non-compete agreement, sometimes known as a non-compete clause, is a legal agreement or contract between an employer and an employee. It states that the employee should not enter into competition with an employer if they leave the company.
The employee is not allowed to disclose secret or personal information about the company they worked for to any other parties. This applies both during and after the employment period.
Most non-compete agreements last a certain length of time. Both parties must sign a written agreement that specifies the terms and conditions. The length of time that the employee is under the agreement will also be specified in the contract.
Non-compete agreements can be used for full-time and part-time employees, contractors, and subcontractors. Usually, they are signed at the start of the business relationship.
What is Included in a Non-Complete Agreement?
The contents of a non-compete agreement can vary depending on the company, the employer, and the location.
Some of the common conditions that are included in a non-agreement clause are the following:
Working for the company’s direct competition, whether it’s another business or an individual
Starting a business that will become a direct competitor to the company
Selling the same products or offering the same services as the company
Purposely recruiting former employees of the company
If you are unsure about what to include, get assistance with non-compete agreements from a qualified professional. They can advise you on which conditions to include in your clause to avoid any legal issues in the future.
How Enforceable Are Non-Compete Agreements?
The laws around and forcing a non-compete agreement differ from state to state. In some states, enforcing a noncompete clause is viewed as overly restrictive, and some states do not allow them at all.
In the areas where a non-compete agreement is enforceable, there are several rules that employers must follow when creating their agreement.
For example, the length of time that the employee is prohibited from entering into competition with the employer must be reasonable and the agreement must protect both parties equally. The courts must deem the conditions of the agreement to be reasonable.
There is also the added complication of whether or not the clause is going to affect the employee’s ability to gain work in the future. If this is the case, some states require the employer to continue paying the employees base salary for the length of the agreement, even when the employee leaves the company.
Some non-compete agreements specify location restrictions or industry restrictions. If this is the case, the employee must abide by the rules of the non-compete agreement only in certain locations or with certain companies.
Companies within any niche can use non-compete agreements. Commonly, non-competes are used in information technology (IT) businesses, banking and finance companies, and manufacturing facilities where the work is highly specific to the company and information is valuable.
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