Contents of a Noncompete Agreement

A non-compete agreement protects employers from unfair competition.

A non-compete agreement is a valid contract in most states, forcing the employee to promise not to compete with his employer for a certain period of time after employment has ended and within a certain geographical location. The non-compete agreement protects the employer's trade secrets and interest in the company. The non-compete agreement will have several terms that detail the restrictions placed on the employee.

Valid Contract

The court will consider certain factors in a non-compete agreement.

To determine whether a non-compete agreement is fair and valid, the court will look to the following factors:

1. Whether there was consideration when the employee signed;

2. Whether it is evident in the non-compete agreement that the employer has a legitimate business interest that must be protected;

3. Whether the restriction to compete is unreasonable and unnecessary in order to protect the employer's business interests;

4. Whether the non-compete agreement causes an undue burden on the employee, such that the employee's only livelihood is effected by the restrictions; and

5. Whether the restrictions in the non-compete agreement will be detrimental to the public, thus going against public policy.

Protection

All states restrict employees from leaking trade secrets.

It is imperative that every state protect employers from employees leaking trade secrets and unfairly competing with the employer. For instance, all states will not allow an employee to divulge trade secrets to competing businesses. Most states will not allow employees who have signed a non-compete agreement to do the following:

1. Leak trade secrets;

2. Use business relationships from employment to compete with the employer; and

3. Use information obtained during employment to compete with the employer.

Terms

All terms must be reasonable in length and location.

An employer is allowed to ask employees to sign a non-compete agreement that has the following terms:

1. Restriction from competing for a set time frame that is reasonable;

2. Restriction from competing within a certain geographical location a set time that is reasonable;

3. Restriction from solicitation of other employees; and

4. Restriction from interference with affiliated vendors or clients.

References

• Fklaborlaw.com: Non-compete and Non-competition FAQs