Protect your business by preventing your employees from working for your competitors. Create your own legally valid Non-Compete Agreement (NCA) in minutes using LawDistrict’s easy-to-use template.
Templates created by legal professionals
Customize your documents quickly & easily
24/7 free phone & email customer support
Trusted by 2,321 users.
What type of Non-Compete Agreement are you creating? What type of Non-Compete Agreement are you creating? Service/Employment Disclosure of Intellectual Property Commercial NegotiationLast Update September 1st, 2024
Convenant not to Compete
Fill forms in a few steps
Save, print, & download
Done in 5 minutes
Table of Contents: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:
In July 2021, President Biden signed an Executive Order to restrict the use of Non-Compete Agreements, aiming to curb their unfair use and enhance worker mobility.
The FTC's final rule, announced in April 2024, was intended to ban non-compete agreements nationwide, with the rule set to become effective on September 4, 2024.
This rule required employers to notify employees with a Final Non-Compete Rule Notice that existing non-competes would not be enforced, with certain exceptions for senior executives.
However, in August 2024, a U.S. judge struck down the Biden administration's nationwide ban on worker non-compete agreements, challenging the FTC's authority to enforce such a rule.
This decision may impact the enforcement of the FTC's rule and requires employers to stay informed about ongoing legal developments.
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.
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.
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.
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:
| State | Enforceability | Period /Blue Pencil Rule* |
|---|---|---|
| Alabama | If there is an interest to protect. Not enforceable for lawful professions. | 2 years / Yes |
| Alaska | If it is narrowly tailored to reasonably protect the interests of the employer and employee. To protect trade secrets. | 5 years / Yes |
| Arizona | Not enforceable for physicians, attorneys, and broadcast employees. Enforceable only if the agreement is reasonable in duration, geographic scope and type of activity prohibited. | No fixed period / Yes |
| Arkansas | If it is ancillary to an employment contract that preserves a protectable business interest. It cannot be broader than necessary. | 2 years / Yes |
| California | Not enforceable, except in the following cases: The seller of a former business, a former business partner, or a former member of an LLC. |
1. Whether the restrictive covenant protects a legitimate interest.
2. Whether the restrictive covenant is reasonable in scope as to time, activity, and geographic area restricted.
1. Restriction is reasonable (not injurious to the public).
2. If it is not greater than reasonably necessary to protect legitimate employer interests.
1. If it protects the legitimate interests of employers.
2. If it imposes no undue hardship on employees.
3. If it is not injurious to the public.
1. If in writing (per § 75-4 ).
2. If reasonable as to time and geographical area.
3. If made a part of the employment contract.
4. If based on valuable consideration.
5. If designed to protect the employer’s legitimate business interest.
2. Part of the employment contract.
3. Based on reasonable consideration.
4. Reasonable in duration and geographical area.
5. Not against public policy.
*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:
To further clarify any doubts, read the answers to the most frequently asked questions about NCAs.
Check the responses to get a better understanding of this type of legal document.
A violation of a Non-Compete Agreement letter can involve a lawsuit, injunction, or the payment of punitive damages if the filing party can prove malicious conduct.
If you wish to get out of an agreement, it is best to try to do it with a Release of Liability Form.
Non-Compete Agreements are often enforceable, but restricted.
In cases where they are not enforceable, it is usually because they are too restrictive.
States have different ways of legally treating agreements.
Take a look at the table in the section “Non-Compete Agreement Laws” on this page.
The length of validity of non-competes varies from state to state. Validity can go from 6 months to 5 years, 1 year being most common.
The longer the period included in the agreement, the most likely that it will be deemed unreasonable by a court.
You are only a few steps away from your own Non-Compete Agreement!
Download our professional examplesPosition and Confidential Information
A. The Employee is currently or may be employed as an employee with the Employer for the position of: _________. In addition to this responsibility or position, this Agreement also covers any position or responsibility now or later held with the Employer (the "Employment").
