What is Non Compete Agreement?

December 1, 2016

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A contract between two parties, where one party agrees not to compete with the other for a period of time.

WHAT IS A NON-COMPETE AGREEMENT?

A Non-Compete Agreement is a contract between two parties, where one party agrees not to compete with the other for a period of time. It lessens the possibility that knowledge gained by an employee or business partner will be used in the future to compete against them. In return, for not competing, the party is paid a fee. In most cases, the Non-Compete Agreement would prevent someone who signed it from competing directly, or from working for a competitor. This agreement outlines the duration of the agreement, any geographical limitations, and what subjects or markets it covers.

ADVANTAGE

It provides business owners and employers a degree of protection. A business owner cannot sell his business and then turn around and start a competitive business. A key employee cannot join a company, work there for several months, then leave and start a competing business in the same capacity.

High-performing former employees will be far less likely to put their skills to use with the competition.

Trade secrets and other confidential information may be protected in the short term.

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FAQ

1. What is a Non-Compete Agreement?

It is an agreement between the employer and his or her employee whereby the employee promises to refrain from competing with that of employer’s business.

2. What are the provisions in a Non-Compete Agreement?

Time • Geographical Location • Purpose

3. Are Non-Compete Agreements enforceable?

Most courts will simply invalidate the parts in the non-compete agreement that are illegal and enforce the other provisions of the contract.

4. What is important in determining if the Non-Compete Agreement will be enforceable?

There is a consideration. • The employer has a legitimate business interest to refrain the employee from competing with it. • The restriction on the employee’s right to compete is not overbroad.

5. What if the Non-Compete Agreement prevents me from working for anyone?

If a Non-Compete Agreement prevents you for working for a long time, the whole agreement would get invalidated.

6. What would happen to me if I violated the Non-Compete Agreement?

Maybe nothing, as long as your employer does not want to enforce the agreement. It is more likely that your employer will either file a lawsuit against you to enforce the agreement for an injunction (i.e. decree to the court to refrain you from violating the agreement) and/or money damages.