Non compete Agreement Meaning


If you are an employer, a non-compete agreement would give you the authority over certain activities of your employees even after the employment ends. It is a legal obligation that stops the employees from competing with you or sharing your sensitive information, in the future.

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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 legal obligations 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. 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 a 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. It 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-compete 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-compete agreement, the company secrets cannot be shared with any other person.

It can help you to hire employees

With a non-compete contract, 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-compete agreement

A non-compete 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 contracts 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 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.

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.
  • Organize 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 analyze 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 them. 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-compete 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.

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