Noncompete Agreement

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 4,069 reviews

Jump to Section

Need help with a Noncompete Agreement?

CREATE A FREE PROJECT POSTING
Post Project Now

What Is a Noncompete Agreement?

A noncompete agreement — also known as a noncompete covenant, a covenant not to compete, restrictive covenant, or noncompete clause — is a legal contract between employees and an employer that prevents employees from entering into competing business ventures if they terminate their employment. Businesses may ask new employees to sign this type of agreement to ensure that they don't take the knowledge, skills, and relationships that they gain on the job and use them to set up business as a direct competitor. Employees gain distinct knowledge of their industries, which could make them formidable competitors, as they're aware of the following:

  • Pricing strategies
  • Workflows
  • Product formulas
  • Client information
  • Salaries
  • Business methods
  • Pending products
  • Research and development information
  • Marketing strategies and plans

While a noncompete agreement offers advantages for the business, it may not be as appealing to an employee. A company doesn't necessarily want to lose the valuable investment made into the training, education, and development of an employee. However, these individuals must still retain the basic right to seek other employment opportunities and pursue professional advancement.

Enforceability of Noncompete Agreements By State

Noncompete agreements are not allowed in all states. This type of contract is unenforceable in the following states:

  • North Dakota
  • Oklahoma
  • California

Employers in these states may still ask employees to sign this type of contract in the hopes that the individuals are unaware of their rights and will believe that they cannot legally compete with the business. In California, an employer who requires their employees to sign a noncompete agreement can be sued.

Other states may allow noncompete agreements but confine them to particular industries or circumstances. Do some research on your local laws and understand what's applicable in your state.

What's Included in a Noncompete Agreement?

A noncompete agreement has a few basic parts that include the following:

  • The date the agreement becomes effective: This date is typically the first date of employment for a new hire. However, some noncompete agreements are executed later in the employee's term. This contract may become necessary before an employee earns a promotion or comes into contact with sensitive business information.
  • The reason for the agreement: The employer must specify the scope of the noncompete agreement and the purpose for this contract. A noncompete agreement makes more sense for a high-level employee who will work with sensitive company information than for an hourly worker with minimal responsibilities.
  • The duration of the agreement: Noncompete agreements must be reasonable. These agreements are typically limited to a year or two after employees terminate their employment with the company.
  • Compensation for complying with the terms: For a new hire, the job itself is usually considered adequate compensation for agreeing to the terms of the noncompete agreement. However, if you're asked to sign a noncompete agreement for a job you're already working in, you may want to ask for a promotion, raise, or other benefits in exchange for your signature on the contract. Some states require a payment of consideration in exchange for signing a noncompete agreement. Courts are more likely to uphold the agreement if the employee received some type of compensation.

The noncompete agreement should also include any relevant specifications regarding the type of competition prohibited. For example, the employee may not be allowed to work for a competitor within a particular region or industry. Jobs that fall outside of the geographical area or specialized industry, however, may be acceptable. The employer may also specify particular companies for which an employee cannot work.

How Enforceable are Non-Compete Agreement?

For a court to uphold a noncompete agreement, it must deem the contract reasonable. It is not reasonable for an employee to enforce restrictions so confining that an individual cannot find gainful employment outside the current job. People have the right to earn a living, and the noncompete agreement cannot take this right away from them.

When a court is evaluating a noncompete agreement to determine whether it's reasonable and enforceable, it will consider whether:

  • The employer has a legitimate need to protect his or her business interests
  • The geographical scope is reasonable in size
  • Employees can find other employment opportunities that will not force them to violate the contract
  • The term of the noncompete agreement is appropriately limited
  • The agreement is unreasonably broad regarding the type of work prohibited

These factors are considered both individually and in conjunction with one another. A long-term agreement is more likely to be enforceable if it's paired with a small geographical scope. Likewise, a noncompete agreement that covers a broad range of companies has a better chance of standing up in court if it applies only for a month.

What Voids a Noncompete Agreement?

An employer cannot typically enforce a noncompete agreement executed simply to keep its employees from leaving the business. The company must prove that it has a legitimate reason to be concerned about employees taking jobs elsewhere. For example, if employees have knowledge about a secret recipe for a major product or have close relationships with and sensitive details about a business's top clients, they could present a notable risk to the company if they took the information elsewhere.

Noncompete Agreements Between Companies: Sale of a Business

If a business is sold to new owners, noncompete agreements may come into play. The entity that acquires a business is often wise about having employees retained within the business sign a noncompete agreement. Lacking this form of protection, the previous owners of the business may poach employees and set up direct competition.

If employees were previously subject to a noncompete agreement, a purchaser would want to investigate these contracts when acquiring the company. The new noncompete agreement must include an assignment provision that allows the new business owner to maintain the contract under new management. If such a provision is not in place, the previous noncompete agreement may become void.