B. As a result of the Employment, the Employee will receive from, or develop on behalf of the Employer, certain proprietary or confidential information (the "Confidential Information") and the Employer has sought assurance this will not be exploited to gain a competitive advantage.
Consideration and Agreement
IN CONSIDERATION OF the Employee's employment and the Employer's provision of Confidential Information, as well as other valuable considerations, the parties to this Agreement, acknowledging the receipt and sufficiency of said consideration, hereby agree as follows:
Non-Competition
1. The Employee agrees that during the period of the Employment, they shall not provide advice, extend credit, financial assistance, or use their reputation to benefit any natural person or business entity engaged in a competing business within the geographic where the Employer conducts its operations. Furthermore, the Employee shall refrain from engaging, either directly or indirectly, in any such capacity such as an employee, owner, sole proprietor, partner, director, member, consultant, agent, founder, co-venturer, or any other capacity, whether individually or in partnership with others, in any business that competes with the business of the Employer within the following geographic area:
Confidential Information
2. The Employee acknowledges that in any position the Employee may hold, as part of their Employment, the Employee will use, acquire, or contribute to information considered confidential to the Employer (the "Confidential Information"), which remains the exclusive property of the Employer.
3. Confidential Information encompasses all data and information related to the Employer's business and management, including, but not limited to, proprietary and trade secret technology, accounting records accessible by the Employee, Work Product, Computer Software, Other Proprietary Data, Business Operations, Marketing and Development Operations, and Customer Information.
4. Confidential Information also encompasses information disclosed to the Employer by third parties and covered by non-disclosure agreements between those third parties and the Employer.
5. Confidential Information shall exclude information that:
a. Is commonly known within the Employer's industry;
b. Becomes publicly available through no wrongful action by the Employee;
c. Was rightfully in the Employee's possession before the Employer's disclosure;
d. Is independently created by the Employee without using Confidential Information, directly or indirectly; or
e. Is rightfully obtained by the Employee from a third party with the authority to transfer or disclose it.
6. Confidential Information also excludes any content developed or produced by the Employee during their Employment, including but not limited to intellectual property, processes, designs, developments, creations, research, inventions, know-how, trade names, trademarks, or copyrights that:
a. Were created without using the Employer's equipment, supplies, facilities, or Confidential Information;
b. Were entirely developed during the Employee's personal time;
c. Do not result from the Employee's work for the Employer; and
d. Do not pertain to any current or reasonably anticipated business opportunities of the Employer.
7. Confidential Information also includes information disclosed to the Employer by third parties and covered by non-disclosure agreements between those third parties and the Employer.
Duties and Obligations Concerning Confidential Information
8. The Employee acknowledges that a critical term of this Agreement is to maintain absolute confidentiality regarding all Confidential Information and prevent its public disclosure. The Employee shall not divulge, reveal, report, or use, for any purpose, any of the Confidential Information obtained from or disclosed by the Employer as a result of their employment. In case of any uncertainty regarding such disclosure, the Employee shall first consult with senior management of the Employer before making any disclosures of information covered by this Agreement.
9. The Employee agrees and recognizes that the Confidential Information is of a proprietary and confidential nature. Any unauthorized disclosure of the Confidential Information to a third party, in violation of this Agreement, cannot be reasonably or adequately compensated for by monetary damages alone. Such a breach would result in irreparable harm to the Employer, significantly impact the effective conduct of the Employer's business and goodwill, and constitute a material breach of this Agreement.
10. The obligations to ensure and protect the confidentiality of the Confidential Information, as imposed on the Employee in this Agreement, will survive the expiration or termination, as the case may be, of this Agreement and will continue for two (2) years from the date of such expiration or termination.
11. The Employee may disclose any Confidential Information:
a. To a third party only with prior written consent from the Employer; or
b. To the extent required by law or by the request or mandate of any judicial, legislative, administrative, or other governmental body, after providing reasonable prior notice to the Employer.
