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Employee Non-Compete Agreement | Sample

Updated on May 14th, 2022

An employee non-compete agreement prohibits a worker from performing the same duties after employment. It is enforceable in 47 states (prohibited in California, North Dakota, Oklahoma, and Washington D.C.). All non-compete covenants must include a specific territory, time period, and consideration.

Recently, states have implemented laws prohibiting a non-compete for low-level employees. Therefore, a non-compete should not be entered into with employees that don’t have special skills or know proprietary information.

Table of Contents

Non-Compete Clause (employment contract)

Non-Compete. For the term of this Agreement, and for a period of [#] months thereafter, the Employee acknowledges and accepts that a non-compete shall exist as a condition of their employment. The non-compete shall restrict the Employee’s ability to work or participate in the following professions, services, or industries: [PROHIBITED SCOPE OF WORK].

This non-compete shall cover the areas of: [GEOGRAPHICAL AREAS].

This covenant is written in accordance with state law. The Employee is advised to obtain the advice of legal counsel regarding their rights on this matter.

Sample

Download: Adobe PDF, MS Word

EMPLOYEE NON-COMPETE AGREEMENT

I. THE PARTIES. This Employee Non-Compete Agreement (“Agreement”) made this [DATE], is made between:

Employer: [EMPLOYER’S NAME], (“Employer”) with a mailing address of [MAILING ADDRESS], and

Employee: [EMPLOYEE’S NAME], (“Employee”) with a mailing address of [MAILING ADDRESS].

This Agreement is for the purpose of employment in order to protect the legitimate business interests of the Employer.

II. CONSIDERATION. In exchange for the non-compete, the Employee shall receive the following consideration: [CONSIDERATION]

III. NON-COMPETE. The Employee shall be prohibited from participating in the following businesses, services, and industries: [NON-COMPETE]

IV. TERM. The Employee shall be bound to the Agreement for: [START AND END PERIODS]

V. GEOGRAPHICAL LIMITS. The Employee shall be bound to the non-compete within the following areas: [GEOGRAPHICAL AREAS]

VI. NON-SOLICITATION. The Employee shall be prohibited from engaging with all employees and customers of the Employer during the term of this Agreement.

VII. CONFIDENTIAL INFORMATION. At no time during the term of this Agreement or after will the Employee be permitted to divulge, disclose, or use for their own benefit any information that is proprietary to the Employer.

VIII. SEVERABILITY. If any provision of this Agreement is deemed to be invalid or unenforceable, the remainder of this Agreement shall be enforced to the maximum extent of the law.

IX. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of [GOVERNING LAW].

X. ENTIRE AGREEMENT. This Agreement represents the entire agreement between the Employer and Employee and may only be modified by the signature of both parties hereto.

Employee Signature: ___________________ Date: __________

Print Name: ___________________

Employer Signature: ___________________ Date: __________

Print Name: ___________________

Frequently Asked Questions

Are employee non-competes enforceable?

An employee non-compete is enforceable in all 50 states except for California, North Dakota, Oklahoma, and Washington D.C. There are requirements in some states such as it cannot be for low-income employees (see state laws).

Attorneys are not allowed to enter into an agreement that restricts their right to practice law (Rule 5.6)

Can I hire an employee with a non-compete?

An employer is allowed to hire an employee with a non-compete, although, the employee may be liable for damages to the non-compete owner. Often times

How long can a non-compete last?

A non-compete can last anywhere from 1 to 5 years based on the laws in the state. Most states require that the term of a non-compete be “reasonable” and is dependent on the geographical area covered (i.e. for a lesser area then the courts will tolerate a longer duration).

What is the penalty for violating a non-compete?

The penalty for an employee violating a non-compete is equal to the monetary damages determined by a court to the affected business. In addition, if any sales or services are found to have been made in violation of the non-compete, a court may hand over any such profits.

If an employer violates the non-compete laws in a state that prohibits such covenants, such as California, the employer will be charged $100 for the initial pay period and $200 for each thereafter (LAB § 2699(f)(2)).

Can a 1099 employee sign a non-compete?

Yes, a 1099 employee or independent contractor is able to sign a non-compete. Although, contractors are held to the same laws and restrictions as w-2 employees under state law. Therefore, they are prohibited from entering non-competes in California, North Dakota, Oklahoma, and Washington D.C. like their w-2 counterparts.

Is continued employment treated as sufficient employment?

Continued employment has been determined to be sufficient consideration in 31 of 50 states.

In states where continued employment is not sufficient consideration, added benefits such as an increase in pay will be deemed as being adequate.

Can a non-compete be in an employee handbook?

A non-compete cannot be located in an employee handbook to be enforceable. It must be in a separate agreement or ancillary to an employee contract.