Sample Noncompete Agreement

When an employee leaves your business, is he or is she taking things along that you would rather not give up? Is the employee going to open up in competition with you, or try to steal your customers, or employ secret processes that are a source of your competitive advantage?

One way to avoid this is to enter into agreements with your employees that restrict their rights to compete with you. These examples of noncompete agreements provide samples of the general language that you would expect to find in noncompete agreements for executives, professionals, artists, and inventors. Be careful, though because of the variances in state law on noncompete agreements, legal counsel should be sought before drafting any noncompete agreement. The content of a noncompete agreement should be individually tailored to fit each organization's particular circumstances and legitimate protectable interests.

This example is part of a larger agreement, such as an employment contract or an employee handbook.

• At all times while this agreement is in force and after its expiration or termination, [employee name] agrees to refrain from disclosing [organization name]'s customer lists, trade secrets, or other confidential material. [Employee name] agrees to respect the confidentiality of [organization name] patents, trademarks, and trade secrets, and not to disclose them to anyone. [Employee name] agrees to take reasonable security measures to prevent accidental disclosure and industrial espionage.
• Employee name] agrees not to make use of research done in the course of work done for [organization name] while employed by a competitor of [organization name].
• [Employee name] agrees not to set up in business as a direct competitor of [organization name] within a radius of [number] miles of [organization name and location] for a period of [number and measure of time (e.g., "four months" or "one year")] following the expiration or termination of this agreement.
• [Employee name] agrees to pay liquidated damages of $[dollar amount] if any violation of this paragraph is proved or admitted.

Example 2: Noncompete clause

• [Employee name] agrees not to compete with [organization name] in the practice of [type of business or service] while working for [organization name] and for a period of [number and measure of time (e.g., "six months" or "two years")] after termination of employment within a radius of [number] miles of [organization name and location].
• For purposes of this covenant not to compete, competition is defined as soliciting or accepting employment by, or rendering professional services to, any person or organization that is or was a client of [organization name] during the term of [employee name]'s work with [organization name].

Reprinted with permission. © CCH