12. In the event that the Employee loses or inadvertently discloses any of the Confidential Information without authorization, the Employee shall immediately notify the Employer and take all necessary and reasonable steps to recover the lost or improperly disclosed Confidential Information.
Avoiding Conflict of Opportunities
13. It is hereby understood and agreed that any business opportunity related to or resembling the Employer's current or anticipated business opportunities that comes to the Employee's attention during the Employment belongs to the Employer. Accordingly, the Employee shall promptly inform the Employer about the opportunity and shall not pursue the opportunity, either directly or indirectly, without obtaining the Employer's prior written consent.
14. The Employee agrees not to do any of the following without the written consent of the Employer:
a. independently or jointly with others, including through any form of partnership, undertake or participate in the planning or establishment of any business venture that competes with the current or anticipated business activities of the Employer; and
b. directly or indirectly engage in any other business activities that, in the reasonable discretion of the Employer, are determined to be in conflict with the best interests of the Employer.
15. Furthermore, the Employee also agrees not to engage or participate, directly or indirectly, in any business activity which the Employer deems its reasonable discretion, to be in conflict with the best interests of the Employer.
Ownership and Title to Confidential Information
16. The Employee acknowledges and agrees that all rights, title, and interest in any Confidential Information shall remain the exclusive property of the Employer. Consequently, the Employee explicitly recognizes and acknowledges that they shall have no claim or interest in the Confidential Information, including, but not limited to, any claim to know-how, copyrights, trademarks, or trade names, notwithstanding any contributions made by the Employee to the Confidential Information.
17. The Employee hereby waives any moral rights they may have regarding the Confidential Information.
18. The Employee agrees to promptly disclose to the Employer all Confidential Information developed, either wholly or partially, by the Employee during their employment and to transfer to the Employer any right, title, or interest the Employee may have in the Confidential Information. The Employee further agrees to execute any necessary documents and take any reasonable actions, both during and after their employment, as requested by the Employer, to fully vest ownership rights in the Employer for the items transferred by the Employee.
Return of Confidential Information
19. Upon request by the Employer, or upon the termination or expiration of the Employment, the Employee agrees to promptly deliver to the Employer all Confidential Information belonging to the Employer. This includes, but is not limited to, all documents, plans, specifications, disks, or any other computer media, as well as any duplicates or backups in the possession or control of the Employee that:
a. Could contain or be derived from ideas, concepts, creations, trade secrets, and other proprietary and Confidential Information as defined under this Agreement; or
b. Is related to or derived from the Employee's services to the Employer.
Remedies
20. The Employee acknowledges and acknowledges that the Confidential Information is of a proprietary and confidential nature. The Employee further acknowledges that any breach of this Agreement resulting in the loss of confidentiality cannot be adequately compensated for in monetary terms and would result in irreparable harm to the Employer. Therefore, the Employee agrees that, in addition to any other legal or equitable remedies available, the Employer is entitled to seek an injunction to prevent the Employee, their personnel, or any agents of the Employee from directly or indirectly engaging in any actions prohibited by this Agreement with respect to the Confidential Information.
Furthermore, the remedies specified in this section are not exclusive, and the Employer may pursue any other remedies available at law or in equity to address breaches of this Agreement.
Lastly, in seeking injunctive relief or any other remedy, the Employer shall be entitled to recover reasonable attorney's fees and costs incurred in enforcing this Agreement against the Employee.
Notices
21. If the Employee is compelled to disclose any part of the Confidential Information in a civil, criminal, or regulatory proceeding, the Employee shall promptly provide written notice of such request to the Employer. This notification will allow the Employer to seek an appropriate remedy or, alternatively, waive the Employee's obligation to comply with the provisions of this Agreement concerning the specific request.
22. If the Employee loses or inadvertently discloses any Confidential Information in violation of this Agreement, the Employee shall immediately notify the Employer and take all reasonable measures to recover the lost or improperly disclosed Confidential Information.
