Business Setup

BookAppointment

Prefer to talk to a business advisor first?

Book a call back

Tax & Compliance

BookAppointment

Prefer to talk to a business advisor first?

Book a call back

Trademark & IP

BookAppointment

Prefer to talk to a business advisor first?

Book a call back

Documentation

BookAppointment

Prefer to talk to a business advisor first?

Book a call back

Others

BookAppointment

Prefer to talk to a business advisor first?

Book a call back
user-login
Consult an Expert

Consult an Expert

Business Setup

Business Setup

Tax & Compliance

Tax & Compliance

Trademark & IP

Trademark & IP

Documentation

Documentation

Others

Others

More

More

Login

Professional tax is mandatory in your state! Avoid penalties. Apply Now

Non-Compete Agreements

Email
Mobile Number
City/Pincode
  • No results found
Language
  • English
  • Hindi
  • Tamil
Get easy updates through
WhatsappWhatsapp

Non-Compete Agreement Meaning

A non-compete agreement is a contract signed between the employer and the employee. It gives the employer authority over certain activities of the former employee even after the employment ends. In this agreement, the employee accepts not to enter into any competition with the employer during or after employment. These non compete agreements for employees stop or restrict the employees from entering into markets. It also includes professions deemed to be in immediate competition with the employer.

Employers (company or business) may attempt a non compete agreement for employees. It is done to secure and protect themselves against former employees sharing the secrets or sensitive information about the company. Sensitive information includes services, customers, clients, formulas, salary, price, methods, company structures, ideas, practices, public connection, and marketing strategies.

Benefits of a Non-compete Agreement Clauses

It keeps former employees from competition

The most noticeable benefit of having an employee non compete agreement is that it can secure or prevent your employees from leaving to work with a contender or competitor. If an employee resigns his/her job and starts his/her own competitive business, a non-compete agreement will be very helpful. Employee non compete agreement will protect you from the loss of important customers.

It helps to protect your company secrets

A company or business secret can be anything such as pattern, formula, program, device, compilation, technique, method, or process. These resources have value because these secrets are common practices made in a business or company. When an employer shares company secrets to its employees, it is very important to support and maintain the secrets by utilizing a non competence agreement. Unfortunately, if a former worker or an ex-employee goes to work with a competitor, a non compete agreement will not be enough. However, with the combination of non-disclosure and non competence agreement, the company secrets cannot be shared with any other person.

It can help you to hire employees

With a non-competition agreement, the employees from your company will feel free to work. Additionally, they can work without any restrictions. Further, you can even claim a payback condition in the contract which will require your workers to refund your training expenses if they leave before a designated period has been given. As an owner or an employer, you can see this information useful to protect the company’s investment.

Checklist Requirements of a Non Competence Agreement

You might be wondering what is a non compete agreement, This section will explain what is a non compete agreement in great precision. A non-competition agreement should be equally fair for both the employer and the employees. They expect certain information to be considered that is legally binding. The requirements are as follows:

  • A valid date on which the non-compete agreement will begin.
  • Additionally, an effective reason for creating a non-compete agreement from both the employer and employee.
  • Further, there must be a specific date during which the staff or employee will be terminated or barred from managing in a competitive environment.
  • The place held in the non-compete agreement must be mentioned in the contract.
  • Some details on how the non-compete employer will compensate for agreeing to the conditions and terms.

Therefore, these rules or agreements are also known as non-compete, non-compete covenant (contract), non-compete clauses.

Non-compete agreement in industries

Non compete agreements in India are very popular in the media. A television channel may hold valid concerns on the agreement. In most domains, it will be taken into account to sign a non-compete agreement.

Similarly, non compete agreements in India are very common in IT (Information Technology) sectors. Here, the employees will be often charged to the employer to decide about the non-compete contract. Additionally, this agreement is practised in many fields like the financial industry, corporate industry, and manufacturing industries.

What Is the Purpose of Non-Compete Agreement Between Business Partners?

A non-compete agreement helps to protect a particular secret or confidential information within business employees, self-governing builders, sales associates, or business consumers may get in connection while running with the company. When a person is given the company’s private information, the non-compete agreement prevents him/her from competing with the business. Hence, if an ex-employee of a business chooses to start a business investment against the company as a competitor, he may not use the information to the loss of his former employer.

