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Employee Non-Compete Agreement Template

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An Employee Non-Compete Agreement is a form used when an individual is set to learn trade secrets that could become valuable to a competitor. This form can also be used if an employee is set to leave the company with trade secrets or highly sensitive information. In essence, a non-compete agreement allows an employer to protect their company by legally blocking an employee from disclosing information they’ve learned from the Company.

The Basics

Non-Compete/Disclosure – Gives the employer the ability to block an employee from disclosing the company’s trade secrets or from creating any other business in similar nature. Requires that an employee does not engage with company’s competitors, current and/or former clients and also the company’s current and/or former employees.

Lasting Power – The document is usually set for a base time-period from the employee’s start time working with the Company and/or shall start upon termination of employment.

Jurisdiction – Details the area in which this document is enforced. The area could potentially be international or the jurisdiction may only apply set to a certain market area. For example, if the Company is not on the west coast of the United States, the employee may have the right to take the information they’ve learned and apply it in a market region where the Company is not located.

What is an Employee Non-Compete Agreement?

An employee non-compete agreement is a legal agreement between an employee and employer in which the employee agrees to not enter into or start a competing profession, usually after they leave the company. Simply speaking, this is a contract between an employee and their employer that prohibits the employee from engaging in a business that competes with the employer’s business. This is to keep the employee from going into business against the employer, generally for a certain period of time within a certain geographical area, after leaving the original company in question. The employer may not be able to force an employee to sign such an agreement, but they can terminate the employee’s position or choose not to hire an individual if they do not sign.

When to Use an Employee Non-Compete Agreement

As more and more companies become technologically driven or deal with sensitive information, companies are using non-compete agreements to protect information and any technology or intellectual property they’ve created. Employers don’t want their former employees to gain all the knowledge they can, leave the company, and set up a new company that competes for business.

There is an increased value in trade secrets these days, and companies want a way to protect this information. Non-compete agreements are used on top of nondisclosure or confidentiality agreements so that employees can’t leave a company and use its information with a competing company. Non-compete agreements offer more protection than the nondisclosure or confidentiality agreement might, but they do so for a limited period of time, whereas the other two last as long as the trade secret itself lasts.

Non-Compete Agreement Employee Rights

There are some employee benefits to signing a non-compete agreement. The first and biggest is obtaining or keeping a job. Employers see the jobs behind these agreements as having value for the employee. Employees that sign the non-compete agreement are saying that the value of being hired or keeping their job is higher than the potential drawbacks of the agreement.

Some employers may offer a promotion or pay raise as incentive to signing the agreement. When an employee signs an agreement that is unfair, a court of law will usually favor the employee. Unfair agreements present a period of time that is too long, an unreasonably large geographical area, is too broad in the types of business the employee is allowed to work in, or it applies to employees that never had access to sensitive information and trade secrets. If an employee is promoted to a new position, asking for a raise in exchange for signing is not unreasonable. The employee should be aware that this may prevent them from claiming the clause not be enforced against them later on.

When presented with a non-compete agreement, employees should ask that it only be enforced if they leave voluntarily and not if they are fired or laid off. Most companies only fear competition with a few other companies, and asking for the prohibited competition to be clearly defined may keep the employee from violating the agreement unknowingly or provide some leniency if they do choose to leave the company.