Legal Advice

What is a Non-Compete Agreement and How to Implement It?


A non-compete agreement or clause is a lawful contract, in the form of writing, between the boss and the worker. It is applicable after the employee leaves their current job. The necessary terms and conditions within this contract include a prohibition to work in the same industry or with a firm which is competing with the organization, for six months to 2 years, following the end of the employment.

Although a non-compete agreement is for the protection of the company’s clients and other private information which is not accessible to everyone; at some places, it is disapproved of, because it stops an individual from earning a living for themselves in the field of their choosing. For this reason, the court system closely analyzes legal disputes arising from non-compete agreements also called as covenant in restraint of trade.

Benefits of a Non-Compete Agreement

Non-compete agreement works in the favor of the employer because it forbids the ex-employees from giving out important confidential information to the competitors that will facilitate them in earning more profits. This information includes; list of clients, business plans, company’s secret of success, and industry experience and knowledge, etc.

The employees can benefit from this agreement by getting some reward which can be; a job, monetary payment, or promotion, in return for signing the clause.

Enforcement of the Clause

These clauses are becoming common as employment contracts; nevertheless they are implemented only if they are impacting the employer’s business which requires shielding. If the non-compete agreement was signed by the employee during their employment, they are less likely to be implemented because they didn’t get anything in return for signing it. However, when the clause is signed before the starting of the job, it is considered as a pre-condition of the job.

Conditions of the Enforcement

After the employee has terminated the employment, the contract will be enforced in the following conditions:

  1. In order to protect a legal profit-making interest. These interests can be any confidential information about the employer or information related to clients that was not meant for someone else. This information may or may not facilitate competitors in money-making.
  2. Enforcement takes place but does not exceed more than is necessary for the employer’s protection.

The restraints should be reasonable and applicable only till a particular time period. To deal with any unreasonable part of the restraint, courts are properly trained to separate them instead of canceling the whole clause. In a few states, if the restraints are unreasonable, the court may reanalyze the unreasonable restraint. If the court believes that the employee’s violation of the law will not harm the employer significantly, it will not grant an injunction to restrain an employee. To ensure that the restraints are legitimate, a lawyer’s assistance is usually needed.

A non-compete agreement is effective as long as it is stating reasonable restraints, and not overprotecting the employer’s interest. It should be made in such a way that the employer is able to protect their business as well as giving the employee the right to earn a living.