What is Non-Compete Agreement Drafting?
A non-compete agreement is a legal document between an employer and employee. It serves to restrict the employee from engaging in prohibited activities, such as working for competitors or sharing company trade secrets and other sensitive business information with third parties.
It’s common for employees to sign non-compete agreements prior to being hired by a company.
If you need to draft a non-compete agreement, read the rest of this article to explore what’s included in the contract, how to draft it, and how a lawyer will help you with the contract-drafting process.
Are Non-Competes Banned Nationwide?
Although the Federal Trade Commission (FTC) tried to ban non-competes across the U.S., the rule was blocked by federal courts. This means that non-compete agreement enforcement is dependent on state rules.
What Key Terms are Included in a Non-Compete Agreement?
A non-compete agreement usually contains essential terms, such as the following:
- Effective date. The agreement should state when the non-compete terms come into effect.
- Duration. This states how long the non-compete restrictions last.
- Geographic scope. This is the physical location in which the employee won’t be able to work to prevent competing with the company. It must be set for a specific, reasonable amount of time.
- Activities. The agreement must provide clarity on all the activities that the employee is prohibited from doing.
- Governing law. The state laws governing the agreement must be specified, which will assist parties during disputes.
- Consequences. For clarity, the non-compete should specify what penalties the employee will have to pay should they breach the contract.
What are Tips for Drafting a Non-Compete Agreement?
Although you might include important terms in your agreement, there is some additional information to include for clarity and legal validity.
Be Clear About Contract Duration
It’s not enough to state the effective start and end dates of the contract. You should also provide a reasonable time frame for the prohibited activities, such as how long an employee can’t work in a specific location or for a different company within the same market. If the timeframe is too long it will hamper the person’s career and financial goals.
Define the Competition
To avoid confusion, the agreement must outline what “competition” means. For example, does it mean that the worker can’t get employed by specific companies or work in certain industries? By making the terms clear, you prevent ambiguity that can result in conflict.
Research Employment Laws
Since employment laws vary quite a bit in different states, you want to ensure that you remain legally compliant. Research all relevant laws in your state so that your non-compete agreement is legally enforceable.
Understand the Prohibited Activities
There are various ways in which an employee can be prohibited under the terms of a non-compete agreement. These include the following:
- Employment restrictions. This is when an employee isn’t allowed to work with the company’s direct competitors.
- Entrepreneurial restrictions. This prohibits an employee from starting their own business that competes with their employer’s company.
- Time period restrictions. It’s common for a non-compete agreement to last for about six months to two years, but this depends on the jurisdiction.
- Geographic restrictions. This is when an employee is restricted within specific states or territories.
How Does a Non-Compete Agreement Become Legally Valid?
There are important things to be mindful of when drafting a non-compete agreement so that you make it valid in the eyes of the law. These include the following:
- The employer in the non-compete agreement must have a valid reason for wanting to restrict the employee, such as protecting their intellectual property (IP) or trade secrets.
- The agreement timeframe must be reasonable. It shouldn’t extend further than two years.
- The territory scope must also be reasonable. This can be ensured by aligning it with the company’s market or influence.
- There should be compensation provided in exchange for the non-compete signing, such as a job offer.
- The non-compete agreement must involve consent from both parties.
- When mentioning restrictions on the employee’s work, be sure to make them specific to the type of work they’re doing. This serves to prevent them from not being able to work in an entire industry.
How Does a Lawyer Help with Non-Compete Agreement Drafting?
It’s advisable to hire a lawyer to assist you with a non-compete agreement so that it’s legal and clear. A qualified lawyer will:
- Check that all terms and clauses in the agreement are aligned with applicable laws. This prevents it from being invalid in court.
- Define reasonable restrictions to prevent a one-sided or unfair contract.
- Protect your business interests, such as your trade secrets and customer relationships.
- Customize the agreement to match your specific situation and the employee’s role.
- Write clear, specific clauses that avoid ambiguity. This reduces your risk of future disputes.
- Address your potential risks and include provisions to minimize them.
- Review a non-compete agreement you’ve written to check that it’s reasonable and legal.
Where to Find a Lawyer for Non-Compete Agreement Drafting
If you want to hire a lawyer to draft your non-compete agreement, you don’t have to spend a lot of time to find the best one for your legal requirements. Use an online legal platform such as ContractsCounsel where you can easily connect with a lawyer.
ContractsCounsel is an online legal marketplace that gives you access to a range of vetted lawyers. To request that a lawyer on the platform drafts your non-compete agreement, here are the easy steps to follow online.
1. Visit the ContractsCounsel marketplace, where you can post your project for free. Include some information about why you need the non-compete agreement so that you can match with the best lawyers.
2. Wait for lawyer bids. You’ll receive multiple bids from lawyers directly on the platform who are qualified to assist you.
3. Review the lawyers. Once you receive the lawyer bids, you should review the lawyers' profiles. There’s lots of info on the platform to help you choose the best lawyer, such as their location, client ratings, years of experience, and field of expertise.
4. Connect with a lawyer you think is best suited to your requirements and hire them to draft your non-compete agreement.
