Free Non-Compete Agreement Template

Non-compete Agreements are legal forms designed to stop employees, freelancers, and vendors of a company from working for a competing business organization in the same geographical area or industry. 

A Non-Compete Agreement is meant to protect a company’s intellectual property and business relationships. Their main objective is to avoid current and former employees taking up employment by competitors and using confidential information to obtain a competitive advantage that may hurt a company’s market position.

If you’re worried about the possibility of this scenario playing out in your business, you can create your own NCA and avoid mistakes by using LawDistrict’s online business documents.

Other names are:

• Non-competition Agreement 

• No-compete Clause 

• Non-solicitation Agreement  

• Non-disclosure Agreement. 

In July 2021, President Biden signed an Executive Order to restrict the use of Non-Compete Agreements. 

The Executive Order aims “to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.” 

During the coming years, we may see states introducing their own law changes in an attempt to limit the unfair use of Non-Compete Agreements.

Biden’s Executive Order suggests that not all agreements may be fair. Its goal is to encourage regulating this anomaly and topromote worker mobility.

The FTC has not yet made any significant changes, andlaws vary by state. 

It is always important to check with your state and local laws when creating an agreement.

Drafting a complete and legally valid agreement can seem like a daunting task. As a legal document, it must be properly written and contain all the necessary sections. 

Take a look at our sample Non-Compete Agreement to ensure that your NCA meets all the legal requirements.

Any business endeavor that involves using critical information is subject to benefit from using a Non-Compete Agreement. 

There are several scenarios where employee NCAs may be particularly necessary to companies.

Use an NCA When Hiring

Companies where the use of confidential information is essential to their success typically include an employee Non-Compete Agreement in employment contracts. 

It is widely understood that new employees must receive compensation for Non-Compete Agreements. Employee salary usually serves as payment in exchange for signing the agreement.

Not only employees have access to confidential information when working for a company, but freelancers and vendors may also obtain sensitive information when liaising with companies. 

In such cases, it also makes sense that they sign agreements.

When Buying a Company Using an NCA

Business owners are usually experts in their industries. One way to avoid competition when buying a business is by making the previous owners sign an agreement.

This way, they cannot use their industry knowledge and contacts to compete in that market again and unfairly replicate their success.

Use an NCA When Partnerships Go Separate Ways

When one of the partners in a business project decides to go their separate way, it is highly recommended to make them sign a Non-Compete Agreement. 

This helps ensure that the parting partner does not turn into a new competitor in the industry.

A Non-Compete Agreement must cover a number of essential details and needs to be drafted thoughtfully. Unclear or too restrictive clauses may cause agreements to become unenforceable in case of need.

The following elements should be included:

• Industry. A Non-Compete Agreement needs to clarify the industry it addresses. It is also recommended to mention the type of positions and any particular competitors that may be relevant.

• Geographic Area. Agreements should be specific about the geographical area that they involve. An agreement that claims to cover too wide an area will be declared invalid by a court.

• Area of Expertise. Employees usually become valuable assets to companies. The skills and knowledge that they bring with them are the reason they are hired in the first place. But other specific knowledge may be acquired while exercising their new duties within the company. A typical example of this is intellectual property.

• Remuneration. In exchange for signing Non-Compete Agreements, employees need to be offered something of value. This may be their salary or benefits, but it can also involve an agreed sum, such as a raise.

• Assignment provision. It makes sense to include a clause to clarify what happens in case of selling the company. It is advisable in most cases to ensure that employees would still be obliged to comply with the agreement.

*Blue Pencil Rule: It allows a court to delete unenforceable or invalid parts of a Non-Compete Agreement so that the remaining part remains enforceable.

Non-Compete Agreements may sometimes place what are felt as unreasonable restrictions. However, there are ways to get out of such agreements.

The most straightforward way is for both parties to sign a Release of Liability Form, with which the Releasor and the Releasee agree to drop any legal claims and lawsuits related to the agreement.

If this is not possible, you will have to prove in court that the Non-Compete agreement is unreasonable in any of its clauses, such as restrictions in duration or geographical distance.   

There are other legal documents similar to Non-Compete Agreements. Take time to learn about them to avoid legal battles. 

Here is a list of other business documents that can offer you legal security: 

• Non-Disclosure Agreement

• Independent Contractor Agreement

• Service Agreement

• Employment Contract