When working to draw up a non-compete agreement, you have probably started to look at non-compete forms that are free online. You might also have been looking at non-compete templates or non-compete agreement examples. These might be the right resources to offer you access to standard non-compete agreement information. However, these sample non-compete clauses might not cover your needs.
Writing a non-compete agreement template that works properly for your business is essential for so many reasons. If you develop unique products or goods, you need to use this kind of agreement when someone leaves your business. This is also common for those working in the arts, like animators, songwriters, musicians, and those who might be able to sell business secrets to competitors. You will need to be sure that your non-compete agreement is written properly to protect your business if someone leaves your company with valuable information.
Table of Contents
- 1 Non-Compete Agreement Templates
- 2 What is a non-compete agreement?
- 3 What is the standard length of the agreement?
- 4 Non-Compete Agreement Samples
- 5 How do you draft a non-compete clause?
- 6 How binding are non-compete agreements?
- 7 Non-Compete Agreement Examples
- 8 How to write a non-compete agreement
- 9 Standard Non-Compete Agreements
- 10 How Effective Are Agreements?
Non-Compete Agreement Templates
What is a non-compete agreement?
A non-compete agreement is signed to protect a business from competitors accessing their private information and the skills of their most talented team members if those people should leave their business. This agreement is also known as:
- A non-compete clause (NCC)
- Covenant not to compete (CNC)
These alternate names are legally acceptable for this document, and they mean the same thing. You can use any of these terms interchangeably to refer to this document.
This agreement will restrict employees from doing the following:
- Working for a competitor
- Starting a similar business in the same niche
- From sharing sensitive company information
- Taking proprietary products or information with them out of the business
- Contacting clients of your business to solicit their business
In most cases, there might also be a clause that indicates how long a person will have to wait to be able to take these options. There might also be a clause that indicates how far away the person must move to seek employment in the same niche or to compete with your company.
What is the standard length of the agreement?
The non-compete agreement template that you write will need to be as long as it is required to include all the necessary information to make it a viable document with legal implications. If you are not thorough in your explanation of the purpose of the document or the limitations that it imposes on you and your former employee, the document will not serve its intended purpose.
The length of the document is not as important as the information that it contains. This document will usually need to cover a lot of different unique situations. You will need to worry more about getting the right information into the letter than the length of the letter.
Non-Compete Agreement Samples
How do you draft a non-compete clause?
The non-compete clause that you add to your contracts needs to be as inclusive as the non-compete agreement template that you might have created to be a standalone document. A non-compete clause is not exactly the same as a non-compete agreement since this clause is often part of a hiring contract or some other larger document. You should consider whether or not this clause will provide enough disclosure of the non-compete legal issues related to a job.
Many people will not read the fine print of an employment contract, and you really do want to be sure that your non-compete agreement information is made clear to those that you are hiring. Having a partial understanding of the non-compete agreement that is associated with their jobs is not enough in most cases. You want to be positive that the full details of your non-compete are included in the information that is provided to your employees when they are hired.
Drafting a non-compete clause will include the same considerations as a non-compete agreement. You will need to think about the actions that you do not want former employees to take when they leave your company. These different actions need to be described correctly so that there are no questions in the future about taking action against someone who has broken the non-compete. Both a non-compete clause and a non-compete agreement template will need to be held up in a court of law, and they can be used to take action against someone who is negatively impacting your business.
How binding are non-compete agreements?
Non-compete agreements are legally binding. These are restrictive contracts that exist between an employer and an employee. The items that are listed in the non-compete are required to be followed by both parties. These agreements would not be useful if they were not legally enforceable. The time period that is listed in the non-compete agreement will need to be followed exactly as well. This is part of the legally binding nature of this agreement.
Non-Compete Agreement Examples
How to write a non-compete agreement
If you are not sure what you need to do in order to create a non-compete, you need to keep reading. We will discuss the sections that need to be included in this document for it to be effective and to provide support for your business needs.
The first thing that you need to be aware of is that there are state laws that govern these agreements. You cannot just make your own non-compete rules without following the guidelines of the non-compete agreement laws.