23. Any notices or deliveries required under this Agreement shall be considered completed when delivered by hand, through an authorized agent, or seven (7) days after being sent via postal mail with prepaid postage to the parties at the addresses specified in this Agreement or any later addresses provided in writing by the parties.
24. The designated addresses for delivering notices to the parties in this Agreement are as follows:
• _________, with a permanent address at _________
• _________, with a permanent address at _________
Representations
25. In furnishing the Confidential Information, Employer makes no representations, either expressly or implicitly, as to its adequacy, sufficiency, completeness, accuracy, or absence of any defects, including any potential patent or trademark infringements that might arise from the utilization of such information.
Termination
26. This Agreement shall automatically terminate upon the date of termination or expiration, as applicable, of the Employment. Unless otherwise stated in this Agreement, all rights and obligations under this Agreement shall cease to be in effect at that time.
Amendments
27. The Employer and the Employee may only amend or modify this Agreement by a written instrument executed by both Parties.
Governing Law
28. This Agreement will be construed in accordance with and governed by the laws of the State of Alabama.
Definitions
29. For the purpose of this Agreement the following definitions will apply:
a. 'Work Product' refers to all work-related information, regardless of form or development stage, stemming from work or projects conducted for the Employer or its clients.
b. 'Computer Software' encompasses computer software resulting from or associated with work or projects for the Employer or its clients, in any form or stage of research and development. This includes, but is not limited to, programs, modules, design concepts, source code, and system designs.
c. 'Other Proprietary Data' pertains to information concerning the Employer's proprietary rights, precluding public disclosure. This includes the nature of proprietary rights, production, technical and engineering data, and details of product and service research and development, as well as information related to acquiring, protecting, enforcing, and licensing proprietary rights.
d. 'Business Operations' encompasses internal personnel and financial data, vendor information, purchasing and internal cost details, operational manuals, and methods used in conducting the Employer's business.
e. 'Marketing and Development Operations' includes marketing and development plans, pricing data, quoting procedures, marketing strategies, forecasts, and potential Employer plans.
f. 'Customer Information' includes customer names, contracts, customer services, data provided by customers, and product and service details purchased, leased, licensed, or received by the Employer's customers.
General Provisions:
30. Time is of the essence in this Agreement.
31. This Agreement may be executed in multiple counterparts.
32. Headings are for convenience and do not affect interpretation. Singular words include the plural, and vice versa. Masculine words include the feminine, and vice versa.
33. The clauses, paragraphs, and subparagraphs contained in this Agreement are intended to be construed independently of each other. If any part of this Agreement is held to be invalid, this invalidity shall only affect that clause, paragraph, or subparagraph. All other clauses, provisions, paragraphs, or subparagraphs in this Agreement shall not be affected or be held invalid as a result of any clause being held invalid.
34. The Employee is liable for all costs, expenses, and expenditures incurred by the Seller in enforcing this Agreement, including legal costs, as a result of any default of this Agreement by the Employee.
35. The Employer and the Employee acknowledge and agree that this Agreement is reasonable, valid and enforceable. This notwithstanding, if any provision of this Agreement is held as invalid and unenforceable by a court of competent jurisdiction, it is the Employer's and the Employee's intention that such provision be limited in scope by the court so as to render the provision reasonable and enforceable, bearing in mind that it is the intention of the Employee to give the Employer the broadest possible protection to maintain the confidentiality of the Confidential Information.
36. No failure or delay to exercise any power, right, or privilege in this Agreement by Employer shall be considered as a waiver. Further, in such a case, any single or partial exercise of such rights, powers, or privileges shall not preclude any further exercise of them or the exercise of any other right, power, or privilege provided in this Agreement.
37. This Agreement will inure to the benefit of and be binding upon the respective heirs, executors, administrators, successors, and assigns, as the case may be, of the Employer and the Employee.
38. This Agreement constitutes the entire agreement between the parties and there are no further items or provisions, either oral or otherwise.
IN WITNESS WHEREOF _________ and _________ have duly affixed their signatures under hand and seal on this day _________.