How Are Noncompete Agreements Enforced?

If you want to be released from a noncompete agreement, you should speak with your employer and get a signed document that releases you from the contract. Lacking this document, you are subject to the enforcement of this contract.

Your previous employer may request an injunction or restraining order preventing you from taking any type of employment that falls within the limits of the noncompete agreement. Courts often expedite these cases to protect the employer from potential damage. You may have only days or weeks to prepare your case with an employment lawyer if a hearing is scheduled.

A court may begin by issuing a temporary order that prevents you from taking a particular job. Likewise, the court might deem that your activities are temporarily permitted, but continue to investigate the case. The court may choose to grant an injunction, a legal order that will stop you from working in violation of the noncompete agreement. This injunction can restrict your activities for any period of time set forth by the court.

A noncompete agreement is a beneficial contract for employers in particular situations where an employee could do significant harm to a business by taking knowledge to a competitor. If you're asked to sign a noncompete agreement, review the document carefully to make sure it's valid within your state and does not prohibit you from taking reasonable actions to further your career.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Noncompete Agreement Lawyers

Jonathan M. on ContractsCounsel
View Jonathan
5.0 (1)
Member Since:
January 18, 2023

Jonathan M.

Attorney
Free Consultation
Get Free Proposal
Charlotte, NC
13 Yrs Experience
Licensed in NC, SC, VA
Charlotte School of Law

Owner and operator of Meek Law Firm, PC. Meek Law Firm provides comprehensive business law representation, precise and informed representation for real estate transactions in the commercial and residential markets of North and South Carolina and efficient succession and estate planning for business owners and individuals.

Dayton M. on ContractsCounsel
View Dayton
Member Since:
January 17, 2023

Dayton M.

Attorney
Free Consultation
Get Free Proposal
Morgantown
1 Yr Experience
Licensed in WV
West Virginia University College of Law

Business Law - Criminal Defense - Immigration

David A. on ContractsCounsel
View David
Member Since:
January 23, 2023

David A.

Family Lawyer
Free Consultation
Get Free Proposal
Florida
41 Yrs Experience
Licensed in FL
University of Florida

Graduated UF Law 1977. 40 years experience in Family Law/Divorce and Prenuptial Agreements. Rated "AV Preeminent" By Martindale Hubble, the oldest lawyer rating firm in the USA. Top 5% of attorneys in Florida as reviewed by Judges and other Lawyers (not client reviews). Personal prompt service and easy to contact--available 24/7. Good negotiator and very personable. My clients are my priority.

Judi P. on ContractsCounsel
View Judi
Member Since:
January 26, 2023

Judi P.

Attorney
Free Consultation
Get Free Proposal
New Mexico
3 Yrs Experience
Licensed in NM
Arizona Summit Law School

Driven attorney with a knack for alternative dispute resolution, real estate, corporate law, immigration, and basic estate planning, with superb people skills and high emotional intelligence, and for working smart and efficiently, as well as time and financial management skills to deliver excellent legal work and solutions to legal issues. Seasoned with 20+ years of law firm and legal experience (real estate/corporate).

Brittany T. on ContractsCounsel
View Brittany
Member Since:
January 26, 2023

Brittany T.

Attorney
Free Consultation
Get Free Proposal
Georgia
9 Yrs Experience
Licensed in GA
Florida Coastal Law School

Brittany is an experienced attorney specializing in transactional and complex contract matters including but not limited to SaaS development and product implementation, technology/data agreements, licensing, and compliance. She has over 7 years of experience providing strategic legal advice to individuals and business clients of all sizes, from start-ups to large corporations. Brittany has a strong understanding of the legal issues related to technology and software and is well-versed in drafting and negotiating contracts ranging from software licenses to data sharing agreements. She is a highly-skilled negotiator and is adept at finding creative solutions to challenging legal issues.

Karen S. on ContractsCounsel
View Karen
Member Since:
January 31, 2023

Karen S.

Attorney
Free Consultation
Get Free Proposal
Atlanta, GA
12 Yrs Experience
Licensed in GA
Georgia State University

I'm an attorney available to help small businesses in Georgia get started with initial business set-up, required filings, tax strategies, etc. I'm also available to draft, review, and negotiate contracts. My experience areas include small business startups, information technology, technology innovation, real estate transactions, taxes, community associations, intellectual property, electrical engineering, the business of video game development, higher education, business requirements definition, technology consulting, program management, and the electric utility industry. I work part-time for a firm practicing community association law and part-time in my solo practice. I'm also an adjunct professor at Southern New Hampshire University teaching business innovation and business law. In addition, I'm part owner, legal counsel to, and a board member of a virtual reality video game development company. I am a member of the Georgia Bar Association. Please reach out if you need attorney, documentation or consulting help in any of those areas!

Find the best lawyer for your project

Browse Lawyers Now

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call