What does a non-competition agreement cost? An employer whose business has valuable trade secrets may ask this question. So let’s explore non-competition agreement costs and review some general information about non-competition agreements and how they work.
How Much Does a Non-Competition Agreement Cost?
A non-competition agreement, also called a noncompete agreement, is a legally binding contract that an employee signs when starting a new job. This contract is considered a restrictive covenant. By signing it, the employee agrees that they will not compete against the employer if their employment is terminated or they choose to leave the company.
Many companies train their new employees using company policies, knowledge, skills, and sometimes intellectual property. This company information, often called “trade secrets,” can be very valuable, and trade secrets must remain confidential within the company.
Suppose an employee decides they no longer want to work for the employer. In that case, they are legally bound by the non-competition agreement to keep all company information and trade secrets private.
A non-competition agreement also prevents employees from starting their own businesses to compete against their former employer. Companies can also use a nondisclosure agreement and a confidentiality agreement to help protect trade secrets.
The legality and enforceability of non-competition agreements vary by state and jurisdiction. Many states require that a non-competition be “reasonable,” and the definition of reasonable is subjective. Therefore, it can change depending on the court and judge hearing the case.
It is highly recommended that a business owner who needs a non-competition agreement consults with an attorney familiar with non-competition agreements. An attorney will know the laws that govern non-competition agreements and how to draft a comprehensive non-compete agreement that stands up in court and protects the company.
According to ContractsCounsel’s marketplace data, the average cost of a project involving a non-competition agreement is $439.94.
What’s Typically Included in a Non-Competition Agreement
Non-competition agreements will vary based on the company's industry, business, and needs. Therefore, they can be customized to serve the needs of a specific business but should include the following key information:
- Date. The date the agreement becomes effective is typically when the employee is hired. However, sometimes employees will be required to sign a non-competition agreement if their job title and responsibilities change, and they gain access to sensitive company information.
- Duration. Non-competition agreements must specify how long the departing employee must wait before working in the same industry again. This duration is usually between two and five years because the time must be reasonable.
- Geographic Location. This is where the former employee is not allowed to seek employment in the same industry. The area must be reasonable, and if the employee moves outside this area, they will be allowed to work in the same industry.
- Specific Competitors. Depending on the industry and types of local competition, employers may list specific competitors that an employee cannot work with. This is more common with large well-known franchises.
Are Non-Competition Agreements Enforceable?
The validity and enforceability of non-competition agreements vary by state and jurisdiction. For example, California, Oklahoma, and North Dakota prohibit the use of non-compete agreements. Other states will analyze the non-compete agreements case-by-case to determine if the contract is legally enforceable.
Courts will only uphold a non-compete agreement if it is reasonable. The following factors determine reasonability:
- The employer has a legitimate interest in protecting their business
- The specified region is a reasonable size
- The agreement isn’t so restrictive that employees will have trouble finding work
- The duration of the agreement is reasonable
- Whether the type of work or scope of the agreement is overly broad
How a non-competition agreement is drafted is a significant factor in whether the contract is held in court. This is why it is important to have an experienced attorney draft or review your company’s non-competition agreement.
Examples of Non-Competition Agreement Projects
Non-Competition Agreement Drafting Service
Non-competition agreements are important contracts that protect a company’s trade secrets, knowledge, and business practices.
It is common for non-competition agreements to be scrutinized in court, and any mistake in the agreement can result in a judge ruling against the contract and holding it unenforceable. Therefore, when an experienced lawyer drafts your non-competition agreement, you will have the assurance that the contract will protect your business.
Suppose you hire a lawyer to draft your contract. In that case, you will meet with the lawyer to discuss your business and the purpose of the non-competition agreement. The lawyer will then draft a custom-tailored non-competition agreement for you to use with your employees.
Non-Competition Agreement Review Service
It is easy to find non-competition agreement templates online so drafting your non-competition agreement is possible but not recommended. These templates usually contain vague language and may not be enforceable based on your state and jurisdiction.
Suppose you choose to use a template or draft your non-competition agreement. In that case, you should hire a lawyer to review the document before using it. An experienced lawyer will know the state and local laws that govern contracts and can help you customize your non-competition agreement for your business needs.
Non-Competition Agreement Drafting Costs
Hiring a lawyer to draft a non-competition agreement will incur legal fees. In addition, the lawyer will charge for any time spent working on the agreement, including consultations and revisions.
ContractsCounsel’s marketplace data shows that the average non-competition agreement drafting costs are $750.00 across all states and industries.
Non-Competition Agreement Review Costs
A lawyer will charge for review services, although these will typically be less than drafting services. The lawyer will use their time and legal expertise to ensure the non-competition agreement is legally binding and will hold up in court.
According to ContractsCounsel’s marketplace data, the average non-competition agreement review costs are $395.64 across all states and industries.
How Do Lawyers Charge for Non-Competition Agreements?
Hourly Rates for Non-Competition Agreements
Hourly rate fee structures are usually how lawyers in any legal field charge their clients. Under this fee agreement, the lawyer will charge the client a set hourly rate for each hour of work spent on the client’s case or project.
This fee agreement benefits lawyers because it ensures they receive payment for all the time spent on a case. On the other hand, clients may be apprehensive because they won’t know the total cost of legal fees until after the conclusion of the case or project.
The marketplace data for ContractsCounsel shows that the average hourly rate for a non-compete agreement lawyer ranges from $200 - $350 per hour.
Flat Fee Rates for Non-Competition Agreements
Flat fee rates are commonly used when a lawyer is hired for a specific project, like drafting a non-competition agreement. After reviewing the project and estimating the time it will take, the lawyer will provide the client with a flat fee quote to complete the job.
Clients prefer flat rate fees because they know exactly what they need to budget for legal costs and won’t have any surprise bills at the end of legal services.
Lawyers usually require that flat rate fees be paid upfront, which can benefit the lawyer. Still, the lawyer will not be compensated for additional time if a project takes longer than expected.
ContractsCounsel's marketplace data shows that the average flat fee rate for a non-competition agreement costs $439.94.
Get Help with a Non-Competition Agreement Project
Do you need help with a non-competition agreement? If so, post a project in ContractsCounsel’s marketplace to receive flat fee bids from business lawyers to handle your project. All lawyers on the ContractsCounsel’s platform are vetted by our team to make sure you are provided with top tier service.