A non-compete agreement is a document that details the terms and conditions that prevent your employees from working with competitors after your employer-employee relationship ends, including the duration of that restriction.
A non-compete agreement is a document signed when an employee or contractor starts a role, or when an employee is promoted to a position with access to sensitive business information. Its purpose is to prevent employees from working for direct competitors and sharing business secrets that could give those competitors an unfair advantage.
Sometimes, non-competes come as a separate document from the employment contract. Sometimes, they appear as a section or clause within it.
You can customize your non-compete agreement, but every non-compete should have the following core elements:
Beyond the five core elements, you can also include the following for a well-rounded agreement:
The extent to which you can enforce your non-compete depends on the state. Here are some common factors that can determine the extent of the enforceability:
Courts need to confirm that you have something specific worth protecting before they’ll enforce a non-compete. That means identifying concrete protectable interests, like trade secrets, proprietary client relationships, or specialized training you’ve invested in the employee. If your agreement doesn’t identify what it protects, it may be difficult to enforce.
Also, your restriction has to reasonably match the business risk. For example, an agreement that bans a former employee from working in their field across the entire country for 5 years is likely not to hold up in court. Courts look at whether the restriction you want to place measures up to the actual business risk of them working for the competitor.
Most states treat a non-compete as a meaningful sacrifice from the employee. You need to incentivize them with a job offer, a raise, or a bonus.
A non-compete doesn’t fly in every state; some states, e.g Minnesota, California, etc., have a full ban on non-competes, while some states restrict the terms and conditions of your non-compete.
The most common range is six months to two years, and most companies go with one year.
It depends on the state and the circumstances. For most states, two years is the practical ceiling. In some states, a three-year restriction might hold up for a senior executive with access to very sensitive business information, but that’s the exception, not the rule. For most employees in most situations, three years is hard to defend in court.
If you’re drafting a non-compete, two years is about as far as you can go without inviting a dispute. One year is safer.
If your non-compete agreement has any of the following, it may be difficult to enforce:
In some states, courts won’t throw out the entire agreement if only specific parts of the agreement are deemed unreasonable. They may blue-pencil it instead, striking out the unreasonable parts while leaving the rest intact.
Yes, but it fully depends on the state. For example, four states- California, Minnesota, Oklahoma, and North Dakota have a total ban on non-competes. Some states like Colorado, Texas, Florida, and Virginia enforce them but with specific requirements. You can check out this state non-compete law tracker to see what applies in your state.
If you run a multi-state business, review your non-compete with each employee in each state. What’s enforceable in Texas may not hold up in Colorado.
If you’re creating a non-compete, it means you have something worth protecting, and vague or overbroad language is what tends to make these agreements unenforceable. Here’s how to write one that holds up:
While they sound similar and are used for similar reasons, they’re not the same thing.
A non-compete agreement restricts where employees can work after leaving. A non-disclosure agreement (NDA) or confidentiality agreement restricts what the employee can share or disclose during and after they work with you.
A non-compete agreement restricts where employees can work after leaving. A non-disclosure agreement (NDA) or confidentiality agreement restricts what an employee can share or disclose during their employment period and regardless of where they work next.
NDAs are generally easier to enforce than non-competes because they protect a specific category of confidential information rather than limiting someone’s ability to earn a living. That’s why courts tend to be more receptive to them.
Enforcing a non-compete against an independent contractor is harder than enforcing one against an employee. Independent contractors don’t receive the same benefits as employees, so they typically work with multiple clients to earn their desired income. Restricting that cuts into the arrangement both parties signed up for.
That doesn’t mean you can’t include a non-compete clause in an independent contractor agreement, but an NDA serves your interest and may hold up better in court.
Non-competes are fairly common, but they’ve been getting harder to enforce in recent years. The FTC’s 2024 attempt to ban non-competes is a signal that there’s a crackdown on these agreements, not broader enforcement.
Originally, non-compete agreements were primarily used for executive roles with a direct impact on business: sales managers with client relationships, IT employees with access to sensitive systems, and similar key positions. Over time, they spread to lower-wage workers in retail and food service, which triggered significant pushback and much of the current regulatory effort.
Below is a basic non-compete agreement sample you can adapt.
↘️ View Sample Non-Compete Agreement Template
Disclaimer: This is a sample template is just a starting point to illustrate a generic non-compete agreement. Have an attorney review any agreement before you use it.
Your non-compete must cite a legitimate business interest, like trade secrets or client relationships, have a reasonable scope in terms of geography, time, and activity, include sufficient consideration like a job offer or raise, and comply with state law. Missing any of these makes enforcement significantly harder.
It’s the same thing as a non-compete agreement. It’s the document employees sign to agree to the employer’s non-compete terms. Once signed and dated by both parties, it becomes the binding agreement.
Yes, there are many free non-compete agreements you can use. However, it’s always preferable to have a business attorney look through it and review to match your state laws.
Employment attorneys and business law attorneys both handle non-compete agreements. Whether you’re an employer drafting one or an employee looking to challenge one, either type can help you review, draft, or dispute the terms.