- The Start Date: The start date of the non-compete agreement is critical. This is usually the termination date of the employee, but if they leave ahead of the set termination date, this might need to be adjusted. You can also choose to state that any form of termination will enact the start of the non-compete. The date of the end of the non-compete can be entered here as well. This is just as important as the information for the beginning of the agreement.
- Parties Involved: The names of the people that are impacted and involved with the non-compete need to be included. You, as the business owner and the employee that has been terminated, are usually the only parties that need to be included in this section of the non-compete agreement. You will need to put addresses and phone numbers into this section as well. The more complete the information, the better. Make sure that the legal business name and the legal name of the person being terminated are not nicknames.
- Why the Agreement is Needed: The reason for the agreement always needs to be stated. This does not have to include specifics about why someone was fired or released. The reason section can be general in the sense that termination is often the reason that someone is asked to leave and honor a non-compete. You can also choose to indicate in this section that the non-compete will cover termination, willingly leaving the company, or opening a business that competes with yours. The reason for the agreement being enacted is important if there is any legal wrangling surrounding the non-compete.
- Things That Cannot be Done: The specific actions that the former employee cannot take need to be detailed carefully in this section of the agreement. You will want to outline the expectations of the agreement carefully. Anything that is not included might not be required of the former employee when they leave. The better the information in this part of the non-compete, the more effective this document will be. This is arguably the most important part of a non-compete agreement template, and it deserves most of your focus when you are drafting this document or clause.
- How Long the Agreement Will Last: You will want to state again how long the non-compete will be in place. The date that the person in question is able to take the actions that are forbidden in the non-compete can vary. Some parts of the non-compete might not have the same end dates as other parts in unique cases. The end date of the non-compete is important so that you and the former employee know when the non-compete can no longer be enforced.
- The Geographic Area: The area that the non-compete governs is normally dictated by the state. The rules of non-compete agreements are state-specific, which means that you need to be sure that the state laws that are involved in the agreement are referenced. You often cannot enforce a non-compete to cover more than one state, but there might be some situations with regard to international businesses or companies with more than one state of operations where this is not the case.
The geographic area can be dictated by state laws as well, so be sure that you do not include the wrong information in this part of the non-compete agreement. This information has to be correct, or the agreement might not be legally binding. If you are not positive about what geographic area you can legally enact your non-compete in, you might want to speak with a legal expert about this part of the non-compete agreement.
- Compensation for Signing: The end of most of these agreements includes a clause that explains how the employee will be compensated for signing this contract. This can be very unique to many different kinds of employment. You will need to be sure that this part of the non-compete agreement is correct and that you have not stated any part of this section of the agreement incorrectly.
- Signatures: The employee and the company they work for both need to sign this agreement for it to be binding. This is something that is done at the start of employment in most cases, and you should make sure that you start with this information toward the beginning of the onboarding process. No one should be allowed to work for you that will not sign this contract if it is something that is critical to the protection of your business and its assets.
Standard Non-Compete Agreements
How Effective Are Agreements?
Non-competes are quite effective at making sure that former employees follow the directives within them. This is a common practice that is used by companies that develop products and sell unique goods, and it is also really common in the tech space. These agreements, when correctly crafted and signed, hold up in court in many cases. This is something that is disclosed to the employee before they agree to work for your company, and this document must be honored once it has been signed.
These agreements are the industry standard in many niche spaces and are quite commonly used by high-profile companies. Even smaller businesses can benefit from expecting employees to sign this document, and you should not assume that your small company should not use a non-compete agreement template just because of its size. The technicality of the work that is being done at your business or the proprietary nature of its work can require that a non-compete be signed by new hires to prevent your business from being forced to close its doors.
This is one of the most crucial and beneficial documents that businesses can require employees to sign. This is a great protection that you can offer to your business, particularly in areas of industry where competition is fierce and there are not many competitors. Writing this document properly is essential to ensuring that it can be enforced, and you will need to make sure that you are not leaving anything out of your non-compete agreement if you want it to be effective for its stated intent.
The more that you know about drafting this critical document, the more effective your non-compete agreement template will be.