Moreover, when an employee signs a non-compete contract, they may not tell the information protected by the scope of the agreement to competitor businesses, former employers, and outsiders.

It is not mandatory for only the employee, independent constructor, or the business owner to sign a non-compete agreement. So, the person who knows the company’s confidential information that affects the entire operation of the business will need to sign a non-compete agreement. The people who know their business secrets will be officers, secretaries, administrative charges who may know the confidential data.

Components of a Non-Compete Agreement

A non-compete agreement is a contract between an employer and an employee that restricts the employee from competing with the employer for a certain period of time after leaving the company. The non-compete agreement is designed to protect the employer's trade secrets and confidential information.

The following are the components of a non-compete agreement:

  • Definitions: The non-compete agreement should define the terms used in the agreement, such as competition, confidential information, and trade secrets.
  • Scope of the restriction: The non-compete agreement should specify the geographic area and the types of businesses that the employee is prohibited from competing in.
  • Duration of the restriction: The non-compete agreement should specify the length of time that the restriction will be in effect.
  • Permitted activities: The non-compete agreement should specify the activities that the employee is permitted to do, even though they are considered to be competition.
  • Enforcement: The non-compete agreement should specify how the employer can enforce the agreement, such as through a lawsuit.
  • Severability clause: The non-compete agreement should include a severability clause, which means that if one part of the agreement is found to be invalid, the rest of the agreement will still be enforceable.

The non-compete agreement is a complex document that should be drafted by an attorney. The attorney will be able to ensure that the agreement is enforceable and that it protects the employer's interests.

How Do You Get Out of a Non-compete Agreement?

There are three methods to get out of a non-compete agreement. The methods are as follows:

Asking for a release

  • Always have a copy of the agreement that you have signed: Confirm that you have signed the agreement. Have a complete reading on the contract so that you will have a clear understanding. Have an overall outline or reason for your release.
  • Consider what type of role your company has appointed: Since, a non compete agreement has certain highly confidential rules such as business secrets, confidential information, and company relations. However, if you don’t have any trust relation with the customer, and are not aware of any business secrets, then a non-compete agreement will not be enforceable against you.
  • Examine your state’s law: The conditions of the contract may vary from state to state. Some states have tough laws about the enforcement and law of non-compete agreement. Check with your legal counsel and make sure that you have made all the requirements.
  • Organise your information: Have an overall review of the agreement so that you can be well prepared to have a strong discussion from your agreement.
  • Schedule a face to face meeting: you must have a face to face meeting with the employer or manager or your human resources who has the authority to release you from the contract.
  • Consult the duration of your discharge: There might be some possibilities to draft a new contract that both parties protect the company’s interests and allow you to take the new job as you wish.
  • Prepare some agreement in the draft: Since your real non-compete agreement is in process, you can add some more instructions.

Going to court

  • Obtain notice of the lawsuit against you: Your ex-employer may sue you if you have any plan to ignore the non-compete agreement.
  • Think to select a lawyer: Consulting a lawyer or attorney makes more beneficial decisions for fighting against a non-compete agreement.
  • File your answer to your ex-employer’s complaint: Moreover, you must file an answer to the lawsuit within 20 days if you are sued.
  • Involve in finding: During the process of the agreement, you can discuss together and exchange your opinions and information with your former employer.
  • Plan your case: You can analyse any previous cases and look at what the judges have decided. Reviewing your state legislation and making judgments from the court is one of the best ideas
  • You can have a mediator: While writing an agreement, you can have a mediator whom you have trust in. The mediator must be fair and share his opinion for a non-compete agreement.

Securing your co-workers

  • Consider developing a union: The employees can form a team or association if they are not able to convince the employer.
  • Negotiate mutually: The staff or employees can join together and negotiate the non-compete agreement under the assurance of the National Labour Relations Act (NLRA).

What Are the Steps Involved in Securing a Non Competence Agreement Through Vakilsearch?

  • Step 1: Our platform connects you to highly rated lawyers.
  • Step 2: The first draft will be shared with you in four days.
  • Step 3: Two rounds of iterations at no extra cost.

Non-Compete Agreement Template

The agreement titled Non-Compete agreement is being made between the [Company Name] represented by [name of representative] and [Employee] on the __ day of ____ in the year 20 ____. The Company, located at [Address], is involved in [describe type of business].

As part of the Employee's formal Employment agreement, the Employee will serve as a [Job Title]. The Employee agrees to the limitations described herein as being binding.

Accordingly, the Employer and Employee agree to the following terms:

NON-COMPETITION. During the entire period of this agreement and [length of time] after the employee's relationship with the employer has been terminated for any reason, the Employee will not work for a competing company as an employee, officer, director, partner, consultant, agent, owner, or in any other capacity. This implies that the Employee will not perform any work for [describe type of company] in [geographic area].

EMPLOYEE ACKNOWLEDGMENTS. The Employee recognises that they had the opportunity to discuss this agreement and had the chance to get legal advice before signing it. The employee accepts that the restrictions imposed are fair and necessary for the company's business interests. Finally, the employee acknowledges that these limitations are reasonable and do not pose a threat to their livelihood.

APPLICABLE LAW. This agreement and its interpretation shall be governed by the laws of [state, province, or territory].

IN WITNESS WHEREOF, both parties consent and agree to these terms by providing their signature below.

Employee Signature ____________ Date ____________ Employer Representative Signature ______________ Date

Why Vakilsearch?

Vakilsearch is India’s largest professional platform of lawyers, chartered accountants, and company secretaries-with years of experience behind. We execute legal work for over 1000 companies and LLPs every month, by leveraging our tech capabilities, and the expertise of our team of legal professionals.

9.1 Customer Score

We make your interaction with the government as smooth as possible by doing all the paperwork for you. We will also give you absolute clarity on the process to set realistic expectations.

300-Strong Team

With a team of over 300 experienced business advisors and legal professionals, you are just a phone call away from the best in legal services.

Access To Experts

We provide access to reliable professionals and coordinate with them to fulfil all your legal requirements. You can also track the progress on our online platform, at all times.

Realistic Expectations

By handling all the paperwork, we ensure a seamless interactive process with the government. We provide clarity on the incorporation process to set realistic expectations.

FAQs on Non-Compete Agreements

The legal aspects state that a judge has the responsibility in deciding whether a non-compete agreement is valid or not. Likewise, the agreement might be taken to the court when it is right in scope and term. Additionally, it presents a balance between the interests of both the employer and an employee. Most importantly, it is quite difficult to enforce a non-compete agreement. They must get into the law and the rules must, of course, protect the company’s confidentiality and employees' careers as well.
If you infringe a non-compete agreement, which is legally binding and valid under state law, you may end up facing penalties for your business owner or employer. Moreover, your former owner or employer may take legal action against you for violating the rules and agreements. Sometimes, nothing might happen if you violate the contract, because nothing will be stated in the agreement regarding the infringement of the non-compete agreement. Therefore, it is advisable to read the agreement properly.
A non-compete agreement cannot be continued forever. To get into the enforcement, the contract or an agreement must be true and reasonable. They must have a reasonable duration for the contract. It depends on the state’s decision on the duration of the contract. Generally, a non-compete agreement lasts for two or three years.
Voiding a non-compete agreement is done in specific situations. For example, if you can prove yourself that you didn't sign the agreement, you can explain that you didn’t sign the contract. You can even describe that it is against the public interest. Therefore, these are the ways to void a non-compete contract.
If you have signed a contract, you should follow the rules and regulations that are given in the agreement. Once an agreement is signed, there is no other option to quit the job. Further, you could have chosen a company without any agreement or contract. So, it would be more beneficial for you to start your own business. Moreover, the rule of non-compete contracts tries to balance and support restrictions on the worker’s freedom. On the other hand, if you try to take any advantage from the owner of the company or an employer’s investment, the court will take its action and protect them.

Firstly, your employer can easily file a lawsuit against you for an order and cash depreciation. If the company can lead to a valid contract and sensible limitations, most of the courts will permit an order. Whereas, the litigation or suits remain the same. Furthermore, you choose a lawyer to defend the case. If the case gets completed, you can receive your money damages asked by the company. Further, it leads to the period of the lawsuits.

Another chance for the ex-employer is to threaten your new staff with an action for hurting the employee with the non-compete agreement between you and the company. If your non-compete contract is true and accurate, then a third person who makes you break the contract will face the same consequences. To avoid this situation, the company will terminate the employee and hire a new employee.

Get me more details
Select City*
Select Language*

Easy monthly EMI options available

No Spam. No Sharing. 100% Confidentiality.

Other Agreement